Bet on the British National Fortune?Truss government launches massive tax cut plan, hopes to survive five crises
[Global Times Special Correspondent Ji Shuangcheng Global Times Reporter Yang Shasha]The British Truss government announced a series of economic stimulus measures, including large-scale tax cuts, on the 23rd, hoping to boost the British economy that is about to fall into recession. The Institute for Fiscal Studies think tank thinks it will be the largest tax cut since 1972. However, the investment market did not feel relieved about this, but worried that the situation of the British government’s high debt would lead to more social unrest. Britain’s opposition Labour Party called it a “desperate gamble”. A number of British people interviewed by a reporter from the Global Times said that the British economic recession has begun, and their lives have become more embarrassing under high inflation, and life is even more difficult than the 2008 financial crisis.
British Chancellor of the Exchequer Kwarten announced on the 23rd that the tax cuts introduced this time involve personal income tax and property tax. The UK government estimates that the tax cuts will result in a reduction in fiscal revenue, with an estimated £45bn in tax collections to be missed by the 2026-27 financial year. The British “Financial Times” quoted Kwarten as saying that the purpose of this tax cut plan is to promote the UK’s economic growth rate to reach 2.5%, otherwise it will be difficult for the government to pay for public services. A day earlier, the Bank of England announced a 50 basis point interest rate hike, raising the benchmark interest rate to 2.25% in response to rising inflation expectations.
Paul Johnson, director of the Institute for Fiscal Studies, a British think tank, said the UK could borrow £120bn over three years to achieve these measures. Paul Johnson described the plan as a “big gamble” in which money was poured into an economy where inflation was still high. The situation will be “controllable” only if UK economic growth “really keeps up”. The Japan Times also called it a “historic gamble” by Truss on the British economy.
Concerns in the investment market are almost one-sided. According to Bloomberg, the exchange rate of sterling against the US dollar fell to 1 pound to US$1.0894 on the 23rd, falling below the US$1.09 mark for the first time since 1985.
At least five crises, including Brexit, the conflict between Russia and Ukraine, the death of the Queen, high inflation, and skyrocketing energy prices, have led to a recession in the UK economy. Ding Chun, a professor at the Institute of World Economics at Fudan University’s School of Economics, said in an interview with a Global Times reporter on the 25th that the death of the Queen of England, combined with the economic downturn in the United Kingdom, has hit the confidence of the British to a certain extent. However, the root cause of the British economic downturn is mainly related to the long “Brexit”. Due to the prolonged period of Brexit, the United Kingdom and the European Union are still in the process of running in and connecting. In addition, the overall world economy is facing the impact of stagflation, and the United Kingdom is involved in the conflict between Russia and Ukraine, resulting in labor shortages in the British market, serious energy crisis and other problems. difficult. Ding Chun believes that with the highest inflation record in 40 years and the exchange rate of sterling falling to a 37-year low, the economic dilemma faced by the UK at this time is very similar to the situation when Margaret Thatcher came to power. .
Regarding the “prescription” launched by the British government such as large-scale tax cuts, Ding Chun believes that it is not easy for the “prescription” to achieve the purpose of curing diseases and saving people, and it needs to see whether supporting measures are available. “Tax reduction means that the country’s income will be reduced. In this case, how to solve the bills of the common people and fill the holes in the economy requires more economic measures,” Ding Chun believes, whether the common people can survive until the British government plugs the economic holes More critically, strikes and other activities will also break out in the UK during this period.
The lights in many British homes went out early
The Resolution Foundation, a British think tank, warned in a report earlier that the UK is facing the worst crisis of falling living standards in the past 100 years.
In the coastal city of Hastings in southeastern England, the local seafood restaurants hawking along the urban coastline have all but disappeared. Before the outbreak of the epidemic, even if the growth of the local consumer economy was weak, you could still see a large plate of affordable seafood for 25 pounds. Philip, a local who has switched to a fish and chips business with an asking price of £8 each, told the Global Times reporter that closing down a seafood restaurant that he has operated for most of his life is really helpless, under the attack of the epidemic and high inflation. , the original seafood meal of 25 pounds, after deducting the cost and shipping, it will be close to 10 pounds. He said that the surrounding counterparts have also closed their stores one after another since the second half of last year. This round of British economic downturn has lasted for nearly two years, and there has been no turnaround.
In autumn, as long as you pay attention a little, you will find that the lights of many people in the UK go out early. In order to save electricity and gas, many Britons also crowded into free-to-use local libraries and competed for a corner to work. The Johnson government has repeatedly called on office workers to return to work in urban companies during the epidemic, but it has failed. But now more and more office workers are voluntarily returning to work, preferring to arrive late and leave late. One of the purposes is to reduce household energy expenses.
Nasim, who works as a barber in London, originally planned to buy a barber shop of his own at the local bargain price as soon as the epidemic ended. For this, he prepared a down payment budget of 30,000 pounds. But now, he has given up on this dream. He told the Global Times reporter that on the one hand, high inflation has led to the need to double investment costs, and on the other hand, in the small town where he lives, fewer and fewer people are willing to spend £15 for a haircut. “There are already five hair salons in the town, and the business is very bleak,” Nassim sighed, saying that he still has to get 30 haircuts a day for 30 customers to ensure the rent, family meals and car expenses.
Expert: Britain will be more pragmatic in trade with China
For the outside world’s doubts and criticism, in an interview with the British “Daily Telegraph”, Kwoten denied that he took the British economy as a bet. He said he could not comment on volatility in financial markets, but he believed the best thing for the economy would be to create an environment for people to come and invest in the UK.
Thomas, who is engaged in the import and export of medical equipment in Manchester, the largest city in northwest England, told the Global Times reporter that business cooperation with Chinese companies has become less profitable in recent years. On the one hand, the supply chain is not smooth, resulting in high operating costs; on the other hand, many of their investors are not optimistic about the relationship between the UK and China, especially the Truss government’s hawkish style towards China has exacerbated their concerns.
At present, China is the UK’s third largest foreign trade country and largest importer, and the trade development between China and the UK has maintained a good momentum for a long time. Ding Chun believes that the British diplomatic tradition is very pragmatic. This can be seen from the fact that the United Kingdom resisted the pressure of the United States to join the AIIB, and the United Kingdom will now be more pragmatic to have a good relationship with China. British Deputy Prime Minister Coffey, on behalf of the British government, thanked Wang Qishan for his special trip to attend the Queen’s funeral. He said that the new British government is working on various tasks and hopes to further strengthen cooperation with China in the fields of economy, trade, environmental protection, climate change and multilateral affairs. .
(Editor in charge: He Xin)