The UK has introduced another substantial tax cut plan. Is it not afraid of history repeating itself?

The tax cut plan last September led to a complete collapse of the UK's finance at that time, with stock, bond, and exchange rate markets all plummeting significantly, ultimately leading to the resignation of Prime Minister Tesla, who had just taken office. How will the UK avoid this time?

Let's take a look at what is different about this tax cut plan and what impact it will have. Could the UK inadvertently be harvested by the United States?

As the UK's economy is gradually falling into recession, the UK government is trying every means to stimulate the economy.

The latest news this weekend is that the UK has introduced a tax cut plan worth up to 10 billion. This time, the Chancellor of the Exchequer hopes that by increasing spending and reducing corporate taxes, it can stimulate corporate investment and consumer spending among the public.

However, to truly achieve the desired effect and strike a balance is key. If not careful, not only will it fail to stimulate the economy, but it may also fall into a quagmire.

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Firstly, after increasing tax relief for businesses, it means that the UK government's revenue will decrease. With reduced revenue and increased spending, it will lead to a comprehensive increase in government deficits.

The market predicts that the UK will need to issue more bonds, which will inevitably lead to a decline in the bonds that have already been issued.

Secondly, increased spending is likely to lead to continued high inflation. Therefore, some officials in the Ministry of Finance believe that the tax cut plan should be extended for three years to avoid inflation.

The risks of this tax cut plan can be understood by simply reviewing the stock, bond, and exchange rate triple kill that occurred last year.In September last year, after then-Prime Minister Truss took office, she introduced an ambitious tax cut plan, including reducing the corporate tax rate back to 19%, which is the lowest level of corporate tax among the G20 countries.

At the same time, personal income tax was also reduced, including lowering the tax rate for the wealthy from 45% to 40%. In addition, national insurance tax was abolished, stamp duty on property purchases was significantly reduced, and a series of related tax cuts were implemented.

The entire plan announced at the time was expected to reduce tax revenue by 45 billion pounds.

There is no doubt that this was to stimulate the economy, but the effect brought was disastrous.

The market immediately realized that the government's tax revenue would be greatly reduced, and it would inevitably need to issue more bonds to maintain the necessary government expenditures. The increase in the supply of government bonds led to a collapse in the government bond market.

The yield on the UK's 10-year government bonds was only 1.8% at the beginning of August, but by late September last year, it had risen and broken through 4.5% (note, this is a review of last year's data).

At the same time, funds sold the pound and bought dollars for risk aversion. In a short period of time, the exchange rate of the pound against the dollar continued to fall, and at its lowest, it once set a historical low of 1.0366 on September 26 last year.

At the same time, a large amount of funds withdrew from the stock market, which also led to the UK's FTSE 100 index reaching a phase low of 6707 points.

Although the incident has passed for a year, I believe everyone still remembers the final outcome, which is that the entire tax cut plan was announced to be abandoned, and then Prime Minister Truss, who had just taken office, announced her resignation, becoming the shortest-serving prime minister in history with a term of only 45 days.

Now that the UK is introducing a tax cut plan again, it is obviously out of helplessness. Despite the lessons of the past, it still has to carry out tax cuts, which also shows how difficult the UK's economy is.However, this time the tax cut is much more moderate compared to the previous one, and the current economic situation has also improved compared to last September.

Perhaps this is why the UK Chancellor of the Exchequer is confident about this tax cut plan.

But how will the market react? We will have to wait until trading begins next week to judge.

But one thing is for sure, if there is another stock, bond, and currency triple kill like last year, it will be a huge opportunity for Wall Street financial capitalists to harvest.