(London) Freeze of energy bills, tax cuts, but also hardening of social minima and deregulation: London unveils Friday a cocktail of measures to stimulate growth and reduce inflation, with potentially severe side effects for public finances.
Posted yesterday at 7:06 p.m.
With inflation nearing 10% at a 40-year high, an economy heading into recession and a depressed pound, the government of new Prime Minister Liz Truss is hoping to administer a reviving potion for households and businesses alike .
“Fueling growth by lowering taxes and eliminating regulation is the central mission of this government”, comments a Treasury press release published overnight from Thursday to Friday.
“This is how we will reverse the vicious circle of economic” stagnation, and “we will boldly and shamelessly seek growth, even when it means making difficult decisions”, insists Chancellor of the Exchequer Kwasi Kwarteng, who will unveil his measures in parliament from 8.30am GMT.
In the midst of a purchasing power crisis in the UK, the flagship measure of the “mini-budget”, as it is nicknamed, will be the freezing of energy bills for two years, at 2500 pounds for an average household, a rebate of 1000 pounds financed by the government.
Businesses are not to be outdone and will see their bills covered for around half for six months.
Gas and electricity prices have soared since the start of the war in Ukraine, due to limitations on the supply of hydrocarbons from Russia.
However, the United Kingdom is particularly dependent on gas compared to a country like France, where nuclear power dominates.
Conservative Recipes
Alongside this massive support for energy bills, which was advocated by the Labor opposition and is expected to cost tens of billions of pounds, the Truss government’s cocktail of measures includes a healthy dose of Tory prized revenue, including cuts of taxes.
The lowering of social security contributions is confirmed for companies (“social levy”) as for households – welcomed in particular by the British Chambers of Commerce – as well as the suspension of certain ecological levies.
According to the British press, the Truss government is also planning to lower the tax on real estate transactions.
From New York, where she was attending the UN General Assembly, the Prime Minister acknowledged that all of these measures will especially benefit the wealthiest, on the very day that US President Joe Biden castigated the “trickle down economics”. “, the trickle-down economy, supposed to radiate from the richest to all layers of the population.
Another mantra: Chancellor of the Exchequer Kwasi Kwarteng prides himself on “putting Britain back to work”.
While the British job market is suffering from a serious lack of workers which is penalizing almost all sectors of the economy, the Treasury has announced that access to minimum income (“universal credit”) will henceforth be accompanied by obligations for certain people who work less than 15 hours per week.
This could include “applying for a job, participating in job interviews”, adds the Treasury, which also wants to encourage those over 50 to return to the labor market, from which they have come out in large proportions since. the pandemic, in particular because of long illnesses.
Post-Brexit freedoms
In an attempt to attract investment in the United Kingdom and in particular in the financial sector of the City, Kwasi Kwarteng and Liz Truss also want to appear as heralds of post-Brexit deregulation.
The British government “wants to end all laws emanating from the European Union by December 31, 2023 under a new post-Brexit Freedoms Act”, tabled in Parliament on Thursday and intended to “eliminate bureaucracy unnecessary,” according to Minister for Energy, Business and Industry Jacob Rees-Mogg.
According to the British press, London wants in particular to abolish the limits inherited from the EU on City bonuses as well as a tax on sugary drinks intended to fight against obesity.
Finally, the Treasury aims to create 38 deregulated “investment” zones, similar to the free ports project of the previous Conservative government.