With inflation skyrocketing, a depressed economy and the pound sterling at half mast, Prime Minister Liz Truss hopes to administer a life-giving potion to the country.
Freezing energy bills, tax cuts but also hardening of social minima and deregulation: London unveils on Friday a cocktail of measures to stimulate growth and reduce inflation, with potentially severe side effects for public finances. With inflation nearing 10% at a 40-year high, an economy heading into recession and a depressed pound, the government of new Prime Minister Liz Truss is hoping to administer a reviving potion for households and businesses alike .
“Fueling growth by lowering taxes and eliminating regulation is the central mission of this government”comments a statement from the Treasury published overnight from Thursday to Friday. “This is how we will reverse the vicious circle of stagnation” economic, and “we will boldly and shamelessly pursue growth, even when it means making tough decisions”insists Chancellor of the Exchequer Kwasi Kwarteng, who will unveil his measures in Parliament from 08:30 GMT.
In the midst of a purchasing power crisis in the United Kingdom, the flagship measure of the «mini-budget», as it is dubbed, will freeze energy bills for two years, at £2,500 for an average household, a government-funded £1,000 rebate. Businesses are not to be outdone and will see their bills covered for around half for six months. Gas and electricity prices have soared since the start of the war in Ukraine, due to limitations on the supply of hydrocarbons from Russia. However, the United Kingdom is particularly dependent on gas compared to a country like France, where nuclear power dominates.
The heralds of post-Brexit deregulation
Alongside this massive support for energy bills, which was advocated by the Labor opposition and is expected to cost tens of billions of pounds, the Truss government’s cocktail of measures includes a healthy dose of Tory prized revenue, including cuts of taxes. The lowering of social security contributions is confirmed for companies (“social levy”) as for households – welcomed in particular by the British Chambers of Commerce – as well as the suspension of certain ecological levies. According to the British press, the Truss government is also planning to lower the tax on real estate transactions.
From New York, where she was attending the UN General Assembly, the Prime Minister acknowledged that all of these measures will above all favor the wealthiest, on the very day that American President Joe Biden castigated the “trickle down economics”. “, the trickle-down economy, supposed to fall from the richest to all layers of the population.
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Another mantra: Chancellor of the Exchequer Kwasi Kwarteng prides himself on ‘get Britain back to work’. While the British labor market is suffering from a serious shortage of workers which is penalizing almost all sectors of the economy, the Treasury has announced that access to minimum income (“universal credit”) will henceforth be accompanied by obligations for certain people who work less than 15 hours per week. This could include the fact of “apply for a job, participate in job interviews”adds the Treasury, which also wants to encourage the over 50s to return to the labor market, from which they have come out in large proportions since the pandemic, in particular due to long illnesses.
In an attempt to attract investment in the United Kingdom and in particular in the financial sector of the City, Kwasi Kwarteng and Liz Truss also want to appear as heralds of post-Brexit deregulation. The British government “wants to end all laws emanating from the European Union by December 31, 2023 as part of a new post-Brexit freedoms law”tabled in Parliament on Thursday and intended to “eliminate unnecessary bureaucracy”, according to Minister for Energy, Business and Industry Jacob Rees-Mogg. According to the British press, London wants in particular to abolish the limits inherited from the EU on City bonuses as well as a tax on sugary drinks intended to fight against obesity.
Finally, the Treasury aims to create 38 zones “investment” deregulated, resembling the free ports project of the previous Conservative government.