STORY: The UK just got a historic package of tax cuts.
New finance minister Kwasi Kwarteng set out the measures in parliament on Friday (September 23).
“Our aim over the medium term is to reach a trend rate of growth of 2.5%. And our plan, Mr. Speaker, is to expand the supply side of the economy through tax incentives and reform.”
Tax cuts took the headlines among a slew of big measures.
Kwarteng eliminated the country’s top rate of income tax, and said he would trim a lower rate, too.
He also cut taxes on property transactions and scrapped a planned rise in corporate levies.
All told, the tax cuts are expected to cost around £45 billion per year - or about $50 billion.
That’s the biggest reduction in 50 years.
Kwarteng also costed the government’s plans for winter fuel subsidies at around £60 billion, or over $66 billion.
He says faster growth will pay for the tax cuts:
“That is how we will deliver higher wages, greater opportunities, and crucially, Mr. Speaker, fund public services now and into the future. That is how we will compete successfully with dynamic economies around the world. And that is how, Mr. Speaker, we will turn this vicious cycle of stagnation into a virtuous cycle of growth.”
Markets were alarmed, however.
Stocks fell and sterling tumbled to 37-year lows versus the dollar.
Some UK bond yields saw their biggest one-day jump in three decades.
With tax falling and spending soaring, many investors are concerned about the state of UK public finances.
Some economists fear the tax cuts could also further fuel inflation.
The opposition Labour Party called the measures a “desperate gamble”.