Friday 23 September 2022

Truss channels Thatcher, gets timing wrong

Kwasi Kwarteng is an Eton scholar, went to Harvard and has a Phd in economic history from Cambridge. Surely, he is one of the most economically educated Chancellors we have ever had.

Liz Truss too is no slouch, having worked her way to Oxford from humble beginnings.

So here they are, as Mr Drew points out below, trying to do something about the UK economies performance in a big hurry. For a very long time now, the UK has been sinking back to its post-war status, with socialist policies driving down growth and leading to higher taxes in a cycle of despair. Not since the late 1990’s have pro-market policies been popular or implemented. Blair, Cameron and Boris all worshipped at the NHS cult and in massive state redistribution.

With the large tax cuts seen today, the current leaders are trying to change course. To redress the large tax burden to encourage investment. It is the right approach but the timing is so bad, that they have taken the biggest gamble since Cameron agreed to a Brexit referendum.

With the tax cuts, come no spending cuts. Indeed the energy support offered is enormous and comparable to the Covid state spending madness. Still the socialist grasp on the media and body politic insists that gross spending and help for all is the purpose of Government. This year, with interest rates rising, the pound falling and inflation out of control, we will borrow more than during covid and getting on for 2009/10 levels of borrowing.

The markets are shocked, not believing that the UK won’t  continue to follow the EU orthodoxy of managed decline. However, with massive spending there are no guarantees of success and possible horrendous downside risks. 

Next year super energy bills will finish many businesses. No one is paying £35 for a cod and chips.  The war in Ukraine is likely to escalate not end. Interest rate rises will cause huge problems in the housing market and start to damage bank balance sheets.

This will likely lead to a Schumpterian crisis, one where massive destruction is wrought on our zombie economy with the hope that out of the ashes a leaner, better focused and more profitable one arises. 

The fact that the rest of the West will get this too more or less is not much of a consolation for us. Perhaps the real gamble is that with everything buggered anyway we need to set things up for a recovery on a more pro-growth economic base?

A better approach would have been to sign-post these changes. Agree some cuts to budgets no longer affordable to go with them and so limit the real fiscal easing until next year when inflation should drop (it will when high energy prices are baked in, big drops will occur, even if only back down to 5-6%).

Thatcher had to endure first and my take is that this is the Truss plan. It is her 1981. Risk it now, go for growth and hope something turns up. It is a big gamble, we are left to hope it works. 

Failure will be a hard burden. Massive debt, a pound heavily devalued trying to buy expensive energy valued in strong dollars. Double digit interest rates that will induce a recession worse that 2008 in the real economy with huge unemployment and negative equity a common experience for many of us. Plus a Labour government keen to say it is all the fault of Tory tax cuts, trying to tax our way back to growth. 


Don Cox said...

They could cancel the Sizewell power station. Nuclear fusion will be working long before that gets built.

And fracking may work better than expected.

To me, the remarkable thing about today's economy is the high employment rate. Maybe this is caused by taking so many keen young people out of the full-time labour market so they can study for degrees.

I don't think we are anywhere near the state we were in when we had to call in the IMF for help, or when Britain was completely broke after the war.

It would be nice if some of the folk from Hong Kong could set up small manufacturing businesses, using modern gear such as CNC milling machines.


Shiney said...

They could start by making it clear to ALL councils that this sort of shit won't be funded

Or the this in the NHS

There is soooo much waste that we could cut our way to a balanced budget in matter of months - if only someone had the balls to make a start.

dustybloke said...

The blue touch paper has been lit with a flamethrower. Let’s see what happens…

Elby the Beserk said...

" Plus a Labour government keen to say it is all the fault of Tory tax cuts, trying to tax our way back to growth. "

Guido notes that Starmer has swung 180 degrees from complaining about the high tax burden to complaining about cutting taxes. What a plank. However. no significant cuts for low and middle earners.

Nick Drew said...

I read a very telling one-liner the other day

"Few will see the point in capitalism if there's no hope of them ever acquiring any capital"

Mrs T's judgement wasn't perfect & she had huge blind spots (Poll Tax, mortgage interest relief): but she did sell the council houses to their occupiers ...

E-K said...
This comment has been removed by the author.
E-K said...

Don Cox - At the time of the IMF begging bowl we were a nation in which I travelled the length of the M1 London to Newcastle and saw nothing but industry. Many things were still made in Britain. There was much of Britain worth selling off and it was.

Not now.

The so called 'employed' cut each other's hair, make each other's coffee, look after each other's kids and each other's grannies.

Employment will disappear in a flick-of-switch instant without even a chimney being knocked down.

This is the Great Reckoning. The shift of wealth and power from West to East.

Truss has to take on the Blob, Woke, the militant unions, the Lords and the bloody NHS.

Tax cuts must not mean soldier cuts, binmen cuts, policemen cuts but it will.

It must only be Blob cuts, Lords cuts, Woke-ist cuts, Civil Service cuts but can you see that ???

The latest - that a trans teacher allowed to wear a mini skirt and XXX sized fake tits whilst working a lathe in a boy's woodworking class says all you need to know.

The militant Left are well and truly in charge and rubbing our noses in it with glee.

Tax cuts will not cure gas shortages unless accompanied by cuts in surplus and damaging government.


White heterosexual boys who cannot get into med school despite excelling academically (because there is blatant discrimination against them) flee to the chemistry industry. Medicinal research and chemical research (one of our remaining world leading industries) is the latest area of work to be purged of white boys.

Swiss Bob said...

I've known Kwarteng since school days, he was clever chap and by several accounts stayed so at university and soon after. Alas like Matt Hancock, who was also sharp, his brain went mushy during his time in politics.

There's nothing Thatcherite about running a persistent deficit and sending your currency sliding and your gilt yields jumping. If there's a global downturn, Kwarteng's just made it extra painful for the UK. I fear he's not done yet either.

Anonymous said...

The ir35 changes will have a huge positive impact on productivity. Lots of IT friends are now talking about going contracting as a direct result of the ir35 announcement. This will trigger a huge spread of skills and expertise across industries.
I don't see how you get to the level of growth needed without a Schumpterian crisis given how low unemployment is.
Hang on!

DAD said...

Re Don Cox.

I am 85 years old. For all that time the Fusion process has been promised "in 25 to 30 years".

It still is !

Don Cox said...

The 25 to 30 years wait is now 2 to 3 years. There has been big progress in heavy duty electronics. And I don't think fusion power was thought of in 1936.


DJK said...

Swiss Bob, do tell us about Kwarteng. He's certainly highly credentialed, but we all know that there's none as stupid as the really well educated. Moreover, a lifetime of achievement, with people giving you awards and telling you how clever you are removes any doubts about your own, possible failings.

Anonymous said...

Our modern industry and Society runs on cheap, readily available energy.

The budget was one half of a necessary return to Conservative values (allowing people to keep more of what they earn, and making them more responsible for their own wellbeing).

The next shoe to drop has to be the destruction of a whole swathe of the grievance industries.

It's been them and their fellow travellers in the media who have been the root cause of the destruction of our energy industry .

How Britain, sitting atop vast swathes of coal, with a North sea oil industry and possible massive gas reserves, is having a huge energy crisis is purely down to the idiots in charge self destructive policies.

If the Oxbridge and LSE types running the show had a deliberate plan to turn Britain into a third world shithole, I'm not sure what they would have done differently.

Anonymous said...

"For a very long time now, the UK has been sinking back to its post-war status, with socialist policies driving down growth .. "

Remind me, how many years have we had a Tory administration ?

Matt said...

Tory and Liebore are two cheeks of the same arse.

Jan said...

Anonymous @10.48 Well said. I couldn't have put it better.There are far too many attached to the government teat.

andrew said...

Anon @10:48
Please do not be anon as there are many and I would vote for you, but not the others.

Anonymous said...

"If the Oxbridge and LSE types running the show had a deliberate plan to turn Britain into a third world shithole, I'm not sure what they would have done differently"

I think, seriously, that IS the plan.

Whether this is entirely down to Oxbridge and LSE I'm unsure. Who funds and leads the (often violent) opposition to politicians who want to stop third world immigration?

Britain did pretty well pre-mass immigration. It's coincided with a huge drop in living standards and the affordability of a securely housed family.

Elby the Beserk said...

Anonymous said...
"For a very long time now, the UK has been sinking back to its post-war status, with socialist policies driving down growth .. "

Remind me, how many years have we had a Tory administration ?

10:56 am

3 years of huge state tax and spend under the idiot Johnson was hard core Socialist, or "ConSocialist" as we called it.

Get real. There was NOTHING "Conservative" about the past 3 years, witness the ever increasing number of diversity non-jobs all paying more than the real workers in whatever sector. Assume you have been abroad, or had your head in the sand? (Or bofe?)

E-K said...

Under extreme duress from the chav side (David's) of the family. First refused a funeral service, second barred from the cremation (why ?) and third stuff stolen from Mum's property.

We've managed to get an attended cremation for my brother rather than him being sent off like a pet from the vet's.

A bit up 'emselves this ungrateful and over-entitled benefit class.

Let's hope the tax cuts fall hard there.

We are undergoing reverse Darwinism by the state in the UK. The chemist and the doctor have not had offspring yet (aged 24) while the chav side are breeding like rabbits.

E-K said...

... from aged 14.

BlokeInBrum said...

My condolences on the death of your brother, Kev, and the ructions it has caused your family.
Sadly, as you say, the policies of the governments of the last 30+ years have favoured the feckless, the criminal and the irresponsible.
Hard working and sensible families curb the number of kids they have cause they can't afford them, whilst the slackers and benefits class knock 'em out by the dozen, aided and abetted by the State who enable them.
Btw. I'm the anon from above, but im sometimes too lazy to attach my name when I'm on the phone...

E-K said...


They don't want to be at the cremation but wanted us barred too... go figure !

Until now we'd got on with them without any sort of conflict at all. We are dismayed.

Once all is done I'm going to dob the step daughter in it. She's been 'looking after' an ADHD daughter of her own on max 'high rate' benefits in a two bed provided by the state... she's actually been away making a love nest with her 45 year-old divorcee while leaving the 15-year-old on her own for weeks on end with wild teenage parties going on - this was around the corner from David and causing him great stress.

I said to Lin (when she complained that she would lose David's pension and her carer benefits for him (yup- she was supposed to be his carer !) ) "Perhaps you could take Lilly in."

"Oh no. Lilly has her own life now."

I didn't dare suggest she might get a job. They are now suing the police for failing to find David early enough.

We need a few years of hardship to make people intolerant of this sort of outrageous distortion.

E-K said...

PS We went to the site that his body was found, to lay flowers and there was only one other bunch, lain by the people who found him. None from his wife or family who 'loved him sooo much' and for whom he'd done years and years of running around and not a single supportive call for Mum who treated them as her own.

We've had one call to her in which money was asked for a family Butlins trip (to which mum wasn't invited) and a condolences card in which the Butlins trip was detailed above all else.


Total scum.

lilith said...

I'm sorry, what?! Money for...Butlins? At this time? Poor David. What a callous chaotic environment for a sensitive intelligent man.

Anonymous said...

I bet City folk will be at their desks early come Monday. Could be a recovery or a rout. I think a rout, but we shall see.

I can just remember when a "half-crown" (12.5p) was called "half a dollar" in my 50s playground.

Anonymous said...

Sorry to hear that E-K. I posted above before I read your posts. Sounds a real 'mare.

Elby the Beserk said...


Just a massive WTFF re your brother's "family" (for lack of a better word) and all they have dumped on you. Sooner you can turn your back on them the better, or maybe hope that Butlin's is in fact a Gulag.

Just wanted to say that the rose you and your lovely P gave me for my 70th is very happy, and still covered in flowers in late September. If you guys need a weekend off and a laugh with us, you know where to find us

Anonymous said...

Black Monday for sterling?

Don Cox said...

Doesn't the value of a currency depend mainly on its interest rate ? Any effect from tax cuts (which I'm sure will be beneficial) would take months or even years to emerge.

I would expect that a higher interest rate would increase demand for a currency. The US dollar has a higher interest rate than the pound.

Turkey's currency falls in value because Erdogan has a religious objection to higher interest rates.


Anonymous said...

The value of a currency depends on interest rates, but also on expectations of where that value is headed. The Euro held up against sterling when ECB rates were near zero

Anonymous said...

It appears that Kwartruss are planning to increase immigration even more in order to drive down wages, or more accurately in order that agricultural workers aren't rewarded at market rates. When it comes to wages, "the market" is a rigged game.

Anonymous said...

1.1 million visas last year just weren't enough. I'm starting to see Africans and Filipinos in the most unlikely places

Anonymous said...

Don Cox: "Doesn't the value of a currency depend mainly on its interest rate ? "

Would do if interest rates actually reflected the economic reality.

With inflation at around 8% ( Yea, the official figures. The real world is more like 18% ) - interest rates should be at least 100 basis points over inflation.

That of course would destroy everything in the UK economy, which is why they are trying everything, absolutely everything to stave off that eventuality. Including manufacturing a war in Ukraine.

Anonymous said...

Anon @10:23 "It appears that Kwartruss are planning to increase immigration even more ... "

Yea, this malarky started in the '70s. 'We need immigrants to do the work the lazy Brittisher won't do'. It was a lie then and it's still a lie.

Today the lie is bolstered by 'hate speech laws', the UK today is an occupied country.

Apparently, they can't even find English men to run for Parliament.

Anonymous said...

Out of curiosity, anon, how does manufacturing a war in Ukraine, which is the single biggest driver of UK inflation, help stave off a rise in interest rates to stop rising inflation?

Surely, if the Uk, who you claim are manufacturing a war in Ukraine, wanted to stop inflation. Then just don’t have that war.

jim said...

OK so we have a Schumpterian collapse. What then, how would you rebuild the UK's economy - currently based on Polyfilla, magnolia paint, hairdressing and coffee making.

We are a bit high priced for other than top dollar manufacture. Snag is there is only so much top dollar manufacture and everyone wants a slice. So mid range - but the workers are too expensive for that and endless whining about infrastructure and housing. If I were building a car plant the answer would be not here. So services - insurance, finance and lawyering. But we already have more accountants and lawyers/capita than even the USA and productivity is still low. Maybe they are good at hiding it.

Good bets look to be in the bio, pharma, finance and legal sectors. But that soaks up only say 10% of the employable. The very well and expensively educated go into the flim flam, think tank and scribbling industries - say 5%. Then the public and health sectors. That soaks up another 20%. Which leaves around 65% to hew the wood and draw the water which seems rather wasteful. They could be better employed but for social mobility aka housing.

With no new whizzy technologies oven ready or more easily done elsewhere we are left looking at the sh*(ty jobs of the world. Meaning work cheap and stay employed.

Poor old Truss and Kwarteng seem to have a touching faith in The Hidden Hand and trickle down. Trouble is that idea went out 100 years ago. I fear they - and we - are in for a rude awakening.

One approach that might appeal to JRM et al is to return the UK population to forelock tugging serfs. Life being short brutish and nasty for most. That would also solve the immigrant problem. What is not to like.

Anonymous said...

Anon @2:14 "Out of curiosity, anon, how does manufacturing a war in Ukraine, which is the single biggest driver of UK inflation, help stave off a rise in interest rates to stop rising inflation?"

Looks like reading comprehension isn't your strong point.

Anon @2:14 "which is the single biggest driver of UK inflation"

Wrong again.

Anonymous said...

"endless whining about infrastructure and housing"

Can't blame people for that. Let in another 500,000 in every year and where are they going to live? Jam for landlords and estate agents..."the booming housing market", crap for anyone just looking for somewhere to live.

Now, 30 year olds with degrees can’t afford to rent, let alone buy, huge swathes of our cities have been taken over by non-natives, and the “conservative” government is handing out a million visas a year. What remains of our industries are in foreign ownership.

We have more high tech toys for sure – but all made elsewhere.

Did I say 30 year olds couldn’t find places to live?

BlokeInBrum said...

Now that the Universities are starting back up the town is awash with new Freshers.
Hard not to notice that around here, most of them are Chinese.
It's pretty clear who are the ones swimming in cash, and it's not us.

jim said...

Re 'endless whining' which leads to more moaning about immigration etc. The real problem is over population - globally. We might just manage with competent government globally but there is no hope of that.

I thought for a while that a limited nuclear exchange with Mr Putin might hold down the energy guzzling caucasoids and their economies for a while. At least Hastings beach would become a less attractive destination. But over time Nature abhors a vacuum. Of course 'limited nuclear exchange' is an oxymoron, no one could resist a pile-on. The only advantages being that we would not have to bother with an expensive renovation of the Houses of Parliament and no pictures of King Charley on the fivers.

Apropos over population I had thought Covid was a useful experiment to test social reaction across the various political systems. Might help with fine tuning the next wave.

Anonymous said...

jim: "The real problem is over population - globally. We might just manage with competent government globally but there is no hope of that."

A grain to truth mixed with a shovel full of bullshit and a barrow full of globilist Schwabian derangement.

There is next to no overpopulation in Antarctia.
There is next to no overpopulation in South America.
Africa is all but empty.

The UK which until the 1960s had a population of about 50 million
now has a population approaching 80million.

As to the likely results of a nuclear exchange, no one appears to know that the Soviets ( those evil communists ) built significant civil defence and nuclear fallout shelters for the general population, and the Russians since the soviet era have maintained a sophisticated and functioning anti balistic missile defence system.

The West by comparrison? Do you even know where the nearest communal fall out shelter is ?

I take some comfort from the fact that after nuclear armageddon is brought down on our heads by our useless political class, they will emerge from their nuclear shelters, and still be as utterly useless as when the scuttled into them. They won't survive more than a couple of months once their government issue rations packs have been consumed.