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These are the measures of the United Kingdom to fight against inflation and recession

Minister Kwarteng holds a folder that says “The Growth Plan 2022”.

Photo: AFP Agency

The British government presented this Friday before parliament a cocktail of measures to relaunch the economy and reduce inflation, which includes the freezing of energy bills, a reduction in taxes and deregulation in the banking sector.

Conservative Prime Minister Liz Truss’s package may have serious knock-on effects for public finances in a UK on the verge of recession and with inflation hovering around 10%, a 40-year high.

But British minister Kwasi Kwarteng hopes to ease household and business economies and “reverse the vicious cycle of stagnation”.

Also read: Can the United States fight inflation without sinking the labor market?

The main measure of this “mini-budget”, as he called it, will be the freezing of energy bills for two years, saving about 1,000 pounds (about $1,115) a year for the average household.

In the case of companies, the government will finance almost half of the invoices for six months. Gas and electricity prices have skyrocketed since the start of the war in Ukraine, as a result of limitations in the supply of hydrocarbons from Russia.

$67 billion

Kwarteng estimated this Friday at 60,000 million pounds (about 67,000 million dollars) the cost for the first six months of the energy aid announced for individuals and companies.

The minister announced, on the other hand, the annulment of a limit on bonuses for bankers, of 200% of the annual salary so far, and a reduction in the maximum percentage of income tax, from 45 to 40%.

“We need international banks to create jobs here … and pay taxes here in London, and not in Paris, Frankfurt or New York,” he said, ending a rule inherited from the European Union.

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The British labor market suffers from a labor shortage, access to the minimum income (“universal credit”) will be accompanied by obligations for some people who work less than 15 hours a week.

This could include “applying for a job, participating in recruitment interviews,” according to the finance ministry, which wants to encourage people over 50 to return to the labor market, which they have left in large proportions since the pandemic, especially as a result of long illnesses.

Income tax and home purchase

Kwarteng revealed that “the basic rate of income tax will be lowered to 19% in April 2023, a year earlier (than expected)”, which implies a “tax cut for more than 31 million people in just a few months ” and “the highest rate of 45%” of that tax will be abolished.

“This will simplify the tax system and make the UK more competitive,” said Kwarteng, who pointed out that the measure “will encourage growth and benefit the entire economy and the entire country.”

Likewise, the Executive plans to reduce the tax on the purchase of housing (the so-called “stamp duty”) in England and Northern Ireland, raising the price of housing to 250,000 pounds (286,000 euros) from which that tax must be paid. tribute.

For first-time property buyers, the threshold will be raised from 300,000 pounds to 425,000 pounds (from 343,000 euros to 487,000 euros), it said.

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“For the richest”

Kwasi Kwarteng also warned that the right to strike will have a stricter framework and will be limited to cases in which salary negotiations have failed, after the previous government had already authorized the use of temporary staff to mitigate its impact.

The total cost of the package of measures was not disclosed, but economists evaluated it at more than 100,000 million pounds, and the Barclays bank even spoke of 200,000 million.

Liz Truss herself recognized that her government’s policy will favor above all the richest.

“Instead of defending working people, the Conservatives are protecting the profits of the energy giants”, which have benefited in recent months from the soaring prices of hydrocarbons, accused the Labor party responsible for finances, Rachel Reeves.

Reeves stated that the energy measures announced by the Conservatives will be financed with public debt, and therefore on the backs of taxpayers.

The NGO for the fight against poverty Oxfam referred on its side to a policy “that is all profit for the richest”.

After the announcements, investors reacted by selling British debt securities, whose ten-year yield rate rose to 3.84% this Friday, its highest level since 2011.

The pound, for its part, which is already at its lowest values ​​since 1985, lost 2%, around the threshold of 1.10 per dollar.

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Source: Elespectador

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