LONDON (AP) 鈥� Britain鈥檚 new government on Friday announced a sweeping plan of tax cuts it said would be funded by borrowing and revenues generated by anticipated growth, as part of contentious moves to combat the cost-of-living crisis and bolster a faltering economy.
But Treasury chief Kwasi Kwarteng offered few details on the cost of the program and its impact on the government鈥檚 own targets for reducing deficits and borrowing. The government鈥檚 two-pronged approach offers short-term help for homes and businesses struggling with soaring energy costs while betting that lower taxes and reduced red tape will spur economic growth and increase tax revenues in coming years.
鈥淲e need a new approach for a new era, focused on growth,鈥� Kwarteng told lawmakers in the House of Commons.
Friday鈥檚 statement was billed as a 鈥渇iscal event鈥� rather than a budget, because it wasn't accompanied by an analysis of its cost from the independent Office for Budget Responsibility. Opponents said the government was dodging scrutiny.
The plan was immediately attacked by the opposition Labour Party for favoring the interests of business over working people and failing to provide any analysis about the impact on the government鈥檚 fiscal targets.
鈥淚t is a budget without figures, a menu without prices,鈥欌�� said Rachel Reeves, Labour鈥檚 spokeswoman on Treasury issues. 鈥淲hat has the chancellor got to hide?鈥�
Many economists have expressed concern that the government鈥檚 policies will lead to a sharp increase in borrowing, undermining confidence in the British economy. The pound on Friday fell below $1.12 for the first time since March 1985.
The program announced Friday reverses many of the initiatives announced by former Prime Minister Boris Johnson, another Conservative. The center-right party has led Britain for the last 12 years.
For example, Kwarteng annouced that he was reversing a hike in national insurance taxes introduced by Johnson鈥檚 government in May to boost spending on health and social care. Kwarteng said the government would maintain expected funding for the National Health Service 鈥� but he didn鈥檛 say how.
He also said the government would cut the basic rate of income tax to 19% next year, from the current 20%. The top rate will drop to 40% from 45%. He also canceled a planned six percentage point increase in the corporate tax rate, leaving it at 19%.
鈥淭his was the biggest tax-cutting event since 1972, it is not very mini,鈥� said Paul Johnson, director of the Institute for Fiscal Studies, an independent think-tank that scrutinizes government spending. 鈥淚t is half a century since we have seen tax cuts announced on this scale.鈥�
The announcement comes just three weeks after Prime Minister Liz Truss took office. She has said the Conservative government鈥檚 core mission is lowering taxes to drive economic growth and declared this week that she was ready to make 鈥渦npopular decisions鈥� such as to attract jobs and investment.
The plan runs counter to the view of many Conservatives that governments shouldn't rack up huge debts that taxpayers will eventually have to pay.
Reeves criticized the government for expecting taxpayers to foot the bill for its initiatives, rather than increasing a tax on the windfall profits of energy producers benefiting from soaring prices for oil and natural gas.
driven by steeply climbing energy costs and slowing economic growth are the biggest challenges Truss faces.
Inflation stands at 9.9%, near the highest Britain has seen since the 1980s, and is predicted to peak at 11% in October.
The government denied it was gambling the economy on a 鈥渄ash for growth,鈥� but many economists said it was taking a huge risk by allowing borrowing to balloon while the economy is weak and inflation is high.
Thursday that the U.K. may already be in recession, defined as two consecutive quarters of economic contraction. It expects gross domestic product to fall by 0.1% in the third quarter, below its August projection of 0.4% growth. That would be a second quarterly decline after official estimates showed output fell by 0.1% in the previous three-month period.
In the past two weeks, the government has announced th for households and businesses, amid fears that the and companies will go bust this winter. Kwarteng said this initiative would be funded by borrowing.
Kwarteng also announced new 鈥渋nvestment zones鈥� across England where the government will offer tax cuts for businesses and help create jobs. He will also give details on how the government aims to accelerate dozens of major new infrastructure projects, including in transportation and energy.
Truss 鈥� who is inspired by Margaret Thatcher鈥檚 small state, free market economics 鈥� has insisted that growing the economy and tax cuts for businesses will benefit everyone in the country.
But critics say Truss鈥檚 right-wing instincts are the wrong response to the U.K. economic crisis.
Danica Kirka, Jill Lawless And Sylvia Hui, The Associated Press
