Posted Oct 3, 2022, 8:54 AMUpdated Oct 3, 2022, 9:24 a.m.
Liz Truss and Kwasi Kwarteng eventually gave up. The British Prime Minister and the Chancellor of the Exchequer have just announced on Monday to reverse the reduction in income tax announced a few days ago for the richest.
“It is clear that the removal of the 45% tax rate has overshadowed our mission to tackle the difficulties in our country. Therefore, I am announcing that we are not going to prosecute her,” tweeted Kwasi Kwarteng, adding: “we understand, we have listened”.
“This will allow us to focus on implementing the main elements of our growth plan. First, the ceiling on energy prices”, detailed the minister. This measure is valued at 60 billion pounds for only six months, while it should last for two years for households.
Return to calm on the markets?
This decision comes as Liz Truss, who arrived in Downing Street in early September, and her Chancellor of the Exchequer Kwasi Kwarteng, persisted for several days in saying that it was necessary to “stay the course” and maintain this energy support plan. , despite the wave of controversy caused, including among the deputies of their own conservative party.
The cut in income tax for the top bracket, which would have fallen from 45% to 40%, had been particularly criticized, accused of favoring the wealthiest in the midst of the crisis in the cost of living in the United Kingdom.
Other tax cuts have also been announced, including the abolition of increases in corporate tax or social security contributions, and a suspension of environmental levies.
The plan as a whole, estimated at between 100 and 200 billion pounds by economists but whose financing and economic impact have not been fully quantified, had plunged the financial markets into turmoil. The pound plunged to an all-time low, and UK government borrowing rates jumped to their highest since the 2009 crisis, threatening the country’s financial stability.
The Bank of England had been forced to intervene in the bond market, on the back of concerns for financial stability, particularly for the situation of pension funds. In a rare intervention, the International Monetary Fund (IMF) had even asked London to review its copy. “We do not recommend massive, untargeted fiscal plans at this stage, as it is important that fiscal policy does not run counter to monetary policy,” the institution said.
“Trussonomics”: 3 things to know about Liz Truss’ shock program
What benchmarks in a constantly changing world?
Political uncertainties, scientific innovations, war in Ukraine, energy and ecological transition… How to understand these changes? How to position yourself? Every day, the 200 journalists from the “Echos” editorial staff help you decipher economic, political and international news through surveys, analyses, press reviews, chronicles and editorials. Our subscribers know that they can rely on these resources to better navigate our complex environment and make the best strategic decisions.
