UK 'behaving like a submerging market' claims Larry Summers
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Larry Summers, a former US Treasury Secretary, has unleashed a scathing assessment of Chancellor Kwasi Kwarteng’s mini-budget. Speaking to Bloomberg, the top US economist derided the package as “the worst macroeconomic policies of any major country in a long time”. The remarks signal a growing split between Downing Street and the White House.
This comes as Liz Truss admitted a US-UK trade deal remained a long way off.
Mr Summers, who worked for the Obama administration, has maintained close ties to the Biden White House and even helped craft the legislation to curb inflation and boost climate spending.
He told Bloomberg: “It makes me very sorry to say, but I think the UK is behaving a bit like an emerging market turning itself into a submerging market.
“Between Brexit, how far the Bank of England got behind the curve and now these fiscal policies, I think Britain will be remembered for having pursuing the worst macroeconomic policies of any major country in a long time.”
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He claimed that the policies set out by Liz Truss’ cabinet were creating the circumstances for the pound to sink past parity with the US dollar.
The pound on Friday has slumped to its weakest value against the dollar since 1985.
Mr Summers explained: “It would not surprise me if the pound eventually gets below a dollar, if the current path is maintained.
“This is simply not a moment for the kind of naïve, wishful thinking, supply-side economics that is being pursued in Britain.”
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Earlier this week, President Biden tweeted that he was “sick and tired of trickle-down economics” in what some saw as a dig at the UK’s new policy proposals.
Mr Kwarteng’s mini-budget set out the most radical package of tax cuts for the UK since 1972 in an effort to boost the long-term growth of the economy.
This included scrapping the top rate of income tax.
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Despite the US criticism, Mr Kwarteng has remained defiant, telling the BBC this morning that he wants to keep cutting taxes as part of an effort to boost UK economic growth.
Mr Kwarteng told the BBC there was “more to come” and he would not backtrack on his approach.
He said: “We’ve actually put more money into people’s pockets. We’re bringing forward the cut in the basic rate of income tax and there’s more to come.
“I want to see over the next year, people retain more of their income, because I believe it’s the British people that are going to drive this economy.”
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