Fitch warns that unfunded tax cuts may lead to a significant increase in the medium-term government deficit.
Wednesday, Fitch(Fitch)The outlook for the UK's credit rating has been classified as' negative ', while negative evaluations have been given to the UK government's fiscal policy and political credibility, posing a further threat to the UK's credit rating. The rating agency maintains the UK's credit rating atAA-Investment grade, but warning that the current outlook for the UK's credit rating is negative rather than stable, compared to its peers at Standard&Poor's(S&P)The actions taken last week were consistent. Fitch said that the large-scale, unfunded tax cuts announced as part of the government's mini budget - the UK government has not conducted any independent assessment of their impact - could lead to a significant increase in the medium-term deficit and, in the face of high inflation, immediately create tension between monetary and fiscal policies. This has undermined market confidence and the credibility of policy frameworks. The statement by this rating agency clearly states that the UK government's180Big Turn - Abolition and Cancellation45%The maximum income tax rate plan - which will not be enough to repair the damage caused by its initial statement, nor will it be enough to repair the British Chancellor of the Exchequer, Quacy Kwarten(Kwasi Kwarteng)Subsequently, it hinted at the damage caused - that he intended to further reduce taxes while also changing1The financial rules were only formulated in the month. On the contrary, the institution believes that the adverse reactions of voters and investors to these measures will make it more difficult for British ministers to take any action. The tax plan and related financial market fluctuations are reported to have a negative impact on public opinion and the government's already weakened political capital, which may further weaken the credibility and support of the government's fiscal strategy since2008-09Since the financial crisis in, credit rating agencies have lost some of their power, and at that time they were unable to provide them withAAAWarnings are issued regarding the risks associated with many complex products being rated. But their sovereign ratings are still closely monitored. Just hours before Fitch's announcement, British Prime Minister Liz Truss(Liz Truss)Attempting to reassure the financial markets that she is committed to fiscal discipline, promising to maintain "iron fist control" of public finances and reduce the debt to national income ratio at the Conservative Party Congress. But the rating agency emphasized that the UK Chancellor of the Exchequer will face difficulties in convincing the market that he can pay for his tax cuts through stronger growth or lower public spending. The government has not yet explained how it will respond to the long-term structural challenges that hinder growth. It stated that due to recent high inflation and long-term pressures in education, health, and social health, expenditure pressure will still be significant. Fitch estimates that if no measures are taken to offset the tax cuts2023In, the UK government deficit will rise to equivalent toGDPof8.8%——In contrast, the average deficit of other countries with similar credit ratings isGDPof2%。 reach2024In, the UK government debt will rise to equivalent toGDPof109%The interest payment on government debt will be close to government revenue10%。 |
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