According to the IFS, borrowing will continue to exceed £100bn per year for the remainder of the decade.
Director Paul Johnson says this is against the Government’s rules and labels it “unsustainable”.
Kwasi Kwarteng was accused by the Institute for Fiscal Studies of taking a reckless bet on the country’s finances. The Institute for Fiscal Studies warned that the new Chancellor is “betting his house” with £45bn in tax cuts.
Paul Johnson, the head of the think tank, stated that the largest package of tax cuts in 50 decades was not revealed: “without even the semblance of an effort to make public finance numbers add up.”
Here's what the OBR might have said. Borrowing well over £100bn a year into the medium run. This breaks all the government's own fiscal rules and is unsustainable.
Not so odd, perhaps, that no OBR forecasts with today's statement. https://t.co/76kNihMq5J
— Paul Johnson (@PJTheEconomist) September 23, 2022
The IFS gave a harsh assessment of the mini-Budget. It stated that the Chancellor ignores the possibility of tax cuts leading to inflation and forcing the Bank of England to raise interest rates.
Johnson stated that Mr Kwarteng had shown himself to be willing to gamble on fiscal sustainability to get these massive tax cuts through. “He isn’t just gambling on a strategy; he is also betting the house.”
This morning, Mr Kwarteng announced the largest tax cuts at any fiscal event since Ted Heath’s government in 1972.
The Chancellor eliminated the top income tax rate, reduced the basic rate, and helped boost the property market by reducing stamp duties, especially for first-time buyers.
With the tax cuts package totalling £45bn, he also cancelled increases in corporation tax and national insurance.
The pound has extended its tumble against the dollar to more than 2%. Sterling fell as low as $1.10 to a fresh 37-year low. The FTSE 100 is now down over 2%, as traders worried about further interest rate rises and the outlook for the economy 🫣 pic.twitter.com/KkU9FJL2en
— Share_Talk ™ (@Share_Talk) September 23, 2022
The package will be paid for by borrowing, rather than spending cuts. This is a way to fuel economists and market fears about the state of the public finances.
Sterling keeps falling and has now seen its largest one-day drop since March 2020.
The pound fell more than 2pc to the dollar, falling as low as $1.0898
This is the largest one-day drop in price since the pandemic’s early days when it fell 3.7pc. It is also getting closer to $1.0520, its all-time lowest point.
Oil prices fell to their lowest level since January due to fears of a global recession, and a stronger US dollar.
Benchmark Brent crude fell 5% to below $86 per barrel while West Texas Intermediate traded below $79 for only the second time since January.
