U.K. Prime Minister Liz Truss is defending massive tax cuts as the British pound has hit a historic low.
Last week, 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 Prime Minister 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.
Monday morning, September 26, BBC News shared details about the pound's continued decline, noting:
The cost of UK government borrowing also continued to climb on Monday.
If the pound stays at this low level against the dollar, imports of commodities priced in dollars, including oil and gas, will be more costly.
Other imported goods could also become considerably more expensive, further pushing up inflation which is already at its highest rate for decades.
In addition, Truss has spoken to CNN about her own proposed tax cuts, which the outlet shares "would largely benefit corporations and higher-income earners amid Britain's cost-of-living crisis."
Truss has defended the proposal, even as the pound plummets following Kwarteng's announcement. When asked specifically if the nation is already in a recession, Truss said, "That's a matter for the Bank of England."
On Friday, 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.
Opponents fear that the "government's plan to shield households and businesses from soaring energy prices" will lead the United Kingdom to take on excessive debt.
What do you think about the current U.K. economy and how it could impact the rest of the world?
You Might Also Enjoy: