The Brief: After yesterday’s 0.5% interest rate hike announcement by the Bank of England (BOE), today marks another pivotal point in the UK economy as chancellor Kwasi Kwarteng formally announced the government’s massive plan to cut taxes. Ahead of today’s announcement, Kwarteng already proclaimed a reversal of the National Insurance hike that was instituted in April. As he stood in the House of Commons, he outlined the government’s plans to boost the economy during his mini-Budget speech: committing to the energy bill freeze, getting 120,000 people on credit benefits to get back to work, instituting accelerated tax reliefs for buildings, simplifying tax measures, and raising the stamp duty threshold to £425,000.
Why It Matters: Shadow UK chancellor Rachel Reeves has heavily criticised Kwarteng’s solutions including Liz Truss’ policies. She’s expressed her concern over the lack of windfall tax to support the payment for its energy cap. Meanwhile, after Kwarteng’s speech, UK government bonds and stocks tumbled.
Finanze® Foresights: These tax cuts benefit wealthy households and enterprises the most. Getting them to spur private economic activity through higher savings and spending can hopefully give the economy a rebound. Truss’ trickle-down economics is expected to raise domestic consumption as the government counts on the rich to save more and channel these into the banking sector. However, taxpayers need to be aware of the imminent budget deficit from these policies since no windfall tax has been mentioned by Kwarteng.
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