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Kwarteng’s Mini-Budget Sets Out Biggest Tax Cuts In Half A Century

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A loan and hope budget on a scale not seen since 1972.

Such was the view of economics editor Chris Giles of the £45bn debt-funded package of tax cuts and other measures by British Chancellor Kwasi Kwarteng, which aims to move the country from a “vicious cycle of stagnation into a virtuous cycle of growth”. .

Though billed as a “mini-budget,” the Chancellor’s statement was anything but. The most important measures were the abolition of the top tax rate of 45 pence on income above £150,000 and a reduction of the base rate to 19 pence, in addition to previously announced measures such as lifting the cap on bank bonuses and lowering the stamp duty on the sale of property. The government confirmed yesterday that it would reverse the recent increase in national insurance premiums.

City of London institutions welcomed Kwarteng’s ‘love bomb’ of regulatory changes, but the response from financial markets has been harsh. UK government bonds sold strongly, and this week’s rise in long-term borrowing costs is now one of the largest ever. The pound fell to its 37-year low against the dollar as investors feared the chancellor’s “radical economic gamble.”

Kwarteng’s challenge was underlined by data ahead of his speech, which showed UK consumer confidence at its lowest point since records began in 1974, and PMI survey data showing manufacturing and services activity at its lowest point in history. 20 months showed.

These were preceded yesterday by new forecasts from the Bank of England, which showed that third-quarter GDP fell by 0.1 percent, fueling fears the economy was headed for recession as interest rates fell by 0.5 percentage points. increased to 2.25 percent — the highest level since the 2008 financial crisis.

It’s also unclear how the measures will be welcomed by the public, which, according to new research data yesterday, supports raising taxes and social spending, with strong support for redistribution in favor of the less fortunate.

Chief economics commentator Martin Wolf is one of the skeptics, stating that “the idea that further tax cuts and deregulation (such as lifting the cap on banker bonuses) will change this. [economic] achievement is a fantasy”.

Referring to Truss and Kwarteng’s “Britannia Unchained” paean to free markets from 10 years ago, Wolf says, “Britannia is not ‘unchained’. It is instead sailing in dangerous waters. Can the new captain and first mate even see the rocks which lie before us?”

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Need to know: the economy

The BoE was just one of many central banks soaring interest rates over the past few days, led by the US Federal Reserve with its third consecutive 0.75 percentage point hike, as Fed chief Jay Powell warned of more pain in the future. There were also tariff increases in South Africa, Switzerland and Norway. Turkey remains an outlier and cuts interest rates for the second month in a row. Our latest Big Read asks the question: Is the trend going too far and risking unnecessary economic pain?

Shrinking business and a declining currency are not limited to the UK. Today’s PMI value for the euro zone showed the largest contraction in 20 months, pushing the euro to a new low in 20 years against the dollar. Consumer confidence in the EU has also bottomed out.

Latest for UK and Europe

Liz Truss wants to end the post-Brexit quarrel Northern Ireland for the 25th anniversary of the peace agreement on Good Friday next month. Listen to the latest podcast from Rachman Review to learn more about the new British Prime Minister’s approach to foreign affairs, including the war in Ukraine and relations with the US and China.

Italy goes to the polls on Sunday. Here’s our Big Read on what a (probable) far-right victory could mean for Europe. FT subscribers can join our correspondents for a special briefing on September 27. pick up your pass ft.com/italianelection and present your questions to the panelists.

The head of the International Energy Agency warned of the political dangers the EU faces as Member States rush to find solutions to the energy crisis. In the UK, the proposal to end the moratorium fracking for natural gas has led to a serious setback. In Denmarkpetrochemical group Ineos announced the development of the first oil and gas field in years.

Irish youth increasingly consider emigration as the cost of living in their country – especially in terms of housing – increases.

Worldwide last

Hong-Kong has ditched the strict hotel quarantine rules for inbound travelers that have dealt a major blow to the city’s economy over the past two years.

Tokyo intervened to support the yen for the first time in more than 20 years after the Bank of Japan’s decision to stick to its ultra-easy monetary policy plunged the currency. The BoJ is now the only central bank in the world with negative interest rates.

Pakistan suspend international debt repayments and restructure loans after the recent flood devastation, according to a UN memo seen by the FT.

Need to know: business

High inflation, low investment confidence and making a weaker currency struggling British assets tempting for foreign suitors, with French buyers first in line. Business editor Tom Braithwaite considers the great flea market in the UK.

furniture seller Made.com has put itself up for sale after being hit by a collapse in UK consumer confidence and supply chain disruption.

The UK launched an investigation into the $15 billion cloud market to see if Amazon, Microsoft and Google were restricting competition and innovation. The three companies generate approximately 81 percent of market revenue.

Crippling energy price increases could lead to “deindustrialization” in Germany, according to some company figures. The latest sector to sound the alarm is the toilet paper industry.

Finish science

Covid-19 infections have recovered in England and Wales, but have fallen in Scotland and Northern Ireland, complicating efforts to determine the disease’s hold on the UK.

US chief medical adviser Anthony Fauci told FT demonization of Covid-19 shots could harm childhood vaccination programs and lead to disease outbreaks.

Denmark’s non-profit Novo Nordisk Stichting Foundation is to spend $200 million developing what it claims will be the first practical quantum computer for life science research. Applications range from creating new medicines to finding links between genes, environment and disease.

And finally, a reminder that the disruption caused by the war in Ukraine extends beyond planet Earth. Russia’s Threat to Stop the International Space Station has given additional impetus to efforts by other countries to find a replacement for the aging structure. Check out our Big Read (and premium graphics).

A diagram that summarizes the two space stations currently in orbit, the International Space Station and Tiangong

Covid cases and vaccinations

Total number of worldwide cases: 607.2mn

Total Doses Administered: 12.7 billion euros

Get the latest global photo with our vaccine tracker

What good news…

Ospreysthat were nearly wiped out by hunters many years ago to protect salmon and trout stocks are now successful breeding in different parts of the UK.

an osprey
Ospreys, once nearly wiped out in UK to protect salmon and trout, breed successfully © AP

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