The British government on Monday canceled its controversial plan to reduce taxes on the highest incomes, among other things. That reports Reuters news agency. Prime Minister Liz Truss and her team of ministers came to that decision after the announcement of that proposal sparked serious unrest in the Conservative party and the financial markets reacted with panic.
In order to carry out the plan – intended to boost the economy – the British government had to take out loans. Finance Minister Kwasi Kwarteng, with whom Truss drew up the plan, also announced that the state would lose 45 billion pounds (50 billion euros) due to the tax cut. This caused unprecedented turmoil in the financial markets.
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Investors feared the plans would be unaffordable and fuel inflation, also because the UK government had previously announced a £150bn cut in energy costs for households and businesses. The pound fell to a record low last week, British government bond yields soared and several pension funds ran into trouble. The Bank of England then intervened with a £65 billion emergency program; the central bank promised to buy 5 billion pounds of government bonds every day for 13 days.
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