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Finance Minister Kwasi Kwarteng in Downing Street: He wants to relieve the burden on citizens with tax breaks
Photo: Aaron Chown / dpa
Great Britain's Finance Minister Kwasi Kwarteng has announced an extensive package of aid to cushion high energy prices and tax cuts.
The aim is to boost growth in the British economy, he said in Parliament.
According to economists, the measures could cost up to 200 billion pounds – the equivalent of almost 230 billion euros.
It is unclear whether the debt will continue to rise as a result or whether the measures will pay off on their own, as the government hopes.
In the forex market, the pound slipped to its lowest level against the dollar in 37 years.
As finance minister, Kwarteng has to contend with inflation of around ten percent, an impending recession and a weakening pound, which, according to his announcements, has again lost significantly against the dollar.
The new package aims to achieve average growth in the British economy of 2.5 percent, as Kwaiteng said.
At the moment the British economy is teetering on the brink of recession.
The program is to be financed with higher national debt.
However, the measures he is planning could push up the national debt, as he says the cap on energy prices alone will cost the state around £60 billion in the first six months.
However, Kwarteng emphasized in parliament: »In the worst energy crisis in generations, the government is on the side of the people.«
Energy price cap provided
The key measure of the 'mini-budget', as it is called in London, will be a two-year cap on energy prices - at £2,500 for the average household, meaning a government-funded rebate of at least £1,000.
For companies, half of the invoices should be taken over for six months.
Gas and electricity prices have skyrocketed in Britain, as in other European countries, as a result of the Russian war in Ukraine.
He also wants to lower taxes to boost growth, thereby breaking the vicious circle of stagnation.
“We've lingered in this country too long arguing about redistribution.
Now we're focusing on growth, not just how we tax and spend," Kwarteng said.
Among other things, previously decided increases in social security contributions, corporation tax and alcohol tax are to be reversed.
At the same time, the base rate of tax on income up to around £50,000 a year is to be reduced from 20% to 19%.
Below £12,000 there is no income tax.
The top rate of income tax for high earners from 150,000 pounds a year is also to be reduced from 45 percent to 40 percent.
The threshold for the accrual of real estate transfer tax should also increase.
Overall, the government estimates that the measures will save taxpayers around £45 billion by the 2026/27 tax year.
A precise estimate by the independent authority Office for Budget Responsibility should not be available until the end of the year.
»Win-win situation for the richest«
The opposition criticized the measures as misguided and primarily aimed at the wealthy.
"It's a budget without numbers, a menu without prices," said Labor Party finance spokeswoman Rachel Reeves.
The new prime minister, Liz Truss, of the Conservative Tories herself has acknowledged that her course tends to favor the well-off.
The opposition now accused the government that capping energy prices would cost billions and would have to be financed on credit, which would later fall back on the taxpayer.
Economists have also expressed concerns about potentially excessive debt, and the aid organization Oxfam spoke of a “win-win situation for the richest”.
The economist and Allianz advisor Mohamed A. El-Erian fears: "If this continues, and in combination with the fall of the currency, it will probably result in more aggressive politics." The current development of the pound is "absolutely unusual". , he tweeted.
Kwarteng also announced the UK would reintroduce VAT exemption for foreign visitors in a bid to boost the country's sluggish retail trade.
"Britain receives millions of tourists every year and I want our major roads and airports, our ports and our shopping centers to feel the economic benefits," he said in Parliament.
Previous tax-free shopping was abolished at the end of 2020.
Kwarteng said the government will replace the previous paper-based system with a digital one.
"And that will be implemented as soon as possible."
Linda Ellett, head of hypermarkets, retail and leisure at KPMG in the UK, said the move will increase the UK's competitiveness in attracting international visitors.
"This is all the more important as we look for ways to create economic growth, bring international tourism back to pre-pandemic levels and deal with rising high-street inflation."
ani/dpa/Reuters
