Tax cut plans drag sterling to four-decade lows

The British pound has resumed its slide against the US dollar, which accelerated last week after the new UK government outlined plans to cut taxes and increase spending.

The pound fell as low as $1.0349 per US dollar early Monday before recovering to $1.0671, down 2.3 percent.

The tax cut plan has raised concerns that increased public borrowing will worsen the country’s cost-of-living crisis.

The British currency fell more than 3 percent on Friday. It is trading at levels last seen in the early 1980s.

Other currencies have also weakened against the dollar as the Federal Reserve hiked interest rates to fight inflation. The Bank of Japan intervened last week to support the yen and slow its decline against the dollar.

Treasury chief Kwasi Kwarteng announced the sweeping tax cuts, which he said would boost economic growth and generate higher revenues without matching spending cuts. He also said previously announced plans to limit rising energy bills for households and businesses would be financed through borrowing.

Kwarteng offered few details on the cost of the program or its impact on the government’s own targets for reducing deficits and borrowing, but an independent analysis expected it to cost taxpayers £190bn this financial year.

The news triggered the pound’s biggest fall against the US dollar since March 18, 2020, when then-Prime Minister Boris Johnson announced the first nationwide lockdown to curb the spread of Covid-19.

The British currency closed at $1.0822 in London on Friday, up from $1.1255 on Thursday.

Prime Minister Liz Truss, who took office less than three weeks ago, is racing to tackle inflation at a nearly 40-year high of 9.9 percent and avert a prolonged recession.

With parliamentary elections in two years’ time, she must deliver results quickly.

https://www.independent.ie/business/world/tax-cut-plans-pull-british-pound-to-four-decade-lows-42016569.html Tax cut plans drag sterling to four-decade lows

Fry Electronics Team

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