Because of its strategy to address the financial instability that is putting pressure on the country’s companies and citizens, the UK government is receiving criticism from across entities.
The billionaire Ray Dalio said the UK’s spending plan “suggests incompetence” is a new addition to the list.
“I can’t imagine that this is intended – and if it’s not intended, then it’s an understanding question,” added Dalio.
After UK finance minister Kwasi Kwarteng informed the public of the government’s financial objectives in a statement, Dalio made his remarks. Truss asserts that the proposal should contribute to resolving the nation’s present issue.
However, despite the government’s optimism, the initiative has drawn criticism from many quarters. The UK government’s proposed expenditure plan includes large corporation tax reductions.
The International Monetary Fund disagrees with Truss’s strategy as well. The IMF stated in a press release:
“We understand that the sizable fiscal package announced aims at helping families and businesses deal with the energy shock and at boosting growth via tax cuts and supply measures.”
“However, given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy.”
Additionally, the Bank of England took steps to lessen the blowback the government was experiencing. That didn’t stop Dalio from adding his name to the group of people and professionals who didn’t see the advantages of the policies put out by the government under Liz Truss.
Read Also: IMF Calls Out the UK Government for its Plans to Cut Taxes and Increase Foreign Borrowing
What Dalio said
The firm Bridgewater was started by Dalio, one of the leading hedge funds in the world. Dalio contends that the plan cannot create wealth because it heavily relies on borrowing from the government, and lowering corporate taxes makes it harder for the government to find funds to pay for the debt.
“It doesn’t stimulate the economy; productivity is what stimulates the economy over the long run. I would think there would be an understanding of the mechanics of that by the government, and that’s why it’s concerning,” said the billionaire.
“Due to the recognition that the big supply of debt that will have to be sold by the government is much too much for the demand. That makes people want to get out of debt and currency. I can’t understand how those who were behind this move didn’t understand that. It suggests incompetence,” he added.
In the meantime, the UK Treasury consoled the populace that they had a plan in place to deal with the nation’s deteriorating market conditions.
Their spokesman claims that on November 23, specifics of the program will be revealed.
According to Jonathan Portes, a professor of public policy and economics at King’s College London, the UK government’s budgetary strategy is unsustainable.
“It has rightly, I think, been regarded by economists across the political spectrum as unnecessary and damaging.”
Read Also: What Does a Strengthening Dollar Mean to Economies
Truss is positive about the government’s plan
Following the attacks, Liz Truss, the present UK Prime Minister, intervened to support the administration.
She said that the budgetary proposal “incentivizes businesses to invest, and we’re also helping ordinary people with their taxes.”
“I don’t really accept the premise of the question at all. The UK has one of the lowest levels of debt in the G7, but we have one of the highest levels of taxes. Currently, we have a 70-year high in our tax rates.”
“We’ve also put in place a package of measures to support consumers with energy prices, to make sure that nobody is having to pay more than £2,500 on their bills.”
Photo Credit: Patrick T. Fallon
Source: CNBC
