Britain’s new government on Friday unveiled multi-billion dollar measures aimed at helping households and businesses hit by decades of high inflation.
Finance Minister Kwasi Kwarteng, fresh from his appointment by new Prime Minister Liz Truss, will present his mini-budget at 0830 GMT.
Kwarteng announced late Thursday that he would scrap Truss’s predecessor Boris Johnson’s plan to increase taxes on salaries.
The news came after the Bank of England warned that Britain was slipping into recession as soaring fuel and food prices took their toll.
– growing economy –
“Taxing wealth has never worked,” said the Chancellor of the Exchequer.
“In order to raise living standards for all, we don’t have to apologize as our economy grows.
“Tax cuts are crucial for this.”
He should also reverse Johnson’s proposed tax hike on corporate profits.
Kwarteng will also set out the cost of a decision to cap energy costs on Friday.
He could scrap a bonus cap for bankers that has been in place since 2014, a legacy of EU membership.
Truss took office on September 6, two days before the death of Queen Elizabeth II, after winning an election by Conservative Party members on a tax-cut platform.
While the tax reversals aren’t harsh cuts, the government could announce reduced levies on home buyers on Friday.
Analysts at British bank Barclays estimate the cost of the government’s full package could be £235 billion ($267 billion), far more than the job protections program during the pandemic.
– Cap energy costs –
Britain on Wednesday announced a six-month plan to pay around half of energy bills for businesses.
Truss had already introduced a two-year energy price freeze for households. But the caps won’t take effect until Britons face another big hike in gas and electricity bills in early October.
The average household’s annual energy bill will be capped at £2,500 by 2024, but many are expected to spend more to keep homes warm in winter.
Wholesale electricity and gas prices for businesses – as well as charities, hospitals and schools – will be capped at half what they are likely to cost on the open market.
UK energy companies such as BP and Shell will not benefit from the cap as they enjoy rising profits after major oil and gas producer Russia invaded Ukraine.
Britain’s main opposition party, Labor, has called for the government to extend a windfall tax on energy companies introduced earlier this year by former Finance Minister Rishi Sunak.
But Truss ruled out such a move, arguing that additional taxes would hamper economic recovery and energy majors’ efforts to transition into greener businesses.
Growth is at the heart of the new government’s policies, and Kwarteng on Wednesday outlined plans to restructure the welfare system.
Around 120,000 part-time workers could face a benefit cut unless they take new steps to look for more work, he will confirm.
Kwarteng has described the policy as a “win-win” and touted it as a way to fill 1.2 million vacancies in the UK.
– Strikes, rate hikes –
As prices soar, wage values ??are eroding, sparking some of the biggest strikes Britain has seen in more than 30 years.
From the railway sector to postal services to lawyers, tens of thousands of workers are taking industrial action to get higher wages.
In addition, rising interest rates hurt consumers and businesses.
This also increases the cost of government borrowing.
The Bank of England raised interest rates by another half a point to 2.25 percent on Thursday to combat high inflation and warned that the UK could slide into recession in the current third quarter.
