Liz Truss buckles under pressure and buries her tax plan. The British Prime Minister recognized that her proposal went “further and faster” than the markets could tolerate, so she is abandoning her intention to implement tax cuts worth 51,000 million euros and will also increase the types of companies, as planned by the previous CEO Boris Johnson. “We need to act now to convince the markets that we are being fiscally responsible,” he said, before adding that he would “whatever it takes” to ensure debt reduction in the medium term. The message mimics Mario Draghi’s ‘Whatever it goes’ from 2012 to avoid a collapse of the gilts market.
In a short press conference, Prime Ministerwho a few hours earlier sacked the government’s chancellor and finance minister Kwasi Kwarteng, admitted that the way his executive seeks to fulfill its mission “must change”, which is why he decided to keep the corporate tax rise of 19% to 25% despite after promising to cancel the increase planned by his predecessor Boris Johnson. “It is clear that parts of the ‘mini budget’ (presented by Kwarteng on September 23) have gone further and faster than markets expected,” Truss said in a 180-degree reversal of what he has promised since taking office. Prime Minister, September 6.
with increase in profit taxTruss hopes to raise an additional £18bn (€20.7bn). Similarly, among other measures to ensure debt relief in the medium term, Truss stressed that his government “will control the size of the country” and will ensure that “the public sector is more efficient”, while admitting that “spending will grow more slowly than previously planned”.
Truss regretted “incredibly” that he had to do without his “great friend” Kwarteng, although he considered his replacement at the head of the economy and finance, Jeremy Hunt, shares his thoughts on growth and low taxes. “I want to be honest: This is difficult. But we will weather the storm and achieve strong and sustainable growth that can transform the prosperity of our country for generations to come,” he adds, before confirming that he has no intention of resigning and that she is determined to realize her plans. And he felt he had to “act in the national interest”, so it was necessary to guarantee “economic stability” after days of volatility in the UK sovereign debt and anxiety in the value of the pound sterling.
The decision was made to avoid a market storm, as the Bank of England (BoE) plans to wind down its emergency gilts program this Friday, launched on September 28 in response to the market turmoil caused by announcing the plan of fiscal incentives. After doubling its volume from 5,000 to 10,000 million pounds per day and modifying the terms of the program. Despite the fact that the British central bank has begun the process of reducing its balance sheet after several years of property purchasethe instability in the markets after the Government’s announcement forced the entity to intervene in order to establish orderly market conditions and avoid contagion towards credit conditions for households and companies.
In this sense, the BoE decided on Monday to implement additional measures to support the debt markets in order to guarantee the orderly end of its emergency procurement program. Likewise, Britain’s central bank stepped up its intervention on Tuesday after witnessing a significant revaluation of UK public debt, particularly index-linked ‘gilts’.