Announced plans are unique for the UK
The plans included tax cuts that were worth around 45 billion pounds, quoted by several media as the largest tax decrease in 50 years. The headline measure was to remove taxation for taxpayers within the highest income bracket while also lowering taxes on, for example, real estate and removing a bonus limit for bankers. Such so-called trickle-down economics, – lowering taxes to improve high income purchase power so that this “trickles down” to low incomes – are not new to the United Kingdom, as these were used during the 1980s. The intention is again to lower taxes for high incomes but, unlike the 1980s, also toincrease its share of government debt against GDP by loaning money. Deemed a speculative policy by many, the consequently decreasing pound could impact UK import values for several commodities and further increase inflation.The euro is also in a difficult position
The pound declined in a time when the eurozone also faced challenges and financial markets were not open to risks. Many European countries predicted a low GDP growth as both energy and food commodity prices increased sharply after the start of the Russia-Ukraine war, leading to a decline of household purchase power. Other factors of uncertainty include the dependence on Russian gas in several countries in Europe – such as Germany – as well as the results of Italian elections in September 2022. Opposed to this is the relatively strong position of the U.S. dollar against either the euro or the British pound in 2022, regarded by many as a safe haven for investments. Several financial analysts, therefore, conclude that whenever the tension on the financial markets lifts, the British pound could eventually show a recovery.
