RE: Budget.9 Jan 2025 10:19
The lengths that Liz Truss and her cheerleaders have gone to in an attempt to banish her reputation as Britain’s most economically illiterate prime minister have at times been embarrassing.
Aided and abetted by her equally hapless sidekick Kwasi Kwarteng, her plans for the biggest tax cuts since 1972, funded by vast increases in borrowing, triggered a domestic financial meltdown that drew comparisons with the Suez crisis of 1956.
The run on sterling left the pound at its lowest ever level against the dollar. Over just four catastrophic days, the rise in gilt yields exceeded their annual increase for 23 of the past 27 years. But for the intervention of the Bank of England, Britain would have been propelled into a devastating full-blown credit crunch.
Comparisons between Rachel Reeves and the Truss-Kwarteng double act fiasco are premature. But if the Chancellor doesn’t dramatically change tack soon, she and Starmer deserve to be remembered as equally incompetent.
Labour can no longer dispute that the Treasury’s shock tax raid has had a chilling effect on the economy. Thanks to research undertaken by the British Chambers of Commerce (BCC), it is now clear that the Prime Minister and the Chancellor have all but torpedoed the economy with their cavalier and ideologically driven approach to fiscal management.
Surveys claiming to reveal the true state of the economy are ten a penny but the BCC’s survey is comprehensive – nearly 5,000 businesses of all shapes and sizes responded – and the findings are deeply troubling.
Business confidence has been crushed, leaving investment plans and hiring intentions in tatters. A quarter of companies are looking to scale back investment as a result of spiralling fears over the added tax burden that Reeves has shovelled onto employers.
Meanwhile, in a desperate effort to recover these costs, a whirlwind of price rises is about to tear through the economy, shredding household finances and threatening to wipe out the sliver of growth that the UK is clinging onto as it teeters on the brink of recession.
More than half of businesses are now planning to put prices up in the coming months, which, together with sharp rises in energy, water, and council tax bills, and a flurry of new net zero levies on everything from groceries to holidays, will almost certainly stoke another inflationary shock that leaves us all feeling even poorer than we do already.
Sign In
Follow the stocks
