These measures come on top of a major government spending plan to cap household and business energy bills this winter, it could cost the UK government around £100 billion, or around $113 billion, over the next two years.
The aim is to stimulate growth in an economy facing weak growth and high inflation, partly caused by an energy price shock natural gas price of the war in Ukraine, as well as an American-style labor shortage. Absent government bailouts, economists have warned that many Britons will be unable to pay their energy bills this winter and thousands of businesses will go bankrupt…
The government is also planning a campaign of deregulation, particularly in the financial sector, in an attempt to strengthen London’s role as a business centre.
Taken together, the Truss Plan is a bold but risky bet that the payoff from higher growth will more than offset the risks of a sharp expansion in the government’s deficit and debt at a time of high inflation and rising interest rateswhich will increase the cost of servicing debt and could undermine investor confidence in the UK economy and its currency.
Here is more from the WSJ. Somewhere else Ryan Bourne covers the tax changes in more detail:
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- recent increases of 1.25% in the national insurance tax for employers and employees have been reversed;
- the basic income tax rate would be reduced from 20% to 19%;
- the top marginal tax rate of 45% would be eliminated entirely, making 40% the highest official marginal rate bracket;
- stamp duty (property transaction tax) on all transactions up to a value of £250,000 and £425,000 for first-time buyers has been removed;
- the planned increase in corporate income tax was dropped (and therefore maintained at 19%);
- full and immediate expensing in the corporation tax code for the first million pounds invested in plant and machinery would become permanent;
- new investment zones would be introduced, in which there would be 100% relief from the enhanced capital allowance in the first year for plants and machinery and 20% relief per year for buildings and structures.
And on the rules:
Flight details the negative reaction of UK bond, equity and currency markets. Furman and Buiter are very negativeare too. In my opinion, these are mostly good policies, but how will all this borrowing go through? And is the Bank of England ready to make the appropriate compensation? I will be covering these policies as they unfold…