UK tackles energy bills with £60bn emergency package

The UK is taking steps with a temporary budget of 60 billion pounds (68 billion euros) to protect the economy from rising energy prices. Finance Minister Kwasi Kwarting announce Friday morning in the British House of Commons three steps: energy bills for households will be capped at 2,500 pounds (2,846 euros), businesses receive similar financial support, and the central bank gives back guarantees to energy traders. “There should be no doubt that the government stands with the British people during the worst energy crisis in generations,” Quarting said.

The British Cabinet also wants to boost the economy with a series of reforms, including tax cuts. “We are focused on growing, even if it means making tough decisions,” Kwarteng said. These decisions mean, among other things, that the top bracket of income tax will be reduced from 45 to 40 percent and homes will become cheaper.

With 60 billion pounds, the British government will pay the first six months of support measures. After that, costs will come down, Kwarteng predicts, because the government then wants to negotiate better conditions with energy suppliers. “Doing nothing would be much more expensive than the cost of these plans.”

Cash

Shortly after the announcement, the opposition sharply criticized the plans, which are expected to cut inflation by 5 percentage points. The main criticism is that higher incomes benefit disproportionately. Scottish Prime Minister Nicola Sturgeon Reply on Twitter: “The rich are laughing at their donkeys on their way to the bank, while the rest are increasingly dependent on the food bank.”

Concerns have also been raised about costs. In terms of aid and tax measures, the British government will already borrow an additional £72 billion this year, he writes Watchman. The British pound fell to a 37-year low of $1.11 on Friday.

Lawson’s growth

With tax cuts, Prime Minister Liz Truss’ government is going further than it was in the “Lawson boom” of the 1980s, when then-UK Chancellor of the Exchequer Nigel Lawson cut income taxes several times. At the end of that decade, the economy had grown by more than 5 percent.

Then the growth also led to high rates of inflation, which the government tried to curb by raising interest rates, which in turn caused the recession. High inflation is precisely what Kwarteng is trying to combat with a £60bn aid package. Also Lawson warned in August for a combination of loans and tax cuts targeted by then-Prime Minister Truss.