May 21, 2024

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U-turn in London – then: Liz Truss withdraws tax plans – News

U-turn in London – then: Liz Truss withdraws tax plans – News

Above all Liz Truss is crawling back: after harshly criticizing her economic plans, the British government has made a big about-face. Finance Minister Kwasi Kwarteng announced in Birmingham on Monday morning that the 45 per cent tax on top earners would not be scrapped. “We understand, we listen,” the conservative politician wrote in a statement posted on Twitter.

Earlier, key members of the Tory party, such as former ministers Michael Gove and Grand Shoppes, had strongly criticized the tax breaks and the huge national debt and indicated they wanted to vote against them in Parliament. The government feared a revolt within its own party. Finance Minister Kwarteng takes responsibility for these incidents, but at the same time rejects his resignation.

Rachel Reeves, finance spokeswoman for the British opposition (Labour Party), criticized the government. It would have destroyed its economic credibility and undermined confidence in the British economy.

A wreck

Background: Liz Truss’s tax cut plans sparked panic in financial markets. The British pound fell and the Bank of England had to buy massive amounts of government bonds to calm the situation.

A few days later, Truss was the first to comment on Sunday’s events on the BBC. She regrets the turmoil and any — as she puts it — “misunderstandings” that fueled the tax package. She will do better in the future, she learned something.


British Prime Minister Liz Truss faces headwinds ahead of her Conservative party’s party conference in Birmingham.

REUTERS/Toby Melville

At the time, however, he spoke primarily of a communication error. The content of the tax package, namely billions in tax cuts, mostly in favor of the nation’s richest five percent, she saw as even more appropriate and necessary. This view may now be obsolete.

SRF reporter Patrick Wülser said the tax cuts paved the way for Truss to come to power: “With this promise, she emboldened the conservative base over the summer. And like Margaret Thatcher and Ronald Reagan, Liz Truss believes that while the rich prosper, everyone benefits.”

“trickle-down” is controversial to say the least

So if companies invest and create jobs, everyone benefits, Truss justified his theory last week. This is called the trickle-down theory [dt. «nach unten rieseln»]With the idea that the prosperity of the wealthy would spread to the lower classes of society through their consumption and investment, leading to economic growth. A model that doesn’t work well, especially not in times of inflation, according to economists.

But the problem is that millions of Britons don’t know how to pay their bills this winter. Inflation is around 10 percent and the British central bank is grappling with interest rate hikes.

The consequences were immediate and severe, says an SRF reporter: “Truss promised to take less money out of people’s pockets. However, in the past few days, the opposite has happened: the pound has lost value, and you’re getting less for your money.” So now the government is backtracking and rethinking the tax policy.

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