Mini-budget: Chancellor denies gambling with economy as pound sinks to near historic lows | Business News

The Chancellor has dismissed suggestions he is playing the economy as his string of tax cuts met with a hostile reception – and sent the pound plummeting to a 37-year low.

The Institute of Fiscal Studies (IFS) said it was “risking the house” by putting the national debt on an “unsustainable rising path”.

Only those with incomes above £155,000 will be the net beneficiaries of the tax policies announced by the Conservatives, with the “vast majority of income taxpayers paying more tax,” the respected finance think tank said in a scathing review of the plans.

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During a visit to a factory in Kent on Friday afternoon, Kwasi Kwarteng told reporters: “It’s not gambling.

“What is a gamble is thinking that you can keep raising taxes and gaining wealth, which clearly hasn’t worked.

“We can’t have a tax system where you hit a 70-year high, so the last time we had tax rates at this level was before my tax cuts actually happened, before Her Late Majesty had ascended the throne.

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“That was totally untenable, so I’m happy to be able to cut taxes piecemeal this morning.”

The Resolution Foundation think-tank said the Chancellor’s measures would involve an additional £411 billion in borrowing over the next five years.

It said the tax cuts would do very little to boost the income of those who need it most, pointing out that someone making £1million a year would make more than £55,220 a year, while someone would only win £157 with £20,000.

The pound fell to a four-decade low

The Chancellor’s outlined growth plan to lift Britain out of the depths of the cost-of-living crisis and back to prosperity has met with dismay in financial markets, with the pound taking a particular hit late in the day.

Sterling, bonds and stocks all fell sharply in the wake of Mr Kwarteng mini budget.

The pound, already on its knees this month on a strong dollar, slipped below $1.09 for the first time in 37 years.

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That was after US bank Citi said on Friday afternoon that the currency was facing a crisis of confidence. It has been speculated that it may eventually reach parity with the dollar for the first time in history, but added that it expects sterling to settle within the $1.05-$1.10 range.

The all-time low of $1.0545 was reached on February 25, 1985.

Biggest tax cuts in 50 years

The Chancellor unveiled the biggest tax cuts in 50 years as part of the new economic agenda – a package to be paid for by a huge increase in public debt.

He lowered stamp duty for homebuyers and brought forward a cut in the property tax rate to 19p a pound a year earlier, by April, as part of tax cuts costing up to £45bn a year.

The plans, which include previously announced energy bill support for households and businesses, added £72.4 billion to the Treasury’s debt issuance plans for the current financial year alone, to £234.1 billion.

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Taken together, it went much further than markets had anticipated.

The package was announced a day after the Bank of England warned the UK could already be in recession, raising interest rates to 2.25%.

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The FTSE 100 lost 2% of its value by the close, with miners and energy stocks among the worst performers.

Commenting on the package, Caroline Le Jeune, head of tax at auditing firm Blick Rothenberg, said: “In 25 years of budget analysis, this has to be the most dramatic, risky and unfounded mini-budget.

“Truss and her new administration are taking a big risk.”

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