UK government implements major tax cuts as country inches towards recession

As Prime Minister Liz Truss attempts to revive the nation's flagging economic development, the new U.K. administration on Friday unveiled a comprehensive program of tax cuts and investment incentives. Finance Minister Kwasi Kwarteng stated in a House of Commons speech that the government was aiming for a medium-term trend rate of growth of 2.5% and desired a "new approach for a new era centered on growth." “We believe high taxes reduce incentives to work, deter investment and hinder enterprise,” Kwarteng said. The measures consist of:

• Remaining at 19%, the lowest rate in the G-20, instead of the scheduled increase to 25% in the corporation tax.
• A reduction in the recent income tax—National Insurance contribution—increase of 1.25%.
• The elimination of the 45p extra rate that is applied to incomes over £150,000 and a lowering of the basic income tax rate from 20 to 19 cents.
• Significant reductions in property purchase tax.
• A nationwide system of "investment zones" where companies will be given tax breaks, more flexible planning guidelines, and fewer regulatory restrictions.
• A program where taxes paid by tourists on their purchases are refunded.
• Cancellation of a tax rate rise on several alcoholic beverages.
• Removing the bonus ceiling for bankers.

It occurs a day after the Bank of England, which raised interest rates by 50 basis points to combat decades-high inflation, predicted that the UK economy had likely entered an official recession in the third quarter. The package, which includes significant reforms, is not being referred to by the government as an official budget since it does not include the customary economic projections from the Office for Budget Responsibility.