Freezing energy bills, tax cuts, hardening of social minima and deregulation… London unveiled, on Friday, September 23, a set of measures to revive growth and try to mitigate inflation which has almost reached 10%.
> > When are we going to get out of this period of record inflation? We asked an economist
“During the worst energy crisis in generations, this government stands with the people”shouted the new Chancellor of the Exchequer (Minister responsible for Finance and Treasury), Kwasi Kwarteng, during a presentation to Parliament. He also added that he wanted “reforming the supply side of the economy” in “lowering taxes to boost growth”. “This is how we will reverse the vicious circle of stagnation” economic, he insisted.
However, the immediate reaction of the markets, worried about the side effects of the remedy on public finances, was very negative vis-à-vis the pound. At midday on Friday, it approached its historic low against the dollar (below the symbolic threshold of 1.1 dollars, a first for thirty-seven years).
Flagship measure of “mini-budget”, energy bills are frozen for two years, at 2,500 pounds for an average household. Either a rebate of at least 1,000 pounds financed by the government. It should be noted that for companies, their invoices are covered for half for about six months.
This massive support for energy bills should cost 60 billion pounds for the first six months, calculated Kwasi Kwarteng.
The cocktail of measures also includes significant tax cuts, reversing in particular the increases decided by the previous Conservative government. Among them, a reduction in social contributions, the tax on real estate transactions, the maximum rate of income tax, and suspension of certain ecological levies. It should be noted that the Prime Minister, Liz Truss, has herself recognized that the policy of her government will especially favor the wealthiest.
“Instead of defending working people, the Conservatives are protecting the profits of energy giants”which have benefited from soaring oil prices since the start of the war in Ukraine, accused Labor finance chief Rachel Reeves.
The total cost of the package of measures, including the tax cuts, is not disclosed, but economists have estimated it at more than 100 billion pounds, the Barclays bank even speaking of 200 billion.