Prices are skyrocketing. The economy has stopped growing. This is what Britain has in common with many countries in the world right now. Nevertheless, the British are in greater political chaos than others. Why? Because the government has committed a gigantic mistake. At least that’s what several financial circles think, which we refer to further down in the text. But Boris Johnson’s successor is currently standing his ground. Cost crisis The price increase in Great Britain is around 10 per cent. Things therefore cost 10 percent more than last year. People’s wages have not grown nearly as much. As a result, people have received significantly worse advice. This has led to a cost crisis. Millions of Britons are no longer able to pay their bills. This also increases the queues where it is possible to get free food. The manager of such a food station tells news that the number of visitors has increased more than 20-fold recently. Russia’s war against Ukraine gets much of the blame. There has been less energy on the international market when Russian oil and gas are no longer an option. This increases prices. The same applies to many foods. Tax cuts The cost crisis and the financial situation are the first things Liz Truss tackled when she took up her job as Prime Minister almost four weeks ago. First, she launched a plan to help people with their electricity and gas bills. She has limited how much energy prices can increase for consumers. It will help many through the winter, and also limits inflation. Prime Minister Liz Truss and Finance Minister Kwasi Kwarteng. Photo: DYLAN MARTINEZ / Reuters But then Finance Minister Kwasi Kwarteng presented plans for drastic tax cuts last Friday. The aim is to stimulate investments that will generate growth in the economy. British tax levels have reached their highest level in 70 years, and the new Conservative government doesn’t like it. The general tax level will be reduced from 20 to 19 per cent. The top tax of 45 per cent for income over £150,000, or close to NOK 1.8 million, will be removed completely. The tax of 40 per cent on income over £50,271, or around NOK 600,000, is retained. In addition, the government refrains from raising corporation tax from 19 to 25 percent, as the previous conservative government proposed. Tax cuts worth £45 billion, over NOK 500 billion, are to be financed with borrowed money. The reactions were not long in coming. The collapse of the pound The British pound plunged to a historic low against the US dollar when the stock exchanges opened after last weekend. The market’s response was unequivocal; confidence in the British economy was significantly weakened. Thus, the economic chaos was a fact. The International Monetary Fund (IMF) went public and criticized the British government’s tax policy. It is a rare item. The tax cuts will lead to increased differences and push prices further up, the IMF’s judgment read. In its statement, the International Monetary Fund (IMF) writes, among other things, that cutting taxes now will lead to increased differences. Photo: Screenshot IMF Former British central bank governor Mark Carney’s criticism was no milder. He said in an interview with the BBC on Thursday that the government is undermining central financial institutions’ efforts to curb inflation. He called for more information about funding and how the tax cuts will lead to growth in the economy. The only thing the government has said about it is that the money will be borrowed. That the UK has the second lowest national debt of the G7 countries and can stand it. And there will be more details towards the end of November. So in two months. Meanwhile, the market has to guess, and the uncertainty is shown in the weakened confidence. Admittedly, the week ended better than it started for the pound, which strengthened since bottoming out on Monday. It happened thanks to the intervention of the British central bank. The central bank in crisis mode The first thing the Bank of England did was to say that it is prepared to raise the key interest rate as much as the situation requires. The markets believe it could rise from 2.25 to 6 percent. The British central bank Bank of England. Photo: ISABEL INFANTES / AFP The expectation of a sharp rise in interest rates has led to as much as 40 per cent of all loan products now being withdrawn from the British market, reports Moneyfacts. As a result, overnight it has become both more difficult and more expensive to borrow money in the UK. This is in addition to the many other increased expenses people are struggling with, and could lead to a collapse in the housing market. And when the value of government bonds suddenly began to plummet, the central bank went into full crisis mode on Wednesday. It then intervened to save the values of many British pension funds, which have much of their capital in these bonds. People’s pension payments were at risk. The central bank began buying 65 billion pounds worth of government bonds. It corresponds to approx. NOK 750 billion. The plan was actually to sell the bank’s government bonds, but now it is doing the exact opposite. In other words, the central bank, the Bank of England, stepped in and saved British pensioners from the consequences of the government’s economic policy. The government stands its ground Prime Minister Liz Truss has so far resisted the pressure to reverse the tax cuts for the richest. Nor has she fired the finance minister, which some believe could be her way out of the crisis. She has admitted that the tax cuts could lead to short-term disruptions in the economy. But believes that the measures in the longer term should make the British economy grow again. So she stands her ground. But the pressure is increasing. Liz Truss believes the tax cuts will lead to increased investment and growth in the British economy. Photo: DANIEL LEAL / AFP Four recent opinion polls show that voters do not trust the governing party. An opinion poll from YouGov shows that Labor now has a full 33 percentage point lead over the Conservative Party. Another three polls show 21, 19 and 17 point leads for the British opposition party. Today, Liz Truss gathers the Conservative Party for a national meeting. She has the support of communities that believe in her financial plan. Who thinks the central bank is wrong. But she also has to endure criticism from her own people. British media reports that demands have begun to come from the party’s parliamentarians that she must resign. So now she has to convince her own. She has to convince the voters. And she has to convince the financial markets. It’s no small job.
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The pound plunged and the pressure increases against Liz Truss – news Urix – Foreign news and documentaries
