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LONDON — U.K. Chancellor Kwasi Kwarteng cut taxes for Britain’s top earners as he pledged a “new era” of economic policy focused exclusively on boosting growth and moving away from redistribution.
Unveiling his first fiscal statement since he was appointed by Prime Minister Liz Truss earlier this month, Kwarteng on Friday abolished the 45p additional rate of income tax for those who earn more than £150,000. From April 2023, there will now be a single higher rate of U.K. income tax at 40 percent. Kwarteng also cut the basic rate of income tax to 19p. “This means that we will have one of the most competitive and progressive income tax systems in the world,” he said.
The plan comes the day after the Bank of England warned the U.K. economy may already be in recession.
Described by the head of the Institute of Fiscal Studies as the “biggest tax cutting event since 1972,” Truss is betting her premiership that tax cuts and increased government borrowing will stimulate growth.
Kwarteng also announced a reduction in the tax on property sales, canceled next year’s planned rise in corporation tax, and reversed April’s increase to national insurance, the taxes paid by individuals and their employers to fund state benefits. He lifted the cap on bankers’ bonuses, tightened benefits rules for part-time workers, and said the government would soon bring forward legislation “to unpick the complex patchwork of planning restrictions and EU derived laws that constrain our growth.”
“Growth is not as high as it should be,” the chancellor said. “This has made it harder to pay for public services requiring taxes to rise.”
“We are determined to break that cycle,” he added. “We need a new approach for a new era.”
Following a spate of strike action across the country, Kwarteng also took aim at “militant” trade unions and said the government would legislate so that unions have to put pay offers to a vote of their members.
Rachel Reeves from the opposition Labour Party said the chancellor had undertaken a “comprehensive demolition” of the Conservatives’ last 12 years in power. “It’s all based on an outdated ideology that says ‘if we reward those who are already wealthy, the whole of society will benefit,’” she said.
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