With a provisional budget of £60 billion (€68 billion), the UK is taking steps to protect the economy from rising energy prices. Finance Minister Kwasi Quarting announce Friday morning in the British House of Commons will have three steps: household energy bills will be capped at £2,500 (€2,846), businesses will receive similar financial support and the central bank will provide support guarantees for energy traders. “There should be no doubt that the government stands with the British people during the worst energy crisis in generations,” said Quarting.
The British Cabinet also wants to boost the economy with a series of reforms, including tax cuts. “We focus on growth, even if it means making tough decisions,” says Kwarteng. These decisions mean, among other things, that the top income tax bracket will fall from 45 to 40 percent and that homes will become cheaper.
With 60 billion pounds sterling, the British government will pay for the first six months of support measures. After that, costs will come down, Kwarteng predicts, because the government wants to negotiate better terms with energy suppliers. “Doing nothing would be much more expensive than the cost of these plans.”
Shortly after the announcement, the opposition criticized the plans, which are expected to cut inflation by 5 percentage points. The main point of criticism is that higher incomes benefit disproportionately. Scottish Prime Minister Nicola Sturgeon He replied on Twitter: “The rich are laughing at themselves on their way to the bank, while the rest are increasingly dependent on the food bank.”
Concerns have also been expressed about costs. For support and tax measures, the UK government will already be borrowing an extra £72 billion this year, he writes Watchman. Sterling fell to a 37-year low of $1.11 on Friday.
With tax cuts, Prime Minister Liz Truss’s government is going further than it was in the “Lawson boom” of the 1980s, when then British Chancellor of the Exchequer Nigel Lawson cut income taxes several times. At the end of that decade, the economy had grown by more than 5 percent.
Then the growth also caused inflation to rise, which the government tried to curb by raising interest rates, which in turn caused a recession. High inflation is exactly what Kwarteng is trying to combat with his £60bn in support packages. Also Lawson warned in August for the combination of loans and tax cuts that then-premiership candidate Truss was heading for.
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