The sweeping tax cuts, which include cutting the top rate of income tax to 40% from 45%, cuts in duty paid on house purchases and canceling a planned rise in business taxes, will wipe out £45 billion ($50 billion) . Government revenue over the next five years, the British Treasury said. Paul Johnson, director of the Institute for Fiscal Studies, an independent think tank, called the government’s plans “excellent”. “It’s been half a century since we’ve seen tax cuts on this scale announced,” he said in a tweet. The pound fell nearly 2 percent to $1.10 on Friday after Kwarteng’s announcement to its lowest level since 1985. British government bonds also sold off sharply. The yield on the benchmark 10-year bond, which moves against prices, is close to 3.66%. It started the year below 1%. Along with the tax cut, Kwarteng said the government would continue subsidizing energy bills for millions of households and businesses at a cost of 60 billion pounds ($67 billion) for the next six months alone, financed by borrowing rather than taxing the windfalls of oil and gas companies; The measures come a day after the Bank of England warned that the country was already likely to be in recession. It raised interest rates for the seventh time since December last year in a bid to tame 10% inflation that is causing a deep cost-of-living crisis for millions of people.

“Non-financed gifts”

News of the heavy additional government borrowing rattled investors who were already concerned that the country was spending beyond its means. The IFS warned in a report on Wednesday that government borrowing was on an “unsustainable path”. George Saravelos, global head of foreign exchange research at Deutsche Bank, said in a research note on Friday that the UK’s “very large, unfunded tax cuts and other fiscal handouts” are raising concerns about the country’s economy. “The UK’s immediate challenge is not low growth,” Saravelos said. “The big fiscal outlay just announced may boost growth a bit in the short term. But the bigger question is this: who is going to pay for it?” he added. A senior government minister, Simon Clarke, speaking earlier on Friday dismissed suggestions that new Prime Minister Liz Truss was taking a huge gamble on the British economy. “The evidence from the 1980s and 1990s is that a dynamic low-tax economy is what delivers the best growth rates – that’s not a gamble, the weight of history and evidence is with us,” he told the BBC. Huge energy subsidies will mean inflation will peak at 11% next month, according to the Bank of England, instead of soaring even higher this winter. However, investors worry that additional government spending will keep inflation high. And a falling pound makes matters worse by increasing the cost of imports. The opposition Labor Party criticized the government’s plans to increase borrowing instead of raising tax on energy company windfalls. “The oil and gas giants will be toasting the Chancellor in the boardrooms as we speak, while workers will be left to pick up the tab – borrowing more than they need to just as interest rates rise,” said Rachel Reeves, the economist opposition service. Press representative. Kwarteng also announced he would end a cap limiting bankers’ bonuses to double their annual salary that was introduced after the global financial crisis to prevent excessive risk-taking. He said he wanted to encourage global banks to invest in the UK. Labour’s Reeves said the scheme would “reward the rich” and represented a return to the “trickle down [economics] of the past.” — Mark Thompson, Julia Horowitz and Amy Cassidy contributed reporting.