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The British pound fell to all-time low against the U.S. dollar early Monday after Treasury chief Kwasi Kwarteng pledged a sweeping package of tax cuts, fueling concerns about the government’s economic policy as the United Kingdom creeps toward recession.
The pound fell as low as $1.0373, before rallying to $1.0672 in early London trading. It was its lowest level since the decimalization of the currency in 1971.
The British currency has lost more than 5% of its value against the dollar since Friday, when Kwarteng announced the biggest tax cuts in 50 years. It comes as the government plans to spend billions of pounds to help consumers and businesses struggling with high energy bills that are driving a cost-of-living crisis. The combination sparked investor concern about spiraling government debt.
Kwarteng and Prime Minister Liz Truss, who took office three weeks ago, are betting that lower taxes and reduced bureaucracy will spur economic growth and generate enough additional tax revenue to cover government spending. Economists suggest it is unlikely the gamble will pay off.
Opposition Labour Party economy spokeswoman Rachel Reeves said Kwarteng had “fanned the flames” of instability by talking up more tax cuts and said the government’s policies were “reckless.
