Polly Toynbee: In the looking-glass world of Trussonomics, it’s borrow like there’s no tomorrow
Imagine if Labour blew up the rules to balloon already soaring inflation, borrowing without knowing the cost, spending on evidence-free pet projects to benefit its own favoured core backers while falling into recession. Cue collapse in markets, a run on the pound, flight of capital, interest rates soaring, foreign raiders snatching UK companies, collapse in consumer confidence: actually, that’s happening.
In the looking-glass world of Trussonomics, it’s borrow like there’s no tomorrow to reward bankers with bonuses, the rich with huge 5% top tax cuts, second homeowners with stamp duty cuts, with nothing much for the middle or the poor. The Conservatives’ trick through the ages was to persuade ordinary voters that what serves the rich serves “the economy” and ultimately them too – the nonexistent trickle-down Joe Biden just excoriated. But that took deceit and pretence: Cameron’s “big society”, Johnson’s “levelling up”.
Liz Truss and Kwasi Kwarteng’s lack of guile is their one virtue. Fairness is not on their menu and they say so: deliberately accelerating inequalities is their “growth” plan straight from the eccentric rightwing pamphleteers. So far, they’ve had no poll bounce. Will tax cuts yield enough to outweigh alarm at a denuded NHS, care and public services? Shock and awe looks bold, but watch it blow back on them.
Katy Balls: This is a huge gamble. And it won’t take long to see if it has backfired
The Conservative party has reinvented itself once again. In this fiscal event, Liz Truss and Kwasi Kwarteng have undone much of the work of the Tory party over the past few years. It’s hard not to read his pledge to “turn the vicious cycle of stagnation into a virtuous cycle of growth” as an attack on the last 12 years of Tory government.
For all the talk of a mini-budget, the announcements are anything but small – with an estimated £45bn worth of tax cuts. Not only are they economically risky, they’re politically difficult. The decision to abolish the 45p rate of tax for the highest earners is in the words of one Tory backbencher “what a diplomat would call brave”. The unease among Tory MPs who backed Rishi Sunak was clear in the Commons chamber as the announcements rolled out.
Ultimately, today’s announcements are further evidence of the clear blue water opening up between Labour and the Conservatives. Supporters of Keir Starmer will be quick to weaponise the lifting of the banker bonus and tax cuts for the rich.
The bet Truss and Kwarteng are making is that the package of measures will lead to growth. The reason they went so big with today’s announcement was twofold. First, they have only a limited period before the next election to try to get the economy going so time is of the essence. Second, Truss’s team know that political capital tends to go down not up so they want to push through her plans when her stock is highest. It is intended to set the framework for the next two years.
But it’s ultimately a gamble – and it won’t take long to find out if it has backfired.
Miatta Fahnbulleh: A missed opportunity to tackle the crisis head on
Make no mistake, today’s announcement was not for most of us, but the very wealthiest in society. At its heart was a massive transfer of income to the wealthy. A string of tax cuts – abolishing the top rate of tax, lowering corporation tax, reversing the national insurance rise, cutting stamp duty – disproportionately benefit the rich and provide no answers to the cost of living scandal. They don’t help the people who need it the most and rob our creaking public services of the investment they desperately need.
The energy price guarantee will take the sting out of the cost of living crisis for many, but millions of families on low and modest incomes will still feel it. This is a mini-budget completely divorced from this reality.
The chancellor missed the opportunity to tackle the crisis head on. He should have provided additional protections for families on low to modest incomes through a cost of living allowance, plus a much needed boost to benefits, paid for by toughening the windfall tax on energy producers and increasing the tax paid on wealth. He should have put the building blocks in place to get us out of this energy crisis, for example through a Great Homes Upgrade, which would help to reduce the energy we use by insulating millions of homes and ramp up the production of clean energy through cooperative energy providers owned by the public. Boosting green investment could have unlocked the growth Truss and Kwarteng claim to want.
Instead, this was a budget that put ideology over common sense. And it is the country that will pay the price.
Nick Butler: Kwarteng believes in markets. But will they believe in him?
Winning University Challenge is not a qualification for being chancellor of the exchequer. On the contrary, youthful victory can breed an exaggerated self-belief. Who needs the scrutiny of the Office for Budget Responsibility (which he has refused) or the help of an experienced permanent secretary in the Treasury (whom he has sacked) when you know it all?
Unfortunately, the financial markets can sense bluster as the fall in the pound since he took over on 6 September demonstrates. Nowhere is the bluster more evident than on energy. The government has taken on the price risk for the next six months – a necessary but not sufficient response. Nothing has been done to augment short-term supplies of imported gas or to add to the UK’s minimal levels of storage. Fracking and development of a few small North Sea fields will not provide any extra supplies for years to come. There is no examination of which price increases are justified and which are not. Companies producing power from wind and nuclear have not seen their costs increase but continue to milk a broken system. There is no serious attempt to limit energy demand. Unless Vladimir Putin is in the mood to surrender, the risk of further increases in gas prices this winter is very high.
Once in place the subsidies will be hard to remove. The bill will be enormous and could be far higher than the unexplained £60bn estimate, adding to a new level of borrowing which the chancellor avoided spelling out. This time round even Kwarteng could not answer the starter for 10 – the most important question of all for the financial markets – who pays? Kwarteng believes in markets. But will they believe in him?
Nick Butler is a visiting professor at King’s College London, a former group vice president for strategy and policy development at BP, and an adviser to Gordon Brown
James Perry: This only helps the new super-class of extreme wealth holders
The intellectual underpinning of, and justification for, this mini-budget is “trickle down economics” – the idea that wealth trickles down from the wealthy to everyone else. The data is unequivocal that this doesn’t happen. Rather than trickling down, the last 50 years has shown us that new wealth creation drifts like snow into the hands of the already wealthy. And when it is there, it is hoarded. The top 1% of households have 230 times more wealth than those in the bottom 10%.
So this budget is built on ideological self-delusion – extreme wealth holds back the economy, leaves public services underfunded and creates social division. Kwarteng today has scrapped the top rate of tax and the cap on bankers’ bonuses. This only helps the new super-class of extreme wealth holders – a small number of people who horde an eye-watering amount of wealth.
Britain was built on fair play, playing by the rules, being in it together. If this government is serious about “levelling up”, there is a simple and obvious move for it to make. Tax extreme wealth. Doing so will create a structural change in the public finances and promote social cohesion. And what’s more, it’s popular – supported by 70% of the public and 64% of Conservative voters.