British Prime Minister Liz Truss’s new Conservative Party government has unveiled the biggest package of tax cuts in 50 years as the country seeks to tackle the economic crisis by boosting growth.
The new budget is aimed at spurring growth in the UK economy, which may already be in recession.
Announcing his mini-budget in the House of Commons on Friday, Chancellor Kwasi Kwarteng confirmed that the rise in corporation tax and national insurance contributions have been canceled.
The increases had been planned under former Prime Minister Boris Johnson’s administration.
Kwarteng also abolished the top rate of income tax for the highest earners, brought forward a planned cut to the basic rate of income tax to 19 pence in the pound a year early to April, and reduced stamp duty for homebuyers.
He confirmed plans to place restrictions on the welfare system while axing the cap on bankers’ bonuses.
The plan uses more than £70 billion ($77 billion) of increased borrowing.
The package was announced a day after the Bank of England warned the UK may already be in a recession and lifted interest rates to 2.25 percent—the highest level for 14 years.
The chancellor argued his economic vision will “turn the vicious cycle of stagnation into a virtuous cycle of growth.”
He said: “Growth is not as high as it should be.
“This has made it harder to pay for public services, requiring taxes to rise.
“In turn, higher taxes on capital and labor have lowered returns on investment and work, reducing economic incentives and hampering growth still further.”
He added: “We are determined to break that cycle.
“We need a new approach for a new era, focused on growth.”
Paul Johnson, the director of the Institute for Fiscal Studies economic think tank, called the package the “biggest tax-cutting event since 1972.”
He told BBC News: “This is a big gamble.
“There is a chance it will pay off.”
But he said he is concerned that “the government is putting tens of billions into the economy now at a point when inflation is very high.”
The main opposition, the socialist Labour Party, called the package an admission of “economic failure” on the part of the Conservative government.
Labour’s shadow chancellor Rachel Reeves likened Truss and Kwarteng to “two desperate gamblers in a casino chasing a losing run.”
But business groups have welcomed the government’s new economic direction.
The Confederation of British Industry (CBI) called it a “turning point for our economy.”
CBI Director-General Tony Danker said: “Today is day one of a new UK growth approach.
“We must now use this opportunity to make it count and bring growth to every corner of the UK.”
Shevaun Havilland, director-general of the British Chambers of Commerce, said, “Businesses across the UK will enthusiastically welcome the chancellor’s pledge to focus on economic growth and speed up new infrastructure development.”
The Adam Smith Institute, a free market think tank, said it is “incredibly encouraged to see so many pro-growth policies.”
The London-based Institute of Economic Affairs (IEA) also called it a “very encouraging start.”
IEA Director-General Mark Littlewood said, “It’s refreshing to hear a chancellor talk passionately about the importance of economic growth and supply-side reforms, rather than rattling off a string of state spending pledges and higher taxes.”