Britain's new finance minister Kwasi Kwarteng unleashed historic tax cuts and huge increases in borrowing today in an economic agenda that floored financial markets, with British government bonds in freefall.
Kwarteng scrapped the country's top rate of income tax and for the first time put a price tag on the spending plans of Prime Minister Liz Truss, who wants to double Britain's rate of economic growth.
Investors unloaded short-dated British government bonds as fast as they could, with 2-year gilts on track for their biggest one-day fall since at least 2009, as Britain raised its debt issuance plans for the current financial year by 72.4 billion pounds.
Support for household energy bills announced by Truss will cost 60 billion pounds for the next six months, Kwarteng said. Tax cuts would cost a further 45 billion pounds, he said.
The pound fell to a new 37-year low against the dollar of $1.1148 as Kwarteng updated parliament.
"Our plan is to expand the supply side of the economy through tax incentives and reform," Kwarteng said.
"That is how we will compete successfully with dynamic economies around the world. That is how we will turn the vicious cycle of stagnation into a virtuous cycle of growth."
The opposition Labour Party said the plans were a "desperate gamble".
The Institute for Fiscal Studies said the tax cuts were the largest since the budget of 1972 - which is widely remembered as ending in disaster because of its inflationary effect.
The market backdrop could barely be more hostile for Kwarteng, with the pound performing worse against the dollar than almost any other major currency.
Much of the decline reflects the US Federal Reserve's rapid interest rate rises to tame inflation - which have sent markets into a tailspin - but some investors are also wary about Truss's willingness to borrow big to fund growth.
Asked on Friday how Britain would fund its spending while cutting taxes, one cabinet minister said that economic growth was the answer.
A Reuters poll this week showed 55% of the international banks and economic consultancies that were polled judged British assets were at a high risk of a sharp loss of confidence.
Consumer morale figures on Friday underlined the challenge facing Kwarteng, with the mood among households falling to its lowest ebb since records began in 1974.
On Thursday the Bank of England said Truss's energy price cap would limit inflation in the short term but that government stimulus was likely to boost inflation pressures further out, at a time when it is battling inflation near a 40-year high.
Despite the extensive tax and spending measures, the government had decided against publishing new growth and borrowing forecasts from the Office for Budget Responsibility, a government watchdog, until a formal budget later this year.
Kwarteng confirmed the OBR will publish its full forecasts later this year.
"Fiscal responsibility is essential for economic confidence, and it is a path we remain committed to," he said.
Meanwhile, Britain is set to accelerate moves to bolster the City of London's competitiveness as a global financial centre by scrapping the cap on banker bonuses ahead of an "ambitious deregulatory" package later in the year, Kwarteng said.
The cap limits bonuses to twice a banker's basic salary, with shareholder approval, and was introduced in the European Union to curb excessive risk taking after taxpayers had to bail out lenders in the global financial crisis.
The move was already flagged, triggering anger as Britain faces a cost of living crisis, forcing the government to spend billions to help households pay their energy bills.
Britain and the Bank of England have always opposed the cap, introduced in 2014, saying it simply bumps up basic pay.
"We need global banks to create jobs here, invest here and pay taxes here in London, not in Paris, not in Frankfurt and not in New York," Kwarteng told parliament.
"All the bonus cap did was to push up the basic salary to bankers or drive activity outside Europe, it never capped total remunerations... As a consequence of this ... we are going to get rid of it."
Banks and finance recruiters have said scrapping the bonus cap would likely take time to have an effect - as many bankers' had their fixed pay lifted in recent years to make up for constrained bonuses. The banking industry had been prioritising other demands to boost competitiveness, including scrapping government levies on bank profits.
Britain has already set out a draft law before parliament to make its capital market and system of financial rulemaking more efficient as the City faces added competition from Amsterdam, Paris and Frankfurt now that Britain has left the EU.
Britain's new Prime Minister Liz Truss has signalled she wants to go further to "unshackle" the City from remaining rules inherited from the EU.
Kwarteng said the financial services sector will be at the heart of the government's programme to drive growth in the economy.
"To reaffirm the UK's status as the world's financial services centre, I will set out an ambitious package of regulatory reforms later in the autumn," Kwarteng said.
The finance ministry said in documents accompanying Kwarteng's speech that the "deregulatory" package will unleash the potential of the sector.
"This will include the government plan for repealing EU law for financial services and replacing it with rules tailor made for the UK, and scrapping EU rules from Solvency II to free up billions of pounds for investment," the ministry said.
The BoE has already proposed easing Solvency II, a set of capital requirements for insurers inherited from the EU, but insurers want more capital released