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π¬π§ Fiscal policy: a test for the leaders of the British raceβ
π Rishi Sunak goes all-in: the under-ranked candidate promises to cut the base income tax rate from 20% to 16% by 2029. His rival for the premiership, Liz Truss, is demanding an immediate reduction in fiscal pressures.
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The political hunt began on July 7, when Johnson finally resigned. A recent YouGov poll showed that the lady-challenger is now 24 points ahead of the gentleman. Tories will announce their decision on September 5, and until then, both candidates will wage an information war for the opinion of voters.
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It is the attitude to the fiscal problem that puts politicians at opposite poles of the British economy.
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Sunak chose to fight inflation as his main goal. He believes that each percentage cut in the income tax rate will cost the budget Β£6 billion, and if the economy grows in line with official figures, he will be able to reduce the UK's debt-to-GDP ratio. Sunak proposes to start correcting the income tax only in two years due to the growth of real budget revenues.
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Truss believes that corporate tax hikes and income tax cuts need to be rolled back now to jump-start the economy. Compensate for the loss of Β£34 bln in tax revenues is proposed at the expense of the Β£30 bln of Β«headroomΒ» in the public finances identified by the OBR, plus additional borrowing if necessary. For the real economy, this is a weak solution, but such ideas appeal to voters.
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This discussion does not take into account the opinion of the BOE, which intends to raise the interest rate by 50 bp again tomorrow: while politicians are fighting for power, the regulator has to solve current problems. Speculators are ready to collect StopLoss on both sides of the market, so you need to be very careful with positions in the pound.
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Profits to yβall!