The ship of state is all at sea

The Economist cover 20 September 2022

For the past week, I’ve been trying to make some sense of what Liz Truss and Kwasi Kwarteng, Prime Minister and Chancellor of the Exchequer respectively, are attempting to achieve in and for the UK with the not very “mini” budget announced to the House of Commons a week ago today.

Reaction to that announcement was swift, not only in terms of wide criticism almost anywhere you cared to look but also in a hard negative financial reaction through what looked like a near-collapse of sterling vs the US dollar over the course of the week. Things rallied somewhat today after the OBR met with the PM and Chancellor.

Then there’s the wider social cost, what looks like something regarded by those who make these decisions as “collateral damage.” It’s things like the abolition of the 45% higher rate of income tax that will benefit people with six-figure incomes. There’s little to nothing there for people at the other end of the earnings spectrum. And talk about cuts to welfare benefits (which some say is to pay for the tax cuts for the rich).

Another was the withdrawal of mortgage offerings by many lenders with some disappearing completely and others re-emerging a day or so later at much higher interest rates.

There’s a lot more of this social cost that you can find in the Wikipedia entry that presents a neutral, factual, evolving report. No rants and hysteria there.

Meanwhile, spin from Kwasi and silence from Liz all week until Thursday when she did a blitz of radio interviews around the country. I can best summarise those media encounters as truly awful. Pauses, silences, sounding like she knew not what to say much of the time other than trot out bland statements. It’s almost as if she has had no media training at all. Surely not so.

Take a listen to the recordings on BBC Sounds, see what you think.

This is a pretty bleak picture on the immediate future for our country. I’m reflecting on what I tweeted at the end of the day last Friday, a thought about trust.

Today, I don’t think Liz Truss has 30 days. If she had a honeymoon period from winning the Conservative Party leadership contest and becoming Prime Minister, that’s all well used up now. She needs to give immediate reassurance to every citizen that the pain – severe for many – inflicted by this government (yes, that’s what it is) is worth it.

This weekend the Conservative Party conference takes place in Birmingham. I can imagine that the planners have ditched their original plans for this event and instead are working on a Plan B in which Truss and Kwarteng are the star acts.

How bad are things and can they get worse? To me, things look very bad and they will likely get much worse. I can’t see an easy solution for this government.

After 12 years in power, it’s a time for change. With this nightmarish week leading into a continuation in the next, the Conservatives just aren’t believable any more. The fiasco of Johnson is being compounded by Truss. There’s even some talk of the return of Johnson. That’s a dreadful prospect.

Time for someone else to give it a shot. Keir Starmer and (New) Labour? Have they got what it takes? Are they ready? 54% of voters think so says a YouGov poll yesterday, compared to just 21% who think the Tories are.

But I’m just a voter with a reasonably-informed opinion. Take a look at The Economist’s view in this short video. It has a calm and credible assessment on where we are and what might be next with the economy. That will have a bearing on whether a general election will loom any time soon.

Have a great weekend.

[Updated 2 October:] I watched Laura Kuenssberg’s politics show on BBC News early this morning where Liz Truss was the guest.

If anyone was expecting a repeat of the calamitous radio interviews on Thursday, mentioned above, that’s not what happened. Arguably Truss spent much of the time avoiding answering direct questions from Kuenssberg, instead forcefully pressing her points on every interruption.

Compared to Thursday, I’d say she had some effective counsel from her communciators and so was far better prepared for this.

She was clear on a number of matters that Laura had been pressing her on.

Yes, she said that the mini budget announcement on Friday 23 September could have and should have been handled far better. I interpret that to mean that effective communication and explainers at the time of the announcement could well have helped the financial markets better understand the details and how they’ll be paid for, thus avoiding the currency drama and more of the past week.

Truss also said she wouldn’t change her plan on the tax cut for high earners (removing the 45p top rate) and mentioned that her Cabinet was not consulted about this beforehand.

To me, the overall takeaway from this interview is that Liz Truss has no intention of changing the mini budget plans announced by Kwasi Kwarteng on 23 September.

None of this means she is suddenly looking at calmer waters ahead, though.

On the contrary, she has the Conservative Party conference starting today – can she count on enough support within her own party to get her plans rolling? Let’s remember she wasn’t top choice for new Leader by Conservative MPs – that was Rishi Sunak – but was the one among Conservative Party members who had the final say.

Speaking of Sunak, by the way, he was the lone influencial voice who predicted what would happen if Truss launched into unfunded tax cuts.

After all of this, Liz Truss can look forward to fun times in Westminster when the House of Commons returns on 11 October.

(Image at top via The Economist.)

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