Today, the shortest-lived Prime Minister in British history, Tras was born. At this point, the 45-day term of Tras has come to an end. Let's take a look at what tricks Tras did in these 45 days.
1, Mini Budget
The first big thing a businessman met was the death of Queen Elizabeth II . The queen who experienced World War I and World War II made a bad start for tras' term. After the Queen's mourning ended, the cabinet returned to normal, and Tras launched the "Mini Budget".
This budget can be called the largest tax cut plan in the UK in the past 30 years. It abolished the original plan to increase the corporate tax rate from 19% to 25%, the personal income tax rate increased by 1% to 19%, abolished the highest tax rate for high-income groups of 45%, lower the national insurance contribution ratio, lower the alcohol tax and stamp duty on home purchases, restore shopping tax refunds for international travelers, etc. According to the budget of the Trass Cabinet, the total tax cut is about 55 billion pounds per year (about 450 billion yuan).
Tax cuts are a common plan for Western countries to stimulate the economy. Some economists even say that the lower the tax rate, the better the economic situation. The original purpose of the Trass team was to stimulate a rapid economic recovery, but they underestimated the impact of this plan.
"Mini Budget" just launched, the terrible double collapse of the bond and foreign exchange market occurred quickly. On Monday, September 26, as soon as the financial market opened, the interest rate of the UK 30-year Treasury bond soared more than 200 basis points, from 3% to nearly 6%. The exchange rate of pound and fell 10%, reaching a low of 1:1.03 US dollars, almost a parity, setting a record for more than two hundred years since the birth of the two currencies, the British pound and the US dollar.
2. Vigorously borrow
0. He served as the British government, especially during the administration of the Conservative Party, and had always emphasized strict adherence to fiscal discipline and was very vigilant about the rise in the government's debt ratio. The Conservative Party has been strongly attacking the vicious cycle of "more debt, higher taxes" during the previous period of Labor's rule. Since the Conservative Party came to power in 2010, it took about nearly a decade for the Conservative government to work hard to fill the huge debt left by the Labor Party, putting the British finance on a low debt track. In 2022, the conflict between Russia and Ukraine was severely escalated, causing the energy and commodity markets to soar, driving the UK's sharp rise in food, gasoline and retail prices since May, and the inflation rate officially broke through 10% in the summer. At the same time, the Federal Reserve on the other side of the ocean began to make efforts to enter the interest rate hike cycle, and began the process of recycling global dollars with high inflation. This leaves the Bank of England with little choice but to follow the small steps to prevent the pound from collapsing like the yen.
3. Pension collapse
0 At the end of September, facing the double-debt and foreign exchange killing, London Finance was forced to sell large amounts of assets, causing liquidity to almost dry up. In just three days, interest rate swap transactions in London have failed and collapsed, and most market makers have left the market, and the trading spreads for one-year interest rate swaps have increased by a hundred times, and the market has completely lost liquidity.
htmlOn September 28, the Bank of England was forced to take advantage of to rescue , announcing that it would invest 65 billion pounds to buy British Treasury bonds in 13 working days, which barely stabilized the price of the Treasury bond market and prevented the investment in most pension projects from falling below the closing line.However, the yield on the UK 30-year Treasury bonds is still hovering around 4.5%, and it will not return to its original healthy level of 3% in the short term. Afterwards, some financial analysts estimated that this market shocked, about 500 billion to 600 billion pounds of funds evaporated, which was equivalent to the loss of nearly 10,000 pounds per British, while the original tax cuts that the Conservative government had planned was only 55 billion a year, accounting for only one-tenth of the losses in the past few days.
4. Recovery policy
After Tras made three unsuccessful moves, the economic and fiscal situation in the UK deteriorated clearly, and the public was in a state of resentment, and political enemies also began their attacks. Tras had no way to refer to the policy and fired the Chancellor of the Exchequer, which became what Tras looked like before he came to power, which also became an excuse for political enemies to attack her.
Finally, Tras had to step down to calm everything so that the British political arena would return to peace.
In fact, since taking office, Tras has faced tremendous pressure and a complex economic situation. At this time, if you want to save a country's economy, you need very strong wisdom. Obviously, Tras does not have that wisdom. Under such a complex situation, the next UK will face a more complicated situation.
Facts have proved that the previous tax cut plans were not feasible. Can the opposite policy work? If both tax increases and tax cuts do not work, what policies should be adopted?
