The Chancellor’s “mini-budget” was anything but small. It’s hard to find any comparisons of a fiscal statement having such a significant impact on the wider economy in such a short space of time.
The announcements dragged the pound further into the doldrums, resulted in the Bank of England stepping in to save a section of the pensions industry from collapse and led to the sudden withdrawal of an estimated 40 per cent of mortgage products. The International Monetary Fund has taken the unusual step of openly criticising the UK Government for their plans, noting that the measures would drive up inequality. These are not normal times.
Sitting in the House of Commons listening to Kwasi Kwarteng deliver his statement was a surreal experience; watching him towering over the dispatch box, bursting with enthusiasm for cutting the top rate of tax and restoring banker’s bonuses, as former Conservative ministers behind him looked on stony-faced. Usually, such speeches are met with whoops and hollers from the massed ranks of MPs behind him – not so that Friday.
People would expect criticism from the Opposition but to see so many in the Chancellor’s own party sceptical about his strategy was quite remarkable. As the impact on the wider economy rapidly became clear, the enormity of this catastrophic economic folly has given more of them pause for thought.
Unfunded tax cuts for the wealthy at a time when many can’t afford to put the heating on will be difficult for any Conservative to justify to their constituents. This statement has been characterised by some as an “unforced error”, as if the economic chaos created was all by accident.
Yet, Prime Minister Liz Truss and her team were clear about their intentions during the leadership campaign, and they show no signs of changing course. The Office for Budget Responsibility confirmed to Ian Blackford MP and I this week they had offered to provide an independent analysis of the Chancellor’s plans – and he declined.
I can only imagine that this is because Kwarteng knew that the OBR assessment would expose the deficiencies in his plans. Given the wider economic circumstances, this is incredibly worrying.
Households and businesses are already struggling. Inflation is making it harder to afford the basics. People are putting bills on credit cards and racking up debts.
Soaring interest and mortgage rates will put them all at increased risk. And this all before the inevitable cuts to public services which the Tories will carry out to balance the books.
Across the sea in Ireland this week, Finance Minister Paschal Donohoe has dipped into the Irish budget surplus to provide additional energy support for individuals and businesses, increasing social security and public sector pay. The contrast between broke, broken Britain and prosperous Ireland couldn’t be greater.
People across Scotland will be looking at Westminster in dismay and considering whether we might do things better ourselves, using the levers of taxation to create a fairer, more equal country rather than tax cuts which make the better off even more wealthy.
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