Posted Sep 29, 2022, 10:29 AMUpdated on Sep 29, 2022 at 12:13 PM
Still no turn in sight on the side of the British government, despite the slippage of the pound and the emergency intervention on Wednesday by the Bank of England to appease the financial markets. British Prime Minister Liz Truss, who spoke Thursday morning on regional radio, assured that she had “the right project”.
“I am very clear that the government has done the right thing,” she defended at BBC Leeds. She highlighted government intervention in the energy market, where tariffs will be capped to protect households from soaring gas prices. “We had to take decisive action to help people for this winter and the next,” she said, taking on “difficult and controversial decisions. »
45 billion tax cuts
More than intervention in the energy market, it was the fiscal measures announced by its finance minister, Kwasi Kwarteng, that set the fire to the powder. The “Trussonomics” provide 45 billion pounds of tax cuts by 2026, largely targeted on the wealthiest. Representing nearly 1.5% of GDP, this tax relief is the most massive in the country since 1972.
Kwasi Kwarteng’s intervention has since Friday caused the pound to slide and interest rates to soar. This Thursday morning, the British currency fell again against the dollar. It lost 0.85% to 1.0797 dollars early in the morning. Government bond rates rose slightly, after falling sharply on Wednesday under the effect of the action of the Bank of England.
Global phenomenon
But for Liz Truss, the fall of the pound is linked to a global phenomenon. “Currencies are under pressure around the world,” she said. Asked how tax cuts for the wealthy would help the poorest, she replied that she was lowering taxes “for everyone”. A vision that contradicts the analyzes of the think tank Resolution Foundation, according to which the vast majority of the plan will benefit the wealthiest 5%.
Asked about rising mortgage rates which are already hurting borrowers, she said interest rates were within the purview of the Bank of England and were rising all over the world.
Tory MP Chris Philp, Treasury Secretary, justified the UK government’s program on Radio 4: “If we can get economic growth going again, it will lead to higher wages, better jobs, and it will ultimately pay for the taxes that finance public services, such as health, etc. “.
These statements come after a warning from the International Monetary Fund (IMF) on Wednesday. “Given the high inflationary pressures in many countries, including the UK, we do not recommend large, untargeted fiscal programs at this stage, as it is important that fiscal policy does not work against the grain of the tide. monetary policy,” the organization said.
