Liz Truss’s government establishes economic growth of 2.5% per year as an objective.
The British Chancellor of the Exchequer, Quasi Quarteng, has announced the start of a new era in which the UK economy should grow at 2.5% of GDP every year. His “new approach to the new era” would be based on three pillars: reforms to increase supply, fiscal responsibility and tax reduction.
The measures presented in his ‘mini-budget’ included the repeal of the increase in taxes for the public and companies, provided by Boris Johnson’s government, cutting rates on the sale of homes, and an obligation to consult for unions. With their associated proposals on behalf of the company to avoid the strike and a reduction of the tax rate from 20% to 19% on income up to 57,000 euros per year and from 45% to 40% for those above 170,000.
The tax cut totals over 50,000 million euros, the largest by the British government in five decades. In 1972, the prime minister was Edward Heath, the economy was consumed by inflation and strikes, and the United Kingdom was preparing to join the then European Economic Community, as it was perceived as the “sick man of Europe”. and was believed. ,
The new prime minister, Liz Truss, wants a radical revamp of the economy based on growth – the United Kingdom has the lowest percentage growth in GDP among G7 countries – betting on a reduction in the state’s role. However, it has set a numerical target for growth, to be pursued by both the government and the independent Bank of England.
It will also promote the creation of “investment zones”, forty has already been indicated, which will benefit from tax incentives. The previous finance minister, Rishi Sunak, initiated the creation of a dozen free zones in British ports. Tourists going to the UK will no longer have to pay VAT. And in the EU imposed bonus limits have been removed that banks can receive.
Rachel Reeves, the head of the Treasury portfolio in the Labor opposition, has characterized Quarteng’s plan as “a budget without figures, a menu without prices”. He presented the reform of the Truss government as an implicit criticism of the Conservative governments of the previous twelve years. For the Labor Party, now Boris Johnson’s ‘leveling up’ (equation between regions) is moving the economy to ‘trickle down’ the economy in favor of the rich so that their spending reaches the poorest.
Capital market reaction to the price of shares, government bonds and the pound was negative. Worryingly, inflation rises and debt increases when interest rates rise. Quarteng estimates that the cost of freezing energy prices over the next six months would already be around 70 billion euros.