U.K. Makes Biggest Tax Cuts Since 1970s, Pound Tumbles

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Government officials in the United Kingdom have approved the biggest tax cuts since the 1970s in a bid to brace for recession. As a result, the pound has tumbled.

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The Wall Street Journal reported on the sweeping tax relief package, noting that it will "cut payroll taxes, freeze corporation tax, ditch banker-bonus cap and spend billions to subsidize energy bills."

U.K. Chancellor of the Exchequer Kwasi Kwarteng, who was appointed by new Prime Minister Liz Truss after she took over Boris Johnson's post, spoke about the U.K.'s inflation-stricken economy while announcing the plan:

“This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s. We are determined to break that cycle. We need a new approach for a new era focused on growth.”

The news led the British pound to tumble 1.5% on Friday, September 23 -- this followed an already difficult year for the currency, which has already fallen by almost 1/5 against the United States dollar in 2022.

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CNBC also weighed in on the major economic policy shift in the United Kingdom, noting that despite "containing extensive reforms, Friday’s package is not being described by the government as an official budget as it has not been accompanied by the usual economic forecasts from the Office for Budget Responsibility."

As evidenced by the pound's slide, the news outlet pointed out that not everyone is happy about the tax cuts.

Specifically, CNBC shared that critics are concerned that the combination of extensive tax relief measures and the "government's plan to shield households and businesses from soaring energy prices" will lead the United Kingdom to take on excessive debt.

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On Wednesday, September 21, the official U.K. government website published data indicating that all departments borrowed £11.8 billion in August, significantly above forecasts. This is also £6.5 billion more than the same month in 2019.

What do you think about the United Kingdom's tax cut package?

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