Prime Minister Kwasi Kwarteng has rejected suggestions that his small budget is a “gamble” as market reactions caused the pound to fall to a 37-year low against the dollar.
The pound fell after Prime Minister Kwazi Kvarteng announced the biggest tax cut in half a century. To raise the low standard of living by stimulating growth
last friday Using more than £70 billion in loans, Quarteng has provided a package that includes the abolition of income tax rates for the highest earners.
He reduced the stamp duty for homebuyers. and lowered the basic income tax rate to 19 euros per pound from the beginning of the year until April. This is part of a £45 billion a year tax cut.
Mr Kvarteng said the Commons tax cut was “Key to solving the mystery of growth” as he confirmed plans to close the banker’s bonus cap while increasing restrictions on the welfare system.
But the pound slid to a 37-year low against the dollar at $1.0895 as “feared” traders swallowed up the cost of the spree that Prime Minister and Prime Minister Liz Truss left two years before the general election.
Government borrowing prices soar as British bond yields rise Amid fears the package has sent the UK market into recession.
In an interview with the BBC, Mr Kwarteng admitted the UK was “technically” in a recession but claimed his tax cuts would help ensure the cuts were “shallow”.
Mr Kwarteng told the BBC: “Technically, the Bank of England said there was a recession. I think it will be shallow. And I hope we can recover and grow.”
Pressed on whether or not he admitted there was a recession, he said: “I don’t admit, no, no, I said technically there was a recession.”
“We have very little negative two-quarters growth. And I think these measures will help us drive growth.”
The minister was accused by the Institute of Finance (IFS) of “staking the house” by placing government debt on it. “Unsustainable Rising Path”
The accepted Financial Think Tank’s dissatisfaction assessment said only those earning more than £155,000 would benefit from the net benefit of the tax policy announced by the Conservative Party in the current parliament by “Most income taxpayers pay more in taxes.”
But Mr Kvarteng argued that his economic vision with the new regulations would “Turn a vicious cycle of stagnation into a cycle of virtuous growth.”
He told reporters during a visit to a modular housing plant in Kent with Prime Minister Liz Truss after revealing his budget: “It’s not gambling.
“What is gambling? Think you can increase your taxes and get prosperous. Which obviously doesn’t work.”
When asked if the fall in the pound had a positive effect on the economy, he said: “I am not commenting on market movements. But what’s good for the economy is creating an environment where people can invest in the UK. And that’s what we are “has done”.
Shadow Prime Minister Rachel Reeves, however, likened Prime Minister and Mr Kvarteng a “Two desperate gamblers in a chasing casino lose.”
The Ministry of Finance assesses the tax-deductible price. Including the contractual reversal of the country’s insurance increase. and a corporate tax hike of nearly £45 billion a year by 2026.
Critics question the fairness of the package. This is because the top 660,000 earners receive an average tax break of £10,000 a year with income tax changes.
from April onwards Those earning more than £150,000 a year will no longer pay the maximum rate of 45% and will join those earning over £50,271 paying the 40% rate.
Major spending packages include:
– Reduce stamp duty in England and Northern Ireland Instantly double the exemption level from £125,000 to £250,000 and for first-time buyers from £300,000 to £425,000.
– Estimates that the two-year energy subsidy will cost around £60 billion in the first six months from October.
– Plans to raise an alcohol tax on beer, cider, wine and spirits, worth 600 million pounds.
– New, low-tax “investment zones” allow planning rules to relax and reduce business taxes to encourage investment.
– Law compels unions to submit paid proposals for member voting. So that a strike can be called only when negotiations have completely collapsed.
– Confirmation of plans to bring approximately 120,000 additional Universal Credit people actively seeking jobs that earn more or better or face a reduction in their interests.
The package was announced a day after the Bank of England warned the UK could be in recession and raised interest rates to 2.25%.
The move has made government borrowing more expensive than the past 13 years.
IFS Director Paul Johnson said Quarteng’s “financially sustainable gambling” was a “Biggest tax break since 1972”
amid rising interest rates He warned that the Bank of England would certainly raise interest rates further in response to this package.
Mr Johnson said: “The initial signal is the market. Which would have to lend the money needed to fill the gap in the government’s fiscal plans. Not impressed. This is worrisome.”
He warned it was “impossible” not to announce further public spending. unless the government allows “Public service has worsened.”
“Let’s say this government also borrows money. Mr. Kvarteng is not just gambling on a new strategy. But he is betting on the house,” Mr Johnson said.
Mr Johnson has warned that the tax cuts announced 50 years ago by then-Prime Minister Anthony Barber under accelerated growth. “Ends in disaster”
Kwarteng has pledged to reduce debt as a percentage of GDP in the medium term, but the Treasury forecasts the package will have to push GDP 1% higher than the current forecast every year for five years. to cover the cost of the new tax cut
The Treasury said the entire package would be backed by a £72.4bn loan increase.
IFS forecasts that government borrowing will continue to reach £110bn a year. Even though the big energy support program expires in two years. And any future tax increases or cost reductions will have to be paid for the rising debt.
to the surprise of what was touted as a small budget Mr Kvarteng has spent around £2 billion a year since 2025 by eliminating the highest income tax rates.
Treasury estimates say it will help those earning up to £10,000 a year on average.
Torsten Bell, chief executive of the Resolution Foundation Think Tank, said those earning £1million a year would get a £55,000 tax cut next year with a broader package.
There were also concerns in the Tory party, with Mel Stride, chairman of the Treasury selection committee, saying there were. “A lot of emptiness” created by the Office’s lack of forecasting budget responsibility.
The prime minister shunned independent financial analysts’ scrutiny, describing the package as It’s a “financial event” instead of the entire budget.
Mrs Reeves said “There has never been a government that spends so much and explains little.”
About the banker bonus Mr Kvarteng said the limit was to double their salaries. “Never limit all compensation,” and added: “So we will eliminate it.”
Pat Cullen, Head of the Royal College of Nursing urges members to cancel the protest She called it a package that was given. “Billions of bankers and nothing to nurse.”
The British Industry Confederation welcomed the deal, with Director General Tony Danger saying: “We have no choice but to grow to buy.” Support during the energy crisis
However, the Joseph Rowntree Foundation said the government had no understanding of the economic realities facing millions across the UK.
Rebecca McDonald, chief economist at the Anti-Poverty Foundation, said: “This is a deliberately neglected budget for families struggling with cost-of-living emergencies. instead, it is aiming for the richest operations.”
Boris Reversal Net Cost Johnson and Rishi Sunak, up 1.25 percent for national insurance due in April. set at around £15 billion per year
Their planned corporate tax cut, by keeping it at 19%, was set to £18.7 billion a year by 2026.