David Milliken and Andy Bruce
LONDON (Reuters) – New Finance Minister Quasi Kwaten announced on Friday an economic agenda aimed at In pushing the UK out of the stagnation cycle and into a new era
Kwarteng affirmed Prime Minister Liz Truss’s goal of doubling the UK’s trend rate of annual economic growth to 2.5% for the first time Given a price tag on her spending plan, Kwarteng said.
Announced support for home energy bills by Truss will cost 60 £1 billion over the next six months. GBP/USD falls to a fresh 37 year low of $1 as Kwarteng updates parliament. 60.
“Our plan is to expand the supply side of the economy through tax incentives and reforms,” Kwarteng said.
“This is how we will work with dynamic economies around the world. This is how we will turn a vicious circle of stagnation into a virtuous circle of growth.”
Truss beat former finance minister Rishi Sunak to lead the Conservative Party – and with it’s the prime minister’s job – largely by opposing Sunak in the COVID- Tax hikes announced after the pandemic.
Investors will be closely watching the UK Debt Management Office’s new borrowing plan, which will be announced after Kwarteng’s closing speech.
There is little hostility towards Kwarteng in the market backdrop, with GBP/USD underperforming almost any other major currency.
Much of the decline reflects rapid rate hikes by the Federal Reserve to curb inflation – which has thrown markets into disarray – but some investors are also wary of Truss’ willingness to borrow large sums to fund growth manner.
Asked on Friday how Britain would finance its spending while cutting taxes, a cabinet minister said economic growth was the answer.
A Reuters poll this week found that 55% of international banks and economic consultancies surveyed judged to be British People
Friday’s consumer morale figures underscore the challenges facing Kwarteng, with household sentiment falling to its lowest point since
records .
The Bank of England said on Thursday that Tesla’s energy price cap will limit inflation in the short term, but government stimulus could push inflationary pressures further, approaching a period of battling inflation 30 year high.
Institute for Fiscal Studies director Paul Johnson) th ink tank said the Truss and Kwarteng tax cuts could be the largest since 1988, And risk setting the UK’s public debt on an unsustainable path.
IFS and Citibank USA estimate that home energy subsidies will cost around 120 £1 billion over two years, while six months of commercial energy subsidies It will cost 1148 one billion pounds.
These are one-offs, while IFS’s bigger focus is on 30 £1 billion permanent tax cuts – First 14 £1 billion payroll tax reduction, confirmed on Thursday, and 19 £1 billion in corporate tax cuts.
However, despite extensive tax and spending measures, the government has decided not to publish new forecasts from the Office of Budget Responsibility, the government watchdog overseeing growth and borrowing, until a formal budget later this year.
Kwarteng confirms that OBR will issue its full
“Fiscal responsibility is critical to economic confidence and this is something we will continue to committed to the road,” he said.
($1=0.8872 pound sterling)
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