DUK Prime Minister Liz Truss’s government is withdrawing most of its recently announced tax breaks in a bid to deal with the country’s financial chaos. In addition, the term of the state energy price cap is to be shortened, as the new Treasury Secretary Jeremy Hunt announced on Monday in a short-notice statement on the country’s budget. “The most important goal for our country now is stability,” said the Chancellor of the Exchequer.
The state energy price cap was intended for a period of two years. Now it is to be limited to a period of six months for the time being. The conservative government also announced at the end of September that it would lower the basic income tax rate from 20 to 19 percent, collect a previously planned increase in corporate tax and grant further tax breaks. All of that is now dropped.
The background to the 180-degree turnaround is that the financial markets went crazy after the announcement of massive tax breaks without a counter-financing plan. Investor confidence in the UK government appeared to have been completely lost. The pound plummeted against the US dollar. The Bank of England had to intervene several times and buy government bonds. Rising interest rates on home loans exacerbated the cost of living crisis for many homeowners.
On Friday, Truss fired her former finance minister, Kwasi Kwarteng, announced a partial departure from her tax policy and appointed Hunt. Now she followed suit. It is questionable whether Truss can still save her office. In particular, the capping of energy prices for households and companies was considered their most important political project. The fact that she now has to backtrack here is considered an admission of a total failure.
Truss has been under massive pressure for days. Even the American President Joe Biden criticized their now discarded tax plans. During a visit to Oregon state over the weekend, Biden said he didn’t agree with the approach of rolling out tax breaks for the super-rich at a time like this. “I wasn’t the only one who thought this was a mistake.” It’s not up to him, it’s up to Great Britain to judge.
Biden was speaking to reporters during a stop at an ice cream parlor in Portland. It is unusual for a US President to so clearly criticize a domestic policy decision by a close ally.
US President Joe Biden in October.
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Image: AP
Truss is struggling for office after just a few weeks as prime minister. She had prevailed in an internal party election as the successor to British Prime Minister Boris Johnson – primarily because she promised massive tax breaks. However, these projects are about to fail miserably because there are no plans for counter-financing.
The financial markets reacted with severe turbulence. Truss then made several U-turns: first she reversed the abolition of the top tax rate, then on Friday she not only said goodbye to her finance minister, but also to a planned tax break for corporate tax.
The plans had led to unrest on the financial markets and massive resentment in the conservative governing party. Even after she left, Truss continued to face harsh criticism and calls for her to be replaced. British media were already speculating about her successor at the weekend.
