Britain’s economy is not world beating, but is taking a beating. After 12 long years of austerity, the worst economic performance of any advanced country during the pandemic, Brexit, and the government’s failures during the cost of living crisis, the economy is on its knees. The new Chancellor, Kwasi Kwarteng, has dealt its most serious blow yet.
In my last article, I wrote about Truss’s hesitation to implement an energy price cap. However, after its publication, she did just that. Though this does provide short-term relief for struggling families, the government’s method remans a cause for concern. Rather than introducing a windfall tax like the EU has recently implemented and Labour proposed, the government is giving oil companies public money. This will increase the national debt, handing the ticking-time bomb to future generations.
This is bad enough but Truss’s plans to aid disaster capitalists goes much further, with the mini-budget helping the rich. Kwarteng announced an end to caps on bankers bonuses (caps introduced after the 2008 crash which aimed to help prevent another one) and scrapped the highest tax bracket.
The pound, once a stable currency, crashed when Truss became Prime Minister, it crashed again when Kwarteng sacked the highly respected Permanent Secretary to the Treasury and crashed again after the mini-budget. As of writing this, sterling is at a 37-year low showing that the international financial markets have no faith in the government’s economic plans. Spooked by the mammoth tax cuts’ potential impact on the U.K.’s already fragile economy, investors sent sterling to a fresh low of $1.033.
It’s not just tax cuts that are harming the economy: Kwanteng’s economic incompetence also includes borrowing even more money adding on to the £2.5 trillion debt. The UK government borrowed £11.8bn in August, almost twice as much as the Treasury’s independent forecaster had expected, as high inflation pushed interest payments up
How does this affect you?
The only people who benefit from these tax cuts are those who earn more than £150,000 a year.
The state of the economy defines everyday life. Increased borrowing adds to the national debt and an extensive tax burden. Lower taxes means less money for already struggling public services that have already suffered 12 years of austerity. Lower taxes contribute to even higher inflation. The pound collapsing makes imports more expensive for both companies and consumes (especially oil which is traded in dollars).
The Bank of England and the government are at loggerheads over whether to increase or decrease demand. To do this and remedy the government’s failures, the Bank of England may have to raise interest rates (up to 6%) to curb inflation, which cools the economy by making borrowing money more expensive. However, this would increase the cost of mortgages, making it even harder to buy a home and will also affect rents as most landlords have mortgages of their own.
Even now mortgage lenders are pulling deals amidst rate rise fears with 40% of mortgage deals withdrawn. This will result in repossessions on a massive scale. Voters may forgive the Tories for Partygate or Johnson putting known Putin allies in the House of Lords, but they will not forgive them if they lose their homes.
In the meantime, the Bank of England have stepped up and started buying long-dated bonds in order to rescue pension funds. If they didn’t do this there was a very real danger pension funds would have collapsed.
Red vs Blue: who is better?
The Conservatives have lost the argument they are the party of fiscal responsibly. Even though the last Labour government had constantly higher growth, they lowered the national debt and had better funded social services.
However, the Tory press still convinced voters the economy was in safer hands with the Conservatives. During the last major global downturn in 2008, the economic policies brought introduced by Gordon Brown increased the UK debt, but the economy did weather the recession.
For all their bravado, the Tories have only increased the national debt year on year during the time of austerity. In April 2022, the UK’s debt exceeded 100% of GDP for the first time since 1963, but very little attention was played to this in the media.
End of Tory Britain?
It is clear that the Conservatives are not going to win the next election. The criminal activities and Russian-connections of Boris Johnson and the ineptitude of Truss have paved the way for a Labour premiership. Rather than leaving the country in half-decent shape and exiting Downing Street with dignity, the Tories are instead trying to damage the country as much as possible.
The government have lost control of the economy and reality. They are gamblers on the losing streak playing with other people’s money. Even though Liz Truss has only been in office a couple of weeks, there have been reports Conservative MPs have started submitting letters of no confidence to the 1922 Committee. This is worrying for Truss who may face a no confidence vote.
She has only been in power for a few weeks. Imagine the damage Truss and her band of fools could to in two years? Removing her and having an other leadership battle would make the party look weak and disunited. But the consequences of keeping Truss as leader would be catastrophic.
Is this on purpose?
Why does Kwarteng want to cause so much damage? He has claimed this was “just the start” of his reign of fiscal incompetence. The answer is rather simple: to benefit disaster capitalists and other hyper-wealthy individuals who gain an enormous amount of money as the economy collapses.
Anything that weakens Britain benefits Putin. Even now, after Russia invaded Ukraine, the Tories continue to take dirty Russian money. The Putin-backed oligarchs do not do this because they have Britain’s best interest at heart but to weaken it from the inside. Kwarteng is pursuing policies that do just this.
Makes you wonder, who really controls Britain?