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The first person to "distribute money" to fight inflation? British Prime Minister's 'philosophy' of financial management

2022-09-04T04:17:53.014Z


The UK consumer price index (CPI) rose to 10.1% year-on-year in July, topping the G7 countries. The typical home energy price cap, which had been raised by 54% in April, will be raised by a further 80% in October to £3,549 a year. pre


The UK consumer price index (CPI) rose to 10.1% year-on-year in July, topping the G7 countries.

The typical home energy price cap, which had been raised by 54% in April, will be raised by a further 80% in October to £3,549 a year.

A third of households in the UK are expected to spend more than 10% of their net income on energy by January next year.


Inflation is undoubtedly the number one problem facing the next British Prime Minister, Liz Truss, who is now almost certain Money (handouts), but the immediate tax cut on the first day of taking office is the main policy.

If taxation means that the government takes money from the people, abolishing taxation means not taking money from the people—this doesn’t seem to be much different from “distributing money”.


Britain's economy will contract in the final three months of the year and inflation will hit 13% this year until the end of 2023, according to estimates by the Bank of England.

Goldman Sachs predicts that UK inflation will reach 22% in the coming year if natural gas prices are not reduced.

In the face of such pessimistic expectations, Tracy and his supporters have packaged them as a "declineist" discourse against the UK, describing tax cuts as the only way to protect the UK economy.

The main focus of the Zhuohuisi tax reduction plan is to cancel the original tax increase policy of his opponent, former finance minister Rishi Sunak, including a 1.25% increase in national insurance (for medical and social care expenses) implemented in April this year. , and the corporate tax rate originally scheduled to rise from 19% to 25% next year.

At the same time, Zhuohuisi also promised that there would not be any new taxes, including a "windfall profit tax" on energy companies that are extremely profitable under high energy prices. windfall tax).

Likewise, she promised not to cut government spending.

In addition, she will remove the green energy levy from energy bills and increase the tax exemption for married people.

Overall, the amount involved in the Zhuohuisi tax cuts ranged from £30 billion to £50 billion.

The picture shows that on July 16, 2022, former British Chancellor of the Exchequer Rishi Sunak (front row, second from right) conducted a canvassing campaign at the Freeport of Teesside (in northeast England).

(AP)

At the same time, she is expected to launch an emergency budget to deal with high living expenses immediately after taking office, citing time constraints, skipping the 10-week process by the Office of Budget Responsibility (OBR) to estimate the budget impact.

As the current business minister, Kwasi Kwarteng, who is expected to be appointed as finance minister, has indicated that "aid is coming", a more "money-sending" policy appears to be on the horizon.

There are different forecasts for its plans, including further subsidies for low-income people and retirees, a further increase in the upcoming £400 per household energy allowance, a reduction in overall or energy-specific value-added tax (the latter is Xin Weicheng's political platform), Implement price caps on energy companies (without government deficit subsidies, a variant of windfall taxes), etc.

Under the various policies of direct money distribution and similar distribution of money, some commentators believe that Zhuohuisi, who often compares Mrs. Thatcher's intentionally or unintentionally, is actually Turkish President Erdo Erdo, who is famous for "cutting interest rates to control inflation". A believer of Recep Tayyip Erdogan (Turkey inflation rate is now close to 80%).

The picture shows Turkish President Recep Tayyip Erdogan attends a press conference during a NATO summit in Spain on June 30, 2022.

(Getty)

Of course, at a time when the prices of necessities such as energy and food are soaring, it is often an art of balancing between controlling the price rise and helping people in need with their living expenses.

And while supporting living expenses, the government should also minimize the impact of its potential to drive up demand (for example, subsidy for energy bills are scaled down by usage, etc.).

Zhuo Huisi's banner of tax reduction is not targeted.

Regarding the issue of inflation, Zhuo Huisi probably took an overly literal interpretation of the phrase "inflation is a monetary phenomenon wherever and whenever" by economist Milton Friedman. Claims to review parliamentary mandates for the Bank of England.

Although the outside world does not know how Zhuo Huisi will "cut the knife" to the Bank of England, if it is common sense, even if the central bank's inflation target is adjusted, or it is replaced with other inflation-related targets (such as nominal GDP growth, etc. ), the current double-digit inflation must also be adjusted through tightening monetary policy.

This will make Zhuohuisi's loose fiscal policy and the central bank's tight monetary policy appear in a contradictory situation of offsetting each other.

When the government sends money to stimulate the economy, the central bank uses high interest rates to reduce the willingness of individuals and businesses to spend.

As a result, the British government probably just increased its debt for no reason and raised its cost of borrowing.

(In fact, Britain's current two-year bond yield is higher than Italy's.)

Looking at major countries in the world today, when it comes to controlling inflation, Erdogan has already represented the deviant in monetary policy, and in the aspect of fiscal policy, Zhuo Huisi may also be a contrast.

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Source: hk1

All news articles on 2022-09-04

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