U.K. Cuts Taxes as Flagging Economy Falls Into Recession

U.K. Cuts Taxes as Flagging Economy Falls Into Recession By Investing.com

Breaking News


Economy 38 minutes ago (Sep 23, 2022 04:40AM ET)

(C) Reuters.

By Geoffrey Smith

Investing.com — The new U.K. Government unveiled a suite of measures to cut taxes and stimulate growth as fresh data showed the economy sliding into recession at the end of the third quarter.

Chancellor of the Exchequer Kwasi Kwarteng stood up to announce a widely trailed “mini-budget,” minutes after a closely watched survey showed both services and manufacturing activity contracting in September.

As widely expected, Kwarteng confirmed that the government will cancel a planned increase in corporate income tax from 19% to 25%, that was due to take effect next year, as well as ending an EU-inspired cap on bankers’ bonuses and a reduction in the stamp duty payable on home purchases.

In addition, he announced a cut in the top rate of personal income tax to 40% from April, as well as pre-announcing a cut in the basic rate of income tax to 19%.

The government had already cancelled on Thursday a planned increase in national insurance contributions, introduced under former Prime Minister Boris Johnson.

Kwarteng’s package illustrates a big swing in Conservative Party policy-making back toward the Thatcherite precepts pf low taxation and a small state that had dominated the Party’s thinking until the Great Financial Crisis.

It represents a particularly sharp turn away from the policies of Johnson, who had raised taxes and public spending in an effort to cement electoral support among lower-income voters in Britain’s poorer regions.

Earlier, the composite U.K. purchasing managers index compiled by S&P Global fell to 48.2, its lowest since February 2021, from 48.9 in August. The manufacturing PMI ticked up surprisingly to 48.5, but the services PMI, which covers a much larger section of the British economy, slumped to 49.2 from 50.9.

The numbers, which were below expectations, drove the pound to a new 37-year low of $1.1150, adding to financial markets’ concerns for the U.K.’s economic outlook.

Financial markets have been unsettled by Truss’s first steps as Prime Minister, which included two big subsidy programs for households and businesses, capping their energy bills for the next six months. Kwarteng estimated the cost of those programs at 60 billion pounds ($67 billion).

U.K. Cuts Taxes as Flagging Economy Falls Into Recession

Goldman Sachs cuts 2022 target for S&P 500 by 16%By Reuters – Sep 23, 2022

(Reuters) – Goldman Sachs (NYSE:GS) has cut its year-end 2022 target for the benchmark S&P 500 index by about 16% to 3,600 points, as the U.S. Federal Reserve shows little signs…

Biden to announce $1.5 billion to fight U.S. opioid crisisBy Reuters – Sep 23, 2022

By Ahmed Aboulenein WASHINGTON (Reuters) – U.S. President Joe Biden will announce on Friday nearly $1.5 billion to fund access to medications for opioid overdoses, sanctions…

European shares extend falls, Credit Suisse hits record lowBy Reuters – Sep 23, 2022

By Shreyashi Sanyal and Johann M Cherian (Reuters) -European stocks extended falls on Friday, dragged down by Credit Suisse and as an array of data pointing to an economic…

Our Apps

Terms And Conditions
Privacy Policy
Risk Warning

(C) 2007-2022 Fusion Media Limited. All Rights Reserved.

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.

About the author