Liz Truss government announces historic tax cuts to revive UK economy

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New UK Conservative government In an effort to save the country from economic stagnation from years of austerity imposed to try to get out of the 2008 financial crisis, it announced this Friday the biggest generalized tax cut in the past 50 years. More than 50,000 million euros in fiscal relief, at a time of peak inflation. Labor opposition scolded Using Old Neoliberal Recipes What he condemns will increase inequalities.

The new Prime Minister of the United Kingdom, Liz Truss, and her Economy Minister, Kwasi Kvarteng, repeat the same mantra whenever the opportunity allows: “It is not possible to grow economically based on more taxes”. With converts confident, two political allies who have been quietly preparing their “revolution” for years have finally unveiled their plan to lift Britain out of a decade of stagnation. And it basically involves recovering the neoliberal creed of the Reagan and Thatcher era: lower taxes and control of the markets. “Trickle Down Effect”, “Supply Economy”, “Laffer Curve”. In short, the idea that reducing the tax burden on the wealthiest companies or citizens would encourage investment and, like Manna, that wealth would reach society as a whole.

“We need a new approach to a new era. In the medium term, we aspire to reach an average growth rate of 2.5%”, Quarteng announced this Friday in his expected appearance before the House of Commons. “We want to expand the share of supply in our economy through tax incentives and reforms,” ​​the minister promised. “We will turn this vicious cycle of stagnation into a virtuous cycle of development. This government is going to focus on development, even if it means taking tough decisions.”

Truss and Quarteng, together with other conservative representatives of Thatcherism, jointly wrote a book 10 years ago titled britannia chainless ,uk without chains), in which he advocated a complete liberalization of labor laws and markets to save Britain from mediocrity. Looks like his time has come. The big paradox is that he has a limited amount of time—the next general election should be in January 2025 as a deadline, according to the polls his electoral hopes are minimal; and the new Conservative government has begun in the midst of In a huge energy crisis, on the verge of recession, and in a deep climate of social discontent,

aid and tax deductions

Faced with such a scenario, those promising to free up the nation’s “internal energy” with fewer taxes and fewer regulations have announced One of the largest direct interventions in the British government’s economy, more than 170,000 million euros in aid to families, Companies, businesses and public administration They will have to pay this winter to cut gas and electricity bills in half.

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With inflation at a gallop (9.9%, as of August data), the Bank of England on Thursday decided to raise interest rates by half a point to 2.25%. The truce government says that, along with its cap on the price of energy, and its plan to guarantee massive loans to energy companies, according to Quarteng, “could reduce the peak of inflation by about five percentage points.” could”. Others, such as the prestigious Institute for Financial Studies (IFS), indicate that the indebtedness that is going to be caused by the truss plan will further weaken the British economy, as already verified with sterling levels these days. He is going. Lowest in a long time. Minutes after the Quarteng was announced, the British currency was at its worst exchange rate in 37 years. “This is the biggest tax cut since 1972. Barber’s famous ‘growth boom’ [Anthony Barber, ministro de Economía del Gobierno conservador de Edward Heath] It ended in disaster. That budget is now considered the worst in contemporary history. In fact, I believe it works better”, wrote IFS director Paul Johnson.

The Truss has decided to reverse the decisions taken by the previous government exactly a year ago. Increases in Social Security contributions to help improve the dilapidated National Health Service (NHS, abbreviated in English) were cancelled. The decision to increase the corporation tax from 19% to 25% in 2023 was rescinded. The maximum personal income tax rate, for the highest income, will be reduced from 45% to 40%, while the basic rate will be reduced from 20% to 19%. In other words, the biggest benefits will go to the approximately 630,000 people in the United Kingdom who earn more than 170,000 euros a year. Finally, a significant reduction in property transfer tax (so-called stamp duty), to encourage home sales, when mortgages have skyrocketed again.

“They are based on an age-old ideology that defends that if we reward those who are already rich, society as a whole will benefit. They have decided to jump from regional redistribution of wealth. [la gran promesa electoral de Boris Johnson en su victoria de 2019] For distributing the pieces”, during the parliamentary debate, Labor spokeswoman for economic affairs, Rachel Reeves, has reprimanded Minister Quarteng.

main opposition party Led by liberal Keir Starmer Based on his message on the need to revive the UK economy – “growth, growth, development,” Starmer reiterated in his speech at a previous party congress – is now focusing on condemning what he says A conservative government has a wrong and unjust strategy. Decided to support the rich. For example, Labor rebuked the truss for completely ruling out the possibility of reintroducing an extraordinary tax on the “heavenly profits” of energy companies, As did the Johnson Gov.

“To achieve that development goal [el 2,5%]There is a need for a sustainable and credible plan, as was achieved under the previous Labor government. And this government doesn’t have it,” Reeves denounced. “The prime minister and his finance minister are like two desperate gamblers in a casino chasing one last stroke of luck,” he said.

The Truss government has also decided to drop the rule that enforces publication, as with any new budget measure, of the Budget Responsibility Office report, in order to foresee expected results in the country’s accounts. They delay that publication until the end of the year, raising the general feeling that the announcement in Parliament this Friday is too much of a jump in the dark. The new prime minister, in his big bid to get the Conservatives to retain power in Britain, displayed a firm belief in his actions, but it remains the same stubborn confidence that made him a Liberal Democrat and a Liberal Democrat as a youth. Led to be anti-monarchical, or to fight Brexit in the 2016 referendum and be its main supporter today. When he reiterates that growth based on high taxes is not possible, many of his critics hear that it is possible to stimulate an economy based on ideology.

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