I’m no economist, nor any kind of tax expert. (What is the Laffer Curve anyhow?) So my views on Kwasi Kwarteng’s Mini-Budget, and the subsequent events carry very little weight. That never stopped me in the past, so here they are.
For many years now, economic policy has been hampered by two things:- First, a combination of the Coalition, Brexit, General Elections, Covid, and Russia’s war on Ukraine has prevented clarity of vision and thought. The Government has been “firefighting” for much of the time since they came to office in 2010. The commonest criticism in my mailbag was that there was no ‘vision’, no ‘direction’ no ‘long-term thought.’ Second, we have only, as a result, dared to take mini baby-steps; we were ’trimmers’. In particular we thought that subsidies and hand-outs were what the people wanted rather than growth and stimulus. The net result is an economy facing the doldrums and quite possibly a long and deep Recession, with all of the agony which comes with it.
I am ready to accept that the Mini-Budget sought to answer both problems. It lays out a vision for growth in the economy thanks to massively cut taxes and swathes of regulation removed. Only time will tell if it has been successful. Its presentation was pretty poor to say the least, enabling Labour and the tabloids to allege that it is ‘unfair’ and benefits the rich more than the poor. (And nothing annoys we Brits more than ‘unfairness’). But the fact is that everyone has benefitted from the vast Government expenditure in the Budget. No-one pays tax on income below £12500 (up from £6500 when Labour left office); a 1% income tax cut benefits all taxpayers; the National Insurance rise was reversed, and even the 7 pence a pint rise proposed was scrapped. The (possibly vastly expensive) cap on energy costs is exactly what we were all crying out for. Not only all of that, but the whole point of the Budget is to curb inflation, create growth and jobs, keep a lid on interest rates, all of which benefit everyone. A strong economy must be our aim.
It is perfectly true that the markets have not yet seen what a great idea it is (the jury is out), and there is no doubt that it’s a bit of a gamble. The huge Government borrowing the Energy price cap needs will only work if the international markets realise it’s inherent success; and the energy limit will only work if international prices turn round within 6 months. But to those whose knee-jerk reaction is so massively against it all, and who (believe it or not) are calling for yet another Tory Leadership change, I would simply say: “We do now have a vision, dramatic change, a plan for Growth. Dumping all that now would be a disaster, and equally a change at the top is both impractical and would be a huge political mistake.”
So for now, I plan to watch the markets, listen carefully to the economists who really do know what they are talking about, support the Conservative Government and our new Leader (despite her not being my first choice.) I shall press for it all to be better explained, and a significant change in our media and public opinion handling.
But I readily admit that I am not an economist- so I will be a Loyalist. For now.