Inflation: Britain's new government goes on the offensive
The British Chancellor of the Exchequer, Kwasi Kwarteng, intends to administer a shock to the economy of his country struggling with annual inflation of more than 10% and a major energy crisis.
Freezing energy bills, tax cuts, hardening of social minima and deregulation: London unveiled a cocktail of measures on Friday to revive growth on the mat and try to mitigate inflation, with side effects severe potential for public finances.
Faced with near-single-digit inflation, an economy that may already be in recession, subdued confidence and a depressed pound, new Chancellor of the Exchequer Kwasi Kwarteng hopes to administer a life-giving potion to households and businesses.< /p>
But the immediate reaction of the markets, worried about the side effects of the remedy on public finances, was very negative vis-à-vis the pound, which fell Friday at midday , to move near its historic low against the dollar.
During the worst energy crisis in generations, this government is with the people, he said during a presentation to Parliament, adding that he wanted to reform the supply side of the the economy by lowering taxes to boost growth.
This is how we will reverse the vicious circle of economic stagnation, he insisted .
A flagship measure of the mini-budget, energy bills are frozen for two years, at 2500 pounds for an average household, a rebate of at least 1000 books funded by the government.
Businesses are not left out and see their bills covered by around half for six months.
Gas and electricity prices have soared since the start of the war in Ukraine, because of limitations on the supply of hydrocarbons from Russia, and the United Kingdom is particularly dependent on gas.
This massive support for energy bills should cost 60 billion pounds for the first six months, quantified Mr Kwarteng.
The cocktail of measures also includes generous tax cuts , returning in particular to increases decided by the previous Conservative government: lowering of social contributions, the tax on real estate transactions and the maximum rate of income tax, and suspension of certain ecological levies.
< p class="e-p">Prime Minister Liz Truss has herself acknowledged that her government's policy will mostly favor the wealthy.
Instead of defending working people, the Conservatives are protecting the profits of giants energy companies, which have benefited from soaring oil prices since the start of the war in Ukraine, accused Labor finance chief Rachel Reeves.
She notes that the energy price cap will be financed by borrowing, an addition that should fall on the taxpayer. The total cost of the package, including tax cuts, is undisclosed, but economists put it at more than £100 billion, with Barclays Bank even talking about £200 billion. billion.
No economic forecasts, no assessment of the impact of large (tax) concessions on public borrowing. It's very damaging to the UK's reputation as a fiscally responsible nation, blasted ex-Bank of England member Andrew Sentence. /p>
Investors reacted by selling British debt securities, whose ten-year borrowing rates jumped to 3.84% on Friday, a high since 2011 .
The pound, meanwhile, already at its lowest levels since 1985, plunged 2% and threatened to break below the $1.10 threshold, approaching its all-time high. weakness since the end of the gold standard at $1.0520.
Many critics also denounced a policy that favors those who have the most means, such as the NGO Oxfam, which speaks of a win-win policy for the richest.
The employers' union CBI welcomed the rapid and decisive action of the government to provide substantial short-term solutions to businesses.
Another Conservative leitmotif hammered home by the new Chancellor of the Exchequer: getting the UK back to work, as the UK job market suffers from a serious lack of labor that is hampering the job market. activity.
Access to minimum income (universal credit) will thus be accompanied by obligations for some people who work less than 15 hours a week.
In order to attract investment in the UK, Kwasi Kwarteng and Liz Truss also want to advertise themselves as heralds of post-Brexit deregulation, including the abolition of limits inherited from the EU on City bonuses.
The government also aims to create 38 zones of x27;deregulated investment, resembling the previous Conservative government's freeports scheme.
Mr. Kwarteng also warned that the right to strike will be limited to cases where wage negotiations have failed, to mitigate the impact of industrial action.