Truss Takes a Bold Economic Gamble. Will It Sink Her Government?

THE NEW YORK TIMES: Three weeks into her term, Prime Minister Liz Truss’s financial plans have thrown the markets and Britain’s currency into chaos and put her future in peril.

Support for the Conservative Party, led by Prime Minister Liz Truss, has plunged in the polls. | Tolga Akmen/EPA, via Shutterstock
LONDON — Prime Minister Liz Truss of Britain campaigned as a tax cutter and champion of supply-side economics, and she won the race to replace her scandal-scarred predecessor, Boris Johnson. Now she has delivered that free-market agenda, and it may sink her government.

Four days after Ms. Truss’s tax cuts and deregulatory plans stunned financial markets and threw the British pound into a tailspin, the prime minister’s political future looks increasingly precarious as well.

Her Conservative Party is gripped by anxiety, with a new poll showing that the opposition Labour Party has taken a 17 percentage point lead over the Tories. It’s a treacherous place for a prime minister in only her third week on the job.

Labour is seizing the moment to present itself as the party of fiscal responsibility. With some experts predicting the pound could tumble to parity with the dollar, economists and political analysts said the uncertainty over Britain’s economic path would continue to hang over the markets and Ms. Truss’s government.

“It’s entirely possible she could be replaced before the next election,” said Tim Bale, a professor of politics at Queen Mary University of London, who is an expert on the Conservative Party. “It would be very, very difficult to conduct a full-blown leadership contest again, but I wouldn’t rule anything out.” » | Mark Landler | Tuesday, September 27, 2022

A Fine Economic Mess in the United Kingdom

THE NEW YORKER: With the pound hitting record lows, financial analysts are questioning the competence of Britain’s new government.

Stocks in the U.S. fell again on Monday, dragging the Dow Jones Industrial Average into bear-market territory—since hitting a peak early this year, it has now fallen more than twenty per cent. The Federal Reserve’s determination to stamp out inflation by raising interest rates is spooking investors, and so is the precipitous decline of the British pound in foreign-exchange markets. On Monday, a senior Federal Reserve official, Raphael Bostic, took the rare step of criticizing a foreign ally, saying the British government’s new package of tax cuts, which sparked the sell-off in the pound, “has really increased uncertainty.”

Spare a thought, if you will, for patriotic Brits. Having just buried Queen Elizabeth II, their last remaining link to a time when their schoolbook maps showed great swaths of the earth’s surface colored imperial red, they now face a humiliating currency crisis. In Asian trading early on Monday, the pound sterling hit an all-time low of $1.035 against the U.S. dollar. When trading shifted to Europe, the battered currency rebounded a bit amid speculation that the Bank of England would announce an emergency interest-rate hike to strengthen the pound. On Monday afternoon, the currency’s slump resumed after the Bank of England announced no rate increase but said it may enact one at its next policy meeting, which isn’t until November. » | John Cassidy | Monday, September 26, 2022

Kwasi Kwarteng Mulls More Beneficial Tax Cuts for High Earners

THE GUARDIAN: Reports chancellor is considering further changes to taxation after mini-budget ‘for the rich’

The government is considering a series of further tax cuts that could hand thousands of pounds to high earners, shortly after it announced the biggest giveaway in 50 years.

Plans under consideration could include bringing back a tax-free allowance for workers paid more than £100,000 a year, and lifting the amount pensioners can save before taxes kick in, the Sunday Telegraph reported.

The chancellor, Kwasi Kwarteng, on Friday delivered a mini-budget with tax cuts that will benefit many of the highest earners in the UK. Although it was not a full budget, it represented the biggest tax-cutting fiscal event since 1972 under another Conservative chancellor, Anthony Barber. » | Jasper Jolly | Sunday, September 25, 2022

Truss/Kwarteng: A Reckless Economic Gamble Certain to Fail

Liz Truss and her Chancellor Kwasi Kwarteng have told us that their priority is to grow the economy. They plan to do this by borrowing huge amounts of money whilst cutting taxes which will inevitably benefit the rich more than those in desperate need. This is in addition to the £130 billion which they are borrowing in order to protect the profits of energy companies as they reduce the prices charged to consumers.

Inflation is at the highest it has been for several decades, interest rates are going up and individuals and businesses are being squeezed ever more. The NHS is in crisis with around 6 million waiting for treatment.

More and more families are depending upon food banks as they face an approaching winter when many of them will be unable to afford to heat their homes.

To reduce taxes thus benefitting the rich at a time of such crisis is a reckless and stupid gamble which will not work.

Opposition to the government is increasing and will only be inflamed by this absurd government policy.

It seems highly likely that this will lead to social unrest and a breakdown of law and order in the coming months

Kwarteng Accused of Reckless Mini-budget for the Rich as Pound Plummets

THE GUARDIAN: Strategy of sweeping tax cuts gets hostile reception from markets and economic thinktanks, leaving some Tory MPs aghast

A screenshot taken from the accompanying video.
Kwasi Kwarteng has been accused of delivering a reckless mini-budget for the rich after his £45bn tax-cutting package sent the pound crashing to its lowest level against the dollar in 37 years.

In a high-risk strategy designed to revive Britain’s stagnant economy, the new chancellor announced more than £400bn of extra borrowing over the coming years to fund the biggest giveaway since Tony Barber’s ill-fated 1972 budget.

Kwarteng said tax cuts worth more than £55,000 annually to someone earning £1m a year were part of a new direction for the economy and were designed to help boost growth to 2.5% a year. Some Labour MPs described them as a “class war”. With video » | Larry Elliott and Rowena Mason | Friday, September 23, 2022

This is capitalism at its most hideous! Kwasi Kwarteng has shown us the true face of the Tory party! These disgusting people need to be kicked out of office asap! There is capitalism and there is capitalism. This kind of capitalism disgusts any decent soul. It is inhumane and unChristian. To use Margaret Thatcher’s own words: No! No! No! – © Mark Alexander

Pound sinks as investors question huge tax cuts: The pound has fallen to a fresh 37-year low against the dollar as financial markets reacted to the biggest tax cutting moves in 50 years. »

Liz Truss and Kwasi Kwarteng Have Made a Declaration of Class War

THE GUARDIAN: This unofficial budget is morally indefensible, economically reckless and so risky it suggests a political death wish

Taking from those who have least, lavishing gifts on those who have most.’ Liz Truss and Kwasi Kwarteng on a visit to Berkeley Modular in Kent. Photograph: Dylan Martinez/AP
She makes Margaret Thatcher look like a moderate and Ronald Reagan seem positively wet. Liz Truss has embarked on an ideological project so extreme that the de facto budget announced by her chancellor today amounts to a declaration of class war. It was a reverse Robin Hood: taking from those who have least, lavishing gifts on those who have most. It is morally indefensible, economically reckless and so politically risky as to suggest a death wish.

Trussonomics rests on a simple article of faith: that by rewarding the already wealthy, life will improve for everyone else. Trickle-down economics, they called it back in the 1980s, and it didn’t work then. Now it’s back in a form more stark, more extravagant, than even its most ardent apostles ever dared contemplate.

The generosity towards the amply blessed was breathtaking. Kwasi Kwarteng’s totemic move was the removal of the cap on bankers’ bonuses – as if the number one problem confronting Britain today was that bankers aren’t rich enough. It’ll be Cristal magnums all round in the City, obviously, but Labour HQ should also raise a glass: they’ve just been handed an attack line that cannot fail. The Conservative predecessors of Truss and Kwarteng had no principled objection to letting bankers receive telephone-number bonuses, but held off because they knew the optics were so screamingly awful. The new duo has no such restraint.

And so they have delivered the biggest tax cuts in half a century, outstripping the landmark Nigel Lawson budget of 1988 – and their largesse is aimed squarely at the top. Kwarteng decided it was those in the highest tax bracket who needed help, so he abolished the top rate altogether. That will hand an average £10,000 to the highest-earning 600,000 people in the country: literally the one per cent. » | Jonathan Freedland | Friday, September 23, 2022

Liz Truss makes Margaret Thatcher look like the fairy godmother! Divisive politics like this could eventually well lead to a revolution. Even tolerant Brits have their limits! Could Tory policies like this—giving the already super-privileged even more privileges—lead even to Britain overthrowing the monarchy? The French did it in 1789, declaring the motto Liberté, Égalité, Fraternité. It is very difficult to see how we Brits could declare the same here! In the UK, there is liberté for the super-priviliged, there is certainly no égalité and where there are such class divisions, there can certainly be no fraaternité, either.

It is high time for this country to call time on giving the already super-privileged yet more privileges. A well-run economy, even a capitalist economy, should be, must be run for the benefit of all. I believe it is true to say that this country has more food banks than it has Starbucks outlets! How can it be morally justifiable to pursue such shameless economic policies when so many people have to go to food banks in order to put food on the table for their children? What we need is more food for our children, not more champagne for our bankers!

Once upon a time, when I was young, I was so proud to call myself British. These days, not so much. Moreover, we Brits were spoken about in the same breath as fairness and fair play. No longer, I fear. This country has become synonymous with class division, unfairness, greed and selfishness.

With policies like these put forward like this by Kwasi Kwarteng and Liz Truss, it is easier to feel ashamed to be British than it is to feel proud. These are , indeed, sad times. – © Mark Alexander

For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath. – KJB Matthew 13:12

Pound Sinks as Markets React to Mini-budget

GETTY IMAGES
BBC: The pound has fallen to a fresh 37-year low against the dollar as markets react to the biggest tax cutting budget in 50 years.

UK stocks also slid after Kwasi Kwarteng outlined a series of tax cuts and economic measures in a massive shake-up of the country's finances.

The pound dropped by nearly 2% against the dollar, putting it close to $1.10.

Sterling has been falling in recent weeks, partly down to the strength of the US dollar. However, sterling also fell against the euro on Friday, with the pound down more than 1% at €1.12.

Meanwhile, the UK's FTSE 100 of major shares fell to its lowest level for more than two months. » | Noor Nanji, Business reporter, BBC News | Friday, September 23, 2022

Kwarteng’s voodoo economics spooks markets. – © Mark Alexander

U.K. Government Goes Full Tilt on Tax Cuts and Free-Market Economics

THE NEW YORK TIMES: The new administration’s proposals are a sharp break from the era of Boris Johnson, and they represent a turn toward Thatcherism.

Britain’s new prime minister, Liz Truss, will be hoping that the measures can engineer at least the start of a solid economic recovery before a general election that must take place by January 2025. | Daniel Leal/Agence France-Presse — Getty Images
LONDON — Prime Minister Liz Truss of Britain on Friday gambled that a hefty dose of tax cuts, deregulation and free-market economics could reignite growth before the next general election as her government unveiled a package of measures that is likely to determine its electoral success or failure.

Breaking sharply with the era of the previous prime minister, Boris Johnson, the new chancellor of the Exchequer, Kwasi Kwarteng, promised the dawn of a new age of lower taxation, with the scrapping of one planned tax rise and the reduction of levies on home purchases to try to fire up the real estate market.

Mr. Kwarteng abandoned a proposed rise in corporate taxation and, in a surprise move, also abolished the top rate of 45 percent of income tax applied to those earning more than 150,000 pounds, or about $169,000, a year. He also cut the basic rate for lower earners.

“We will focus on growth, even when that means taking difficult decisions,” Mr. Kwarteng told a packed House of Commons. “None of this is going to happen overnight, but today we are publishing our growth plan that sets out a new approach for this new era.”

The focus on tax cuts to grow the economy “is how we will turn this vicious cycle of stagnation into a virtuous cycle of growth,” he added.

…

Some dispute the comparison because the plans announced on Friday are likely to mean a large increase in government borrowing, at a time of rising interest rates, because there has been no indication of big spending cuts. While Thatcher was a committed tax cutter, she believed in balancing the books first. » | Stephen Castle and Eshe Nelson | Friday, September 23, 2022

Just when you thought we had reached the bottom with BoJo, along comes Truss to disabuse us of any such notion! At least it will be a smooth ride for the super rich! That's some consolation, I suppose. The rest will be able to look on! – © Mark Alexander

UK in Recession and Further Interest Rate Hikes on Their Way, Bank Warns Kwarteng

THE GUARDIAN: Threadneedle Street makes clear on eve of tax-cutting mini-budget that plans risk triggering more rate rises

One Whitehall source described the chancellor’s mini-budget as having ‘more rabbits than Watership Down’. Photograph: Toby Melville/Reuters
The Bank of England has warned Kwasi Kwarteng the economy is in recession and it will most probably need to push interest rates higher following Friday’s tax-cutting mini budget from the chancellor.

On the eve of a major package of support from the chancellor designed to break what he called the economy’s “cycle of stagnation”, Threadneedle Street said the UK economy was heading for a second consecutive quarter of falling output, with gross domestic product set to shrink 0.1% in the three months to September.

However, with energy and food bills still soaring, and inflation not expected to peak until October, the Bank of England raised the cost of borrowing for a seventh successive meeting of its monetary policy committee (MPC) and made clear the new government’s plans risked triggering more interest rate hikes. » | Larry Elliott, Jessica Elgot and Richard Partington | Thursday, September 22, 2022

UK Becoming a Police State as Government Talks Nonsense about 'Going for Growth'

As Liz Truss appoints her new right-wing government, the UK economy continues to suffer from the effects of Brexit.

The new Health Secretary and Deputy Prime Minister Therese Coffey writes to staff asking them not to use the 'Oxford comma' whilst Kwasi Kwarteng announces that he is going to 'go for growth' by removing the limit on bankers' bonuses.

In Edinburgh a protester was forced to the ground and arrested by the police for shouting an insult at Prince Andrew, whilst another woman was arrested and is due to go to court for holding up an 'anti-monarchy' sign.

Truss is to borrow £130 billion in order to secure the massive windfall profits of energy companies. The taxpayer will repay this loan over the coming years.

Pound Falls as Weak Retail Sales Raise Fears UK Economy Is in Recession

THE GUARDIAN: Sterling drops by more than 1% against dollar to $1.1351, its lowest since 1985

The pound sank to a fresh 37-year low against the dollar on Friday after weaker than expected retail sales raised fears that the British economy is already in recession.

Sterling fell by more than 1% against the currency to $1.1351, its lowest since 1985, partly reflecting broader dollar strength as well as specific concerns about the outlook for Britain. The pound also hit a 17-month low against the euro, with €1 worth 87.66p.

It came as the latest official data showed cash-strapped consumers cut back on spending by more than expected in August, when retail sales volumes in Great Britain fell by 1.6%. Economists had predicted a more modest fall of 0.5%. » | Phillip Inman | Friday, September 16, 2022

The Brexit pound is looking pretty weak and pathetic, isn't it? Never mind! We've got our blue passports back now; so you'll be able to sleep better at night.

Brexit, of course, is not the cause of this recession, but it sure isn't helping any. Gee thanks, Farage! And all your stupid, selfish cohorts. But hey! You'll be sitting pretty even if so many Brits will have to starve and/or freeze to death this winter. In German, we would call the lot of you ein Lumpenpack! Go look it up, Nige (et al), it suits you dorks to a T. – © Mark Alexander

In Full: Former BoE Governor Warns of a "Very Unpleasant Period" Ahead

Former Bank of England Governor Mervyn King blames central banks for fuelling the cost-of-living crisis by printing too much money during the pandemic.

King headed Britain's central bank from 2003 to 2013, and oversaw the start of its QE programme in March 2009 during the global financial crisis.

But in more recent years he has criticised the scale of central bank asset purchases, which were funded by newly-created money.

11 Crisis Issues in Liz Truss's Bulging In-tray Now She Will Be Prime Minister

MIRROR: The new Prime Minister inherits an economy that is juddering towards recession, a hike in energy bills and businesses on the brink of bankruptcy, writes Assistant Editor Jason Beattie

When Liz Truss enters Downing Street, she will be handed a in-tray overflowing with problems.

Top of the list is the looming hike in energy bills that threaten to leave more families in destitution and more businesses on the brink of bankruptcy.

The new Prime Minister also inherits an economy that is juddering towards recession, soaring inflation and a wages crisis.

As she surveys the country she now leads she will also see the damage caused by more than a decade of Tory government - an administration she has played a central role in.

Britain has not looked so broken since the 1970s.

The public services are crumbling, there is a shortage of affordable housing and our infrastructure is in need of urgent repair.

Brexit remains unresolved, exports have slumped and trust in politics has hit rock bottom.

Here are the central challenges facing Britain’s 56th Prime Minister: » | Jason Beattie, Assistant Editor | Tuesday, September 6, 2022

Michael Lambert: Could the UK Economy Collapse?

Sep 3, 2022 The UK economy could collapse very soon if urgent measures are not taken. Climate change, clearly the biggest threat which mankind has ever faced is causing massive disruption of food supplies as a result of drought and flooding.

Vladimir Putin's crazy and irrational behaviour threatens us all, including his own economy. The UK has been ruled by a dishonest, incompetent and self-obsessed prime minister and a second-rate government and has presided over an extensive decline in standards.

Brexit has so weakened the UK economy that we are forecast to be the 19th slowest-growing economy in the G20 next year.

The new prime minister, who is expected to be Liz Truss, has given no indication of how she will solve any of our problems other than by cutting taxes.

Electricity prices have risen so much that many householders will be unable to pay. Businesses which are not protected by any price cap are seeing electricity prices increasing so much that many will simply be forced to close.

The stress of being unable to cope with the rising cost of living is likely to lead to mental health problems for many. Others are likely to resort to crime in order to survive and, given the extremely low possibility of ever being apprehended, may well be seen as the only solution for many to survive.

Liz Truss Cost of Living Crisis Policies Would Make Inflation Worse | Economics | New Statesman

Aug 31, 2022 Liz truss has shown a "complete failure" to address the inflation driven UK cost of living crisis, says economist Duncan Weldon.

Economist and Journalist Duncan Weldon speaks to the New Statesman's Will Dunn to discuss his cover story in the latest issue of the New Statesman magazine, titled "The coming economic storm: As inflation reaches a 40-year high and with Britain facing a punishing recession, the Conservative leadership contenders have failed to grasp the scale of the crisis."

Economist and Journalist Duncan Weldon speaks to the New Statesman's Will Dunn to discuss his cover story in the latest issue of the New Statesman magazine, titled "The coming economic storm: As inflation reaches a 40-year high and with Britain facing a punishing recession, the Conservative leadership contenders have failed to grasp the scale of the crisis."

Pound Slides as Fears Mount for UK Economy

BBC: Worries over the prospects for the UK economy led the pound to slide 5% against the US dollar in August.

Sterling sank again on Thursday morning, dipping below $1.16 on the currency markets.

Analysts said the fall reflects the darkening outlook for the economy, with consumers and businesses facing rising prices and soaring energy bills.

The Bank of England has predicted the UK will fall into recession towards the end of this year.

The weak pound means Brits travelling overseas will find their spending money will not stretch as far.

"Our economic prospects are not looking particularly good compared to the rest of the world," said Laura Lambie, senior investment director at Investec.

Ms Lambie said that recession fears were weighing on markets, with the investment bank Goldman Sachs warning this week that the UK could remain in recession until 2024.

A recession is defined as the economy getting smaller for two consecutive three-month periods. » | Noor Nanji, Business reporter, BBC News | Thursday, September 1, 2022

Energy Prices Could Push UK Inflation to 22%, a Near Post-war Record

Inflation in the UK could top 22% next year, close to the post-war record set in 1975, if wholesale energy prices remain at current high levels, Goldman Sachs has warned. Highlighting the pressure on households and businesses, the US investment bank said inflation could peak at 22.4% next year if wholesale gas and electricity prices continue to spiral over the winter.

In a scenario where prices “remain elevated at current levels”, economists at the bank said the Ofgem energy price cap for household bills could rise by more than 80% in January. This would “imply headline inflation peaking at 22.4%”.

Inflation rose above 10% for the first time since the early 80s in July, fuelled by surging wholesale energy prices and the rising cost of basic essentials. Inflation hit a post-war record of 24.5% in August 1975. » | Richard Partington, Economics correspondent | Tuesday, August 30, 2022

UK Inflation Will Hit 18% in Early 2023, Says Leading Bank Citi

THE GUARDIAN: Forecasts updated after 25% and 7% rally in gas and electricity prices respectively last week

Inflation in the UK will hit 18% early next year as consumers count the cost of the deepening energy crisis, one of the world’s biggest banks has predicted.

Forecasters at the US financial services group Citi said it expects the consumer prices index to breach 18% in the first quarter of 2023, while the retail prices index inflation rate will soar to 21%.

The prediction outstrips previous modelling of the impact of rising costs. Earlier this month the Bank of England said it expected inflation to reach 13% by the end of the year as it raised interest rates for a sixth successive time.

Separately, the Resolution Foundation thinktank has forecast inflation could reach as high as 15% by early 2023.

However, on Monday Citi said the inflation rate was likely to be even higher next year with a peak of more than 18% in January. » | Alex Lawson, Energy correspondent | Monday, August 22, 2022

Truss Poised to Plunge UK Economy into ‘Inflation Spiral’, Says Sunak

THE GUARDIAN: Truss cannot deliver £50bn tax cuts and support packages without pushing public debt to dangerous levels, says Tory leader contender

Liz Truss will plunge the economy into an “inflation spiral” if she does not choose between her unfunded £50bn tax cuts and providing cost of living support, her Conservative party leadership opponent, Rishi Sunak, has claimed.

Sunak’s leadership campaign said Truss would increase borrowing to “historic and dangerous levels” and place public finances into “serious jeopardy” if she attempted to do both.

The comments came after Truss, the frontrunner to be the next prime minister, signalled another U-turn with direct support for companies and households with soaring energy bills this winter.

In a statement, Sunak’s campaign said: “Following weeks of rejecting direct support payments as ‘handouts’, Truss supporters have slowly woken up to the reality of what winter brings. They now say that they will provide people with help – but what help, for who, when and how it will be paid for remains a mystery. » | Tobi Thomas | Monday, August 22, 2022

Michael Lambert : Clueless Liz Truss Set to Turbo-charge UK Economy!

Aug 20, 2022 Liz Truss says she will TURBO-CHARGE the UK economy, whatever that means? The seemingly endless Tory leadership fiasco continues with Truss and Sunak announcing ever more right wing policies. Truss is expected to be announced as the winner on 5th September.

Inflation is at 10% and set to reach 13%, taxes are the highest for 70 years, according to Truss, interest rates are going up as are food prices. Energy prices are rising so steeply that thousands of businesses will find it difficult to survive and many will fail.

The cost-of-living crisis for those with limited means are set to make their lives almost impossible. The railway workers, the post office workers and the employees of Folkestone container port are just some of the unions going on strike and there are many likely to follow them.

Truss's plans to cut taxes now have been roundly criticised by the IFS, the OBR and others. She has said that she will confront the EU over the UK's illegal refusal to abide by the NI Protocol which is likely to risk a trade war with the EU which provides 40% of our food. She also wants to legislate against certain industrial action making strikes illegal. This would almost certainly lead to a catastrophic General Strike.

Truss's government is likely to be even more right-wing than Johnson's and may even include the almost impossibly deluded and incompetent David Frost (aka Lord Gormless) It is perfectly clear that Truss does not have a clue beyond talking about Turbo-charging the economy, 'Unleashing' British business whilst promising she will 'deliver, deliver, deliver' whilst claiming she 'Get's Things Done'