Financial Associated Press, October 4 (Editor Zhao Hao) On Monday (October 3) local time, British Chancellor of the Exchequer Quasi Kwarten said in a statement that he would abandon the previously proposed tax cut plan for high-income earners.
Previously, the British government announced a “mini-budget” consisting of a series of measures on September 23, with a view to boosting the economy. One of the tax cuts – a plan to reduce the top 45% income tax on people earning more than £150,000 a year (the richest 1%) to 40% has drawn widespread skepticism and criticism.
Earlier on Monday, Kwoten wrote on the social media platform that the package was a distraction from the government’s response to economic challenges, leading to the decision to abandon the plan to cut taxes for high earners.
Kwarten said, “We understand and listened to the public opinion. Abandoning it allows us to focus on the most important parts of the budget.” British Prime Minister Truss also retweeted Kwarten’s statement, emphasizing that “now the focus is is to build a high-growth economy.”
(Source: Truss Twitter) Mini-budget controversy continues
Media analysis pointed out that while the “mini budget” proposed a large-scale energy support plan, it also included the cancellation of the company’s tax increase plan, the cancellation of banking bonuses, and the reduction of stamp duty on real estate purchases, with a total tax reduction of 45 billion pounds.
Although this tax cut plan for high-income earners only accounts for about 2 billion pounds of tax cuts in the “mini budget”, it has suffered from soaring household energy bills, high prices, and unclear pension payments in the UK. The opposition was the loudest.
According to calculations by the British agency, if implemented according to the unrevised “mini-budget”, a wealthy British family will receive about 4,700 pounds in subsidies next year, while an average family can receive less than half of the subsidy.
Last week, the International Monetary Fund (IMF) also publicly advised the UK government not to take the fiscal move because it “could increase inequality”.
In addition, the budget could leave the UK with high debt at a time when interest rates are rising, and Moody’s, one of the world‘s three largest rating agencies, wrote very directly that the UK government’s massive, unfunded tax cuts plan will jeopardizing its credit rating, threatening the country’s credibility with investors.
Budget turn still difficult to save Trus approval ratings
In the days following the announcement of the “mini-budget”, the British financial market experienced a tragic transaction, in which the pound fell to its lowest level in nearly 51 years at 1.0327, and the yield of the British 10-year government bond also saw its largest single-day increase in 40 years. The highest level since November 2008 was again brushed.
But after the British government announced today that it would abandon the tax cut plan for high-income earners, the pound rose against the dollar, rising nearly 1% on the day, and has recovered to the level before the plan was announced. In addition, the Bank of England reconfirmed that it will purchase long-term British government bonds before October 14, and the yields of British 2-year, 10-year and 30-year government bonds also recorded varying degrees of decline.
Speaking at the Conservative Party’s annual conference shortly before publication, Kwarten acknowledged “some volatility” with his economic plans. “It’s been tough, but we need to focus on the job at hand, we need to move on and not get distracted,” he said.
While Britain’s financial markets have gotten a respite, Kwarten and Truss could be under more pressure and their Conservative Party is in jeopardy. More than half of the British public believe Truss should resign as prime minister, a poll on Friday showed, just 25 days after she officially took office earlier this month.
Separately, another poll at the end of September showed the opposition Labour Party leading the ruling Conservatives by 33 percentage points, the highest record for Labour since 1998. “The damage from the controversial tax cuts has been done and now we look incompetent,” said a Conservative MP.