Liz Truss wants the British public to believe she represents change. She and Kwasi Kwarteng even want you to believe they have a new plan. But what they suggest is just another zig-zag in a track record of policy failure over the last 12 years of the economy. Just like Boris Johnson before her, the new prime minister and chancellor are long-serving cabinet ministers. Desperate to present themselves as agents of change, they must condemn the growth plans they once supported – there have been six since the Conservatives took power in 2010, each announced with great fanfare but little impact. Instead, the only constant over a decade of Tory government is low growth. Reeves is particularly critical of the plan to abandon the planned corporate tax increase. She says: Of course we need a competitive regime, but UK levels are already lower than France and Germany and will remain so at the planned 25 per cent — yet UK corporate investment is still the lowest in the G7. Businesses have other priorities: in the most recent ONS survey only 2 per cent cited taxation as their main concern. And he also says that Truss is wrong to say that growing the economy is more important than worrying about how its benefits are shared. Reeves says: Truss says she will prioritize redistribution. However, IMF research has shown that higher income inequality is associated with lower and more fragile growth. It’s obvious why. The concentration of income among fewer people—those least likely to spend it and drive the economy forward—undermines the health and education of workers, critical components of a productive workforce. Important events BETA filters Key Events (2) Liz Truss (3) By Sky’s Ed Conway The pound is back down against the dollar this morning. Now under $1.12. Bloomberg trading index and currency-weighted index of sterling strength has fallen to lowest level EVER👇Quite the backdrop for today’s fiscal statement… pic.twitter.com/pxArwNgjjd — Ed Conway (@EdConwaySky) September 23, 2022 Pat McFadden, the shadow chief secretary to the Treasury, was also giving interviews this morning. He told BBC Breakfast that the government was dealing with the financial crisis. He explained: What it looks like today is the government making a huge bet with public finances, taking a series of measures and putting it all into borrowing and calling the growth plan… This is not really a development plan, it is a return to some very old style Tory policies based on the belief that if you make the already rich even richer, it will trickle down to the rest of us… It will be the third change to national insurance in six months. It is the legislative equivalent of digging a hole and refilling it. Simon Clarke, the rising secretary, had a particularly difficult interview on the Today program with Mishal Husain. That prompted these tweets from Jonathan Portes, a former government economist and now professor of economics at King’s College London. On Today, @SimonClarkeMP literally just said that the purpose of the NI pool was to raise money for public services and the point of the cut is to raise money for public services. Whatever you think about politics, they have completely abandoned any pretense of credibility. — Jonathan Portes (@jdportes) September 23, 2022 Ian Mulheirn, head of policy at the Tony Blair Institute thinktank, was equally unimpressed. A lot of double thinking around today. Masterclass from @SimonClarkeMP. 🏥Tax cuts help fund public services! 💰Gifts to the rich help them level up! 🏦Fiscal policy will stimulate growth while the Bank controls inflation! War is peace, freedom is slavery, ignorance is strength! — Ian Mulheirn (@ianmulheirn) September 23, 2022 And the FT’s Peter Foster was not convinced by Clarke’s economic analysis either. Listening to the incomparable @MishalHusain @BBCr4today trying (and failing) to contain her frustration at @SimonClarkeMP comparing the current ‘dash for growth’ to what worked in the 80s/90s while ignoring the inflationary elephant in the room. He thought he might actually say “duuuuuuh”. — Peter Foster (@pmdfoster) September 23, 2022
Leveling secretary Simon Clarke says it’s “nonsense” to call Truss’ approach a trickle down economy
Simon Clarke, the new rise secretary, is giving interviews this morning ahead of the mini-budget. Here are some of the points he made. This whole trickle-down term is such nonsense and is itself a center-left mischaracterization of what this government is. We need to grow the economy because a more successful economy is good for everyone. As my colleague Larry Elliott explains here , what Truss says and does fits exactly the usual definition of economics. These zones will only happen where there is local consent and we have demonstrated this very clearly in the discussions we have had with local authorities and mayors over the last few days… They will only occur where there is local appetite for them to occur. There will be no top-down enforcement of these zones. The recipe here is that we have better underlying growth that frees up the tax revenue that will allow us to both grow the economy and get over that debt. Updated at 08.36 BST
Labor says mini-budget will be ‘another zig-zag on the path of policy failure’
Rachel Reeves, the shadow chancellor, will answer Kwasi Kwarteng in the Commons today and, in an article in the Financial Times, gives a taste of what she is likely to say. Reeves says Liz Truss represents “another zigzag on a course of policy failure” rather than proper change. She says: Liz Truss wants the British public to believe she represents change. She and Kwasi Kwarteng even want you to believe they have a new plan. But what they suggest is just another zig-zag in a track record of policy failure over the last 12 years of the economy. Just like Boris Johnson before her, the new prime minister and chancellor are long-serving cabinet ministers. Desperate to present themselves as agents of change, they must condemn the growth plans they once supported – there have been six since the Conservatives took power in 2010, each announced with great fanfare but little impact. Instead, the only constant over a decade of Tory government is low growth. Reeves is particularly critical of the plan to abandon the planned corporate tax increase. She says: Of course we need a competitive regime, but UK levels are already lower than France and Germany and will remain so at the planned 25 per cent — yet UK corporate investment is still the lowest in the G7. Businesses have other priorities: in the most recent ONS survey only 2 per cent cited taxation as their main concern. And he also says that Truss is wrong to say that growing the economy is more important than worrying about how its benefits are shared. Reeves says: Truss says she will prioritize redistribution. However, IMF research has shown that higher income inequality is associated with lower and more fragile growth. It’s obvious why. The concentration of income among fewer people—those least likely to spend it and drive the economy forward—undermines the health and education of workers, critical components of a productive workforce. Good morning. At the Guardian, as at the BBC, for the sake of simplicity we have decided to call today’s event the 2022 mini-budget. This is clearer than calling it a ‘budget event’, as they do at the Treasury, but it is not ideal because this what we’re getting is not a budget (if it was, it would be accompanied by a Budget Office economic forecast, probably saying it would have dangerous implications for inflation and borrowing) and it’s not going to be mini at all. In fiscal terms, it will be huge – the biggest package of tax cuts since Nigel Lawson’s 1988 budget, according to economists. And just as Lawson’s budget shifted the political consensus around taxation for a decade, Liz Truss and her chancellor, Kwasi Kwarteng, want to shatter orthodox thinking about borrowing and growth. When David Cameron became prime minister in 2010, the Conservatives beat Labor by claiming that Gordon Brown had spent too much and lost control of the public finances. Confronted by Jeremy Corbyn, the Tories claimed that Corbynomics depended on the discovery of some non-existent “magic money tree”. Now Truss and Kwarteng argue that unfunded tax cuts are wise because they will jump-start economic growth, ultimately leading to higher tax revenues, even though Rishi Sunak, Kwarteng’s predecessor, explicitly rejected this approach in his Mais lecture in February of this year. Sunak said: I am disappointed to hear the flippant claim that “tax cuts always pay for themselves.” They do not. Sustainable tax reduction requires hard work, prioritization and a willingness to make difficult and often unpopular arguments elsewhere. And it is difficult to reduce taxes at a time when demands on the state are increasing. Sunak will be very disappointed today. This may turn out to be the defining announcement of Truss’s premiership, and it is extremely dangerous. The political risk is that even if Truss and Kwarteng can turbo-charge the economy, voters won’t start to notice until the next election. The economic concern is that the strategy will fail and that public finances will collapse. Here’s our overnight coverage of what to expect, from Larry Elliott, Jessica Elgot and Richard Partington.
