The last few weeks have been a masterclass in how not to run a country’s finances…
Today’s emergency statement is evidence of panic and a realisation that if the Treasury waited until 31st October to set out the detail, then the damage that would have been inflicted could have lasted for over a decade. Hopefully, today is the final nail in the coffin for the very brief era of Trussonomics as her economic vision is left in tatters.
Jeremy Hunt has at least come into the role as chancellor with an air of contrition and a willingness to not throw every economic orthodoxy out of the window. He understands the markets need stability as does the public and the UK’s business community.
His decision to reverse almost all tax measures announced in the growth plan three weeks ago that have not started parliamentary legislation including the planned cuts to dividend tax rates; VAT-free shopping for tourists; the alcohol duty changes and the cut to the basic rate of income tax from 20p in the pound to 19p from April next year has effectively ripped the mini budget to shreds.
All of this combined will raise an extra £32bn per year for the Treasury and will give the markets some confidence that the UK is on a firmer footing and on a more realistic path. There is still a shortfall – and we are in for a bumpy ride – but it feels like we’ve stepped back from the abyss. Of course, only time will tell to see how inflation, the gilt markets and interest rates are impacted but I’m cautiously optimistic.
The decision to refuse to commit to energy costs support beyond April next year with still no sign of a windfall tax on the energy companies benefiting from the current situation beggars belief and will cause uncertainty and concern for households and businesses across the UK.
Overall, today’s emergency statement was a sobering insight into quite how bad the national finances have become in the brief period of time since Liz Truss took office and the huge cost of correcting it. That shouldn’t be forgotten. We’ve got another instalment in a few weeks’ time so all we can do is buckle up and hold on tight. I don’t think the turbulence is over just yet.