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Kwarteng and Truss hit the pound running

A tenet of democracy is the alternation of power: new ideas, new policies, the chance for another set of think-tanks to have their day. In Britain, we are expert at this. So expert in fact that we now achieve it without changing the party in power or even the faces.

So if you thought that three years ago you elected a government including Liz Truss and Kwasi Kwarteng to pump up public services and squeeze the City of London, don’t worry. You did.

But times have changed. On Friday, Kwarteng, who is chancellor of the exchequer at least for this month, explained that had been a complete mistake and he would be acting entirely differently. No need for any messy elections or manifestos: this was political keyhole surgery, and the electorate didn’t need be woken up from its general anaesthesia for consent.

Kwarteng got to his feet in the packed House of Commons shortly after 9.30am and slashed or froze corporation tax, stamp duty, national insurance, business rates, alcohol duty, VAT for foreigners, and income tax, especially for the 1 per cent.

The previous three chancellors of the Exchequer have each lasted on average just over a year in office. Kwarteng obviously thought he might as well get on with it.

His Budget wasn’t just clear. It wasn’t just bold. It was kamikaze — or should we say, kami-Kwasi. Less Britannia Unchained, more Britannia Unhinged.

You wait years for a tax cut, and £45bn of them come along at once. As a share of the economy, the tax cuts were the biggest since 1972, the Institute for Fiscal Studies quickly calculated. Bankers would be free to earn bigger bonuses, pay less income tax on those bonuses, and then spend them on cheaper champagne. (They could do it all by shorting the pound.) Contractors could once again pretend to be self-employed, and pay less tax as a result.

Kwarteng’s stated aim was growth; his method was more borrowing. Pretty much whatever Boris Johnson’s government had done, he would now be undoing. Take frack control. To top it off, he had the cheek to call the energy markets “erratic”.

Before Friday, the Treasury had refused to call the statement a Budget, because that would require inconvenient independent oversight from the Office for Budget Responsibility. Instead it was, cynics joked, “a special fiscal operation”. But once the statement started, there was no doubt. If you’re cancelling increases in duty on wine, beer and spirits, it’s a Budget.

Kwarteng is an imposing figure: in height, he is 1.96 metres or, as Jacob Rees-Mogg probably prefers to say, 231 barleycorns. He has a deep, gravely voice and a formidable intellect. He seemed to enjoy proceedings, without quite dominating them. He mopped his brow, he took off his glasses, his voice went hoarse.

Tory MPs didn’t seem entirely keen to be sat in the back seat on this fiscal joyride. They liked the idea of enterprise zones. But when Kwarteng cried “We are at the beginning of a new era,” he was not greeted as a Messiah. “I have never seen Tory MPs look so utterly depressed,” claimed Labour MP Chris Bryant, halfway through the statement. Mel Stride, chair of the Treasury select committee, said the lack of an OBR forecast left “a vast void”. One senior Tory MP said privately: “We’re all a bit shell-shocked.” They are hoping that Kwarteng knows what he’s doing.

Alongside the chancellor sat Truss, who promised shortly before taking office to “hit the ground running”. Judging by the market reaction on Friday, she has certainly hit the pound running. Rishi Sunak, her one-time rival for the top job, was notably absent from the Commons — the chamber may not have been big enough for his rueful smile anyway. Johnson and Michael Gove were not there either to see what had become of their legacy.

There were actually quite a few smiles on Friday on all sides. Partisan hatred has diminished since Johnson left office. Indeed, for Labour, there is the joy of finally having an economic policy that they could get their teeth into. Rachel Reeves, the shadow chancellor, said the lack of independent oversight meant the whole statement was “a menu without prices”. She lambasted Truss and Kwarteng as “two desperate gamblers in a casino, chasing a losing run.”

A telling moment came when Kwarteng was asked by former shadow chancellor John McDonnell whether he remembered the tax-cutting ‘Barber Boom’ (and bust) of the 1970s. “All I remember was the financial crash of 2008,” said Kwarteng, proving that a PhD in economic history is not as hard as it sounds. In barely half an hour, he had set out a maxi-Budget that included not much old, quite a lot new, a hell of a lot borrowed, most of it blue.

Remember how, in the austerity years between 2010 and 2016, the Conservative party cared about the national debt? Remember how, in the Brexit years between 2016 and 2019, it said there were more important things that GDP growth? Remember how, in the Johnson years between 2019 and 2022, it believed in the big state? You remember right. Everything must change for the party in government to remain the same. But this felt like the most reckless metamorphosis yet.


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