The week started for Quasi Quarteng the same as the previous one: almost with a face. The British finance minister did not want to reveal exactly how the government’s controversial tax cut plans were to be financed until late November, but that was not possible. The pressure from the financial markets was so high that they announced on Monday that the date would be pushed forward by about a month. On 31 October, Quarteng intends to present what the markets have long expected of him: a strategy that is as credible as possible in how the billion-euro relief package is to be paid – without raising government debt to catastrophic heights. Bring it to
Since Kwarteng two weeks ago the so-called development plan Submitted to the government, Great Britain does not come to rest. The British pound has been able to make up for huge losses in value against the US dollar, but the situation remains tense. How much was shown on Monday when the Bank of England announced it was expanding its program to buy government bonds. The central bank announced that it would no longer buy only five billion pounds of bonds a day, but twice that. The campaign totals £65 billion and is set to end on Friday.
In late September, the Bank of England announced that it would buy as many government bonds as needed to ensure financial stability. This was urgently needed even after the pound fell sharply and yields on 30-year British government bonds exceeded 5 per cent for the first time since 2002. A five per cent yield means that the British government will have to pay five per cent interest to obtain loans for this period on international financial markets. With its purchase, the central bank ensured that interest rates fell again and states could borrow more cheaply. Basically, the Bank of England operates the same form of indirect state financing as the European Central Bank did during the euro crisis.
Many Britons fear that they will not be able to pay off their home loans in the future
The British central bank also announced that it would set up a so-called facility, i.e. a kind of money pot, to provide banks whose customers are facing sudden financial crunch with loans. Many companies are grappling with the hike in interest rates. The situation is similar for private customers, who need to renew real estate loans. Unlike Germany, most British loan agreements do not last ten years, but usually last two to five years. Many homeowners are concerned that the cost of financing their home will rise sharply.
As it turns out, this concern is completely justified. The Bank of England is likely to raise interest rates further from the current 2.25 per cent at its next regular meeting in early November. The central bank wants to bring down the inflation rate from the current 9.9 percent. It is questionable whether this will succeed, as the government’s economic policy plans run against this goal. Prime Minister Liz Truss and her finance minister Quarteng want to accelerate growth with tax cuts.
Even though both have withdrawn their plans to reduce the top tax rate, there are other projects that should result in more money in citizens’ pockets. For example, the so-called basic tax rate would drop from 20 to 19 percent. In addition, there have been cuts in Social Security contributions and tax breaks for companies. All this is meant to stimulate consumer demand, however, should there be a tendency for prices to rise – and thus inflation.
Finance Minister Quarteng, however, does not want to know anything about it. He will have to make his point clear when he travels to Washington for a meeting of the World Bank and the International Monetary Fund (IMF) this week. The IMF had previously criticized the plans of the British government in an unusually outspoken manner. London should “reconsider” the tax cuts, it said.
Even though a reduction in the top tax rate may be off the table for some time, there are other projects whose funding is unclear. Quarteng will have to answer in Washington. For example, rating agency Moody’s warned that Great Britain was about to risk its reputation for stability.
Not only this, Quasi Quarteng is again struggling to improve its image on the stage of the international financial world. He is also counted in his own Conservative Party. Some Tories only speak of “quasickeys”.
