LONDON (AP) \u2014 The United Kingdom\u2019s new government outlined plans Friday to cut taxes and boost spending in an effort to bolster the faltering economy, but the high-risk moves sparked concerns that increased public borrowing will worsen a\u00a0cost-of-living crisis\u00a0and sent the British pound on its biggest one-day drop in 2 1\/2 years.<\/p>\n\n\n\n
Treasury chief Kwasi Kwarteng announced sweeping tax cuts that he said would boost economic growth and generate increased revenue without introducing corresponding spending reductions. He also said previously announced plans to cap\u00a0soaring energy bills for homes\u00a0and businesses would be financed through borrowing.<\/p>\n\n\n\n
Kwarteng offered few details on the costs of the program or its impact on the government\u2019s own targets for reducing deficits and borrowing, but one independent analysis expected it to cost taxpayers 190 billion pounds ($207 billion) this fiscal year.<\/p>\n\n\n\n
It triggered the pound\u2019s biggest drop against the U.S. dollar since March 18, 2020, when then-Prime Minister Boris Johnson announced the first nationwide lockdown to control the spread of COVID-19. The British currency fell more than 3% to as low as $1.0899 in afternoon trading in London, from 1.1255 on Thursday.<\/p>\n\n\n\n
Investors are concerned that government lacks a \u201ccoherent policy\u201d at a time when the economy is facing \u201cimmense inflationary pressures,\u201d said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.<\/p>\n\n\n\n
\u201cI think Kwasi Kwarteng really set off fireworks with his budget,\u2033 Streeter told The Associated Press. \u201cIt was much bigger and bolder than expected. But the real concern on financial markets is that these widespread tax cuts are unfunded, they\u2019re going to add to the government\u2019s debt burden.\u2033<\/p>\n\n\n\n
Prime Minister Liz Truss, who took office less than three weeks ago, is racing to combat\u00a0inflation at a nearly 40-year high of 9.9%\u00a0and head off a prolonged recession. Facing a general election in two years, she needs to deliver results quickly.<\/p>\n\n\n\n
The government\u2019s program offers immediate help for homes and\u00a0businesses struggling with soaring energy costs\u00a0while betting that lower taxes and reduced red tape will spur economic growth and increase tax revenue in coming years.<\/p>\n\n\n\n
\u201cWe need a new approach for a new era, focused on growth,\u201d Kwarteng told lawmakers in the House of Commons.<\/p>\n\n\n\n
But opponents accuse the government of dodging scrutiny by rolling out a major shift in economic policy without the normal analysis from the independent Office for Budget Responsibility. Kwarteng said the office would publish a full economic and fiscal forecast before the end of the year.<\/p>\n\n\n\n
The opposition Labour Party attacked the plan for favoring the interests of business over working people and failing to provide any figures on its impact on government fiscal targets.<\/p>\n\n\n\n
\u201cIt is a budget without figures, a menu without prices,\u201d said Rachel Reeves, Labour\u2019s spokeswoman on Treasury issues. \u201cWhat has the chancellor got to hide?\u201d<\/p>\n\n\n\n