THIS WEEK the Chancellor held a ‘fiscal event’. It was basically a budget, but without any of the independent forecasts and analysis we would usually expect.
The new Conservative Chancellor Kwasi Kwarteng, appointed in September by new Prime Ministet Liz Truss, was absolutely scathing about the last 12 years of Conservative Government.
He called them a ‘cycle of stagnation’ which has led to the highest tax burden in 70 years.’ On this he is right – the UK has the lowest economic growth, productivity and business investment of any major country.
But his prescriptions to fix this were fundamentally unsound. They were to scrap the cap on bankers’ bonuses (currently twice or three times their basic salary), cutting the top rate of tax for those fortunate few earning over £150,000, and cancelling the rise in corporation tax planned for next year.
These measures will simply not get the economy working. We already have the lowest rate of corporation tax in the G7. It has not led to an increase in business investment.
The recent rise to National Insurance was also reversed. I welcome this one as I voted against it when the Tories did it as I believe funding for the NHS and social care should be raised from all sources of income, not just working people and businesses who pay NI.
Most worrying of all however is that the Chancellor is borrowing all of this money. Any pretence at fiscal discipline has gone. The tax cuts alone in this mini-budget will come to nearly £45 billion a year in a few years’ time.
I have never seen anything like this, and the only comparison in history is with the Conservative budgets of the early 1970s, which are widely regarded as a disaster.
In response to the Chancellor’s announcements, the value of the pound fell further and Government borrowing costs have risen sharply. A further steep rise in interest rates seems very likely. I’m not sure it counts as a great apprenticeship if on your first speech as Chancellor, the already precarious economy immediately tanks.
This is a gamble of unprecedented proportions: a hope that making already wealthy even better off will make the economy grow for everyone.
As President Joe Biden said this month: “This has never worked.” I think he’s right and Liz Truss is wrong. They risk the economy falling down, not trickling down.
Pail Johnson, Director of the Institute for Fiscal Studies – or generally an organisation prone to hyperbole – reacted to say “£45 billion of tax cuts. This is biggest tax cutting event since 1972.
Barber’s “dash for growth” then ended in disaster. That Budget is now known as the worst of modern times.”
This is casino economics, a reckless Tory gamble with household mortgages and budgets.
Gambling with the economy is the opposite approach to what is needed right now. By contrast to the Government throwing a pack of cards in the air at the risk of normal families’ security, I have spent a year carefully working on a better solution to our terrible growth, a robust Industrial Strategy.
This week I will unveil my plans to Labour Party Conference in Liverpool. They are built on discussions with businesses and workers across the country, from steel plants in Wales, to chemical manufacturers in Sunderland, to logistics companies here in Greater Manchester.
My strategy will lay out clear missions to boost growth, deliver clean power by 2030, harness data for public good, protect workers’ rights and build a resilient economy.
It will detail how Labour would protect Britain’s supply chains from future shocks, transform skills and make Brexit work.
This Government acts lurches from crisis to crisis on the hoof, but businesses can’t operate like that. I’m proud to be working on a sounder alternative.
“harness data for public good”
Explanation please.