Don’t take my word: here are some reputable commentators. Let’s start with the best – Martin Wolf, senior economic writer for the Financial Times last Saturday, 25 September.
As he says: “reality usually wins in the end” and we have not had long to wait for it to kick in.
In the last day this has happened
- The IMF has issued an almost unprecedented statement urging the government to reconsider its plans to cut taxes without cutting expenditure. “Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy,” the spokesperson said in the IMF’s first public reaction.
- The credit ratings agency Moody’s said the UK’s “large unfunded tax cuts are credit negative”. “A sustained confidence shock arising from market concerns over the credibility of the government’s fiscal strategy that resulted in structurally higher funding costs could more permanently weaken the UK’s debt affordability.”
- In a desperate attempt to prop up the economy the Bank of England has intervened to buy unlimited quantities of “gilts” – or government debt. It is effectively printing money.
- The pound has tumbled – making everything Britain imports that much more expensive.
Banks and building societies have reacted by withdrawing mortgages or offering them only at substantially higher rates. With rising mortgage payments and rising inflation as the pound falls, ordinary families are looking on in disbelief.
Here’s the reaction of Torsten Bell of the Resolution Foundation.
“This is by far the worst unforced economic policy error of my lifetime.
The scale of the destruction it is bringing is hard to comprehend:
– higher import prices – surging mortgage bills
– higher deficits risking big spending cuts to come
– pension funds taking big losses on forced asset sales
– likely lasting risk premiums for UK firms and government
Tory confidence plunges
These are some reactions picked up by UK Correspondents
This is……bad. Entirely self-inflicted wound, forcing the Bank of England to restart the printing presses to bail out pension funds which were falling over this morning…. because no one in financial markets liked the “mini Budget”. This is now financial crisis territory…. limited to the UK Bank of England will seek to stabilise – as it did after Brexit vote – let’s hope so.Chris Giles
Ring round of a dozen Tory MPs is coming up with a consistent theme – where are Kwasi Kwarteng and Liz Truss? They say their constituents are genuinely panicking and need urgent reassurance ‘There’s a vacuum of leadership and empathy,’ one said.Steven Swinford
Tory minister: “Kwasi is toast”Robert Peston
A senior Tory MP on the mood in the Conservative party right now: “Disbelief” “I don’t think is sustainable. I predict the CX will get the sack and it will unravel from there.”Beth Rigby
Am told the Bank of England were responding to a “run dynamic” on pension funds – a wholesale equivalent of the run which destroyed Northern Rock. Had they not intervened, there would have been mass insolvencies of pension funds by THIS AFTERNOON.Ed Conway
Meanwhile, the government insists that it is ploughing on: “Quick update from Treasury sources on chancellor and the economic plan. Told CX not resigning and there will be “no reversal of policy.”
No 10 tells me that Liz Truss is standing by Kwasi Kwarteng despite pressure on him to quit. A spokesman said: “The PM and the Chancellor are working on the supply side reforms needed to grow the economy which will be announced in the coming weeks”.Pippa Crerar
This should come with a health warning: governments always insist there will be “no reversal of policy” until there is. Prime Ministers are always “standing by Ministers” until they don’t.
The only sense in all of this comes from Labour’s Keir Starmer, who has called for Parliament to be recalled so MPs can abandon last week’s mini-budget “before any more damage is done”.