London launches a surprise tax cut for households and businesses. And the pound collapses

Listen to the audio version of the article

Biggest tax cuts in half a century: The new British government has shaken off the past decade of fiscal caution by announcing a series of interventions aimed at reviving economic growth. “It’s the beginning of a new era,” new Treasury Secretary Kwasi Quarting declared in Parliament, and introduced a radical mini-budget to turn “a vicious cycle of recession into a virtuous cycle of growth.” The goal is to return to 2.5% GDP growth, in stark contrast to the current recession confirmed this week by the Bank of England.

The plan includes huge tax cuts worth 45 billion pounds for both citizens and businesses. The government abolished the highest tax rate, which was 45% for incomes over £150,000 a year, and lowered the lowest rate from 20% to 19%, a measure that affects 30 million taxpayers and will cost the treasury £5 billion a year. .

Companies will not have to face the expected increase in corporate tax from 19% to 25% decided by the previous government and canceled by Kwarteng, giving up the expected revenue of 12 billion annually. The increase in social security contributions for workers and employers, which would cost 14 billion pounds, was also cancelled.

The chancellor has scrapped the bankers’ bonus cap set by the European Union after the major financial crisis, to underscore that post-Brexit London intends to distance itself from Brussels, and to send a signal of support for the city as a global financial centre. .

Public debt declining to increase

Given that the government has ruled out taxing extraordinary profits for companies in the energy sector, the expensive measures announced will increase public debt, which has already risen during the pandemic. The Treasury then revised the total from £161 billion in April to £234 billion.