Home World London launches a shock tax cut for households and businesses. And the pound collapses

London launches a shock tax cut for households and businesses. And the pound collapses

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London launches a shock tax cut for households and businesses.  And the pound collapses

The biggest tax cuts in half a century: the new British government has swept away the last ten years of caution on public finances by announcing a series of interventions aimed at reviving economic growth. “It is the beginning of a new era”, the new Chancellor of the Exchequer Kwasi Kwarteng declared in Parliament, presenting a radical mini-budget to transform “the vicious circle of stagnation into the virtuous circle of growth”. The goal is to return to GDP growth by 2.5%, in stark contrast to the current recession situation confirmed this week by the Bank of England.

The plan includes massive tax cuts of 45 billion pounds for both citizens and businesses. The government abolished the highest tax rate, which was 45% for incomes over £ 150,000 per year, and reduced the minimum rate from 20% to 19%, a measure that affects 30 million taxpayers and will cost £ 5 billion a year to the Treasury.

Businesses will not have to face the projected increase in corporate taxes from 19% to 25% that was decided by the previous government and which Kwarteng abolished, giving up an expected revenue of 12 billion a year. Also canceled the increase in social security contributions for workers and employers, which will cost 14 billion pounds.

The Chancellor has abolished the ceiling on bankers’ bonuses established by the European Union after the great financial crisis, both to underline that London after Brexit intends to distance itself from Brussels, and to send a signal of support to the City as a global financial center.

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Public debt destined to increase

Given that the government has ruled out the imposition of taxes on the extraordinary profits of companies in the energy sector, the expensive measures announced will further increase the public debt, which has already risen during the pandemic. The Treasury then revised the total from £ 161 billion in April to £ 234 billion.

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