Following the announcement of its economic stimulus plan a couple of weeks ago, the UK government has attracted criticism.
The UK’s new prime minister then unveiled his new plans in a desperate attempt to salvage the government’s face.
Last week, Jeremy Hunt replaced Kwasi Kwarteng as finance minister under the authority of Prime Minister Liz Truss. In only three months, the UK has had four different prime ministers. Kwarteng held the second-shortest tenure as finance minister in British politics, lasting just 38 days. Hunt predicted that the UK government would reconsider its choice to borrow extensively and spend heavily. Instead, he wants to roll back “almost all” of Kwarteng’s tax policies from when he was in office.
According to Hunt, the turnaround should bring roughly £32 billion ($36 billion). Additionally, the income tax reductions remained delayed because of the new UK finance minister. Amid the oil crisis, the UK government vows to assist individuals and companies. Officials clarified that it only served as a price ceiling until next spring.
“No government can control markets, but every government can give certainty about the sustainability of public finances. The United Kingdom will always pay its way,” Hunt said.
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An unfavorable position for the UK
Many investors and market titans criticized the UK government’s expenditure plan a few weeks ago. Most people believe the action will make the country’s economic crisis worse. As a result, Truss dealt with the criticisms, ultimately costing her Kwarteng’s position as finance minister.
The opposition Labour Party in the UK said that Hunt had brought attention to the country’s issues. Additionally, it forces UK Prime Minister Liz Truss to juggle her political career. However, analysts claim that the government’s most recent initiative only made life for residents worse.
“All the Chancellor’s statement underlines is that the damage has been done,” said Rachel Reeves.
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Fortunately, Hunt’s announcement caused the markets to settle down. The pound’s value increased by 1.2% to $1.13 following a record drop a few weeks earlier. Compared to previous weeks, UK bonds did rather well, as borrowing prices dropped below 4%.
Investors claimed they are still wary about the recent events, though. According to ING strategist Francesco Pesole, Hunt’s economic policies benefit the government and the country. However, it will only provide a short-term fix for the harm caused by Truss’s previous spending policy. In addition, extra market variables should be considered, including OPEC’s production cuts, increasing inflation, and supply interruptions worldwide.
Truss is currently under more hostility as citizens and investors question her ability to continue as UK prime minister. She and Kwarteng hoped that the expenditure plan would help the local economy, but they received negative feedback from credible organizations instead. Additionally, US President Joe Biden concurred with other Truss detractors in his criticism of the scheme.
“I disagree with the policy. (It was) up to Great Britain to make that judgment,” Biden said.
“Looking beyond April, the Prime Minister and the Chancellor have agreed that it would be irresponsible for the government to continue exposing the public finances to unlimited volatility in international gas prices,” the Treasury added.
Photo Credit: TIme