 plus monetary tightening (high interest and mortgage payments) – has been tried before and invariably leads us further on to the scorched earth of more tax rises, more spending cuts and a slump in living standards. Politically, for the Conservatives, the outlook is grim. If Sunak and Hunt press ahead in the November 17 Autumn Statement with their triple whammy of tax rises, spending cuts and higher mortgage rates, the country is unlikely to forgive them. The story being peddled by the current consensus of policymakers and UK market economists is that the recent mini-Budget drove the UK's credit-worthiness to terrible levels, due to fears of budgetary profligacy. This reading of events badly exaggerates UK credit risk. The rates on UK gilt five-year credit defau){kind=link}
The pro-growth agenda of Liz Truss and Kwasi Kwarteng is what the UK economy needed. We will all suffer from its demise
The implosion of Liz Truss’s mini-Budget and the subsequent collapse of her administration are in danger of doing the UK economy grave long-term damage.
The new regime of Rishi Sunak and Jeremy Hunt is on course to learn all the wrong lessons from the turmoil in the markets, which brought down their predecessors and triggered an abrupt and futile change of policy.
Truss was right to prioritise growth.Her prescription of tax cuts and supply-side reforms – all aimed at getting the economy moving and so boosting output, jobs and business expansion, and ultimately tax revenues for public services – was the right one.
The tragedy was that she and her chancellor Kwasi Kwarteng failed to produce the documentary evidence that would reassure the markets that their tax cuts would be covered by faster growth. Poor presentation and communication proved their downfall.