LONDON — The new U.K. government announced a sweeping program of tax cuts and investment incentives Friday, as Prime Minister Liz Truss seeks to boost the country's faltering economic growth.
Speaking to the House of Commons, Finance Minister Kwasi Kwarteng said the government wanted a "new approach for a new era focused on growth" and was targeting a medium-term 2.5% trend rate in economic growth.
"It's half a century since we've seen tax cuts announced on this scale," said Paul Johnson, director of the Institute for Fiscal Studies.
The pound fell to a fresh 37-year low against the dollar below $1.103 in the hours after the announcement, while investors ditched U.K. government bonds and the FTSE 100 fell to its lowest level since March. Johnson said markets appeared "spooked" by the scale of the "fiscal giveaway."
It comes a day after the Bank of England said the U.K. economy was likely to have entered an official recession in the third quarter, as it hiked interest rates by 50 basis points to combat decades-high inflation. The economy contracted by 0.1% in the second quarter amid a squeeze in real incomes.