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Good morning. Interest rates are going up: they were anyway, but the legacy of Liz Truss is that the Conservative party is on the hook politically for those rises. Some more thoughts on that below.
All Trussed up and nowhere to go
The Bank of England has raised interest rates by 0.75 percentage points to 3 per cent, the biggest single increase for three decades. This was expected. Mortgages are just one pressure point. Threadneedle Street has warned the UK is set to experience a “very challenging” two-year slump, predicting that inflation will stay above 10 per cent for the next six months, and above 5 per cent for the whole of 2023. Unemployment will rise from 3.5 per cent to almost 6.5 per cent by 2025, it said.
Our economics editor Chris Giles has analysed the two bleak forecast scenarios for the UK economy, accompanied by grim charts:
But the big political problem facing the Conservative party is that, thanks to Liz Truss and Kwasi Kwarteng, it has made itself the author of the central bank’s rate rises in the public’s mind.
Regardless of the increase to your mortgage costs, very few people are saying “ah, Truss is only really responsible for 0.25 per cent of that”. Even people who were planning and budgeting for a big increase in rates are saying and thinking “this is the fault of the Tories” and Truss’s ideological pursuit.
That reality is one reason why many Conservative MPs are largely resigned to losing the next election. They think that they are going to be blamed for interest rate rises and that as a result there is no way back for them politically.
Rishi Sunak’s government is a machine built to do one thing: to get the Conservative party to swallow a combination of heavy cuts in public spending and broad-based tax rises. Every faction has been appeased, both in personnel terms and as far as their various pet projects are concerned.
There is one exception to that: the Department for Education. Sunak has appointed Gillian Keegan, who is passionate about the skills agenda, to helm that ship. Meanwhile, both Robert Halfon and Nick Gibb, the department’s ministers of state, have about as much experience as humanly possible: Halfon has chaired the education select committee while Gibb has been minister for school standards under David Cameron, Theresa May and Boris Johnson.
The only member of the DfE without extensive experience in the department is Claire Coutinho, who is one of Sunak’s closest political allies: she has been his spad and parliamentary private secretary. Short of appointing himself as a junior minister to the department, he could not have appointed a more loyal ally.
Sunak’s central preoccupations are skills and the post-16 curriculum. Given free rein, we should expect to see Sunak moving English schools towards something that looks a lot more like the international baccalaureate (also known as the “bacc”), with a much broader range of topics, compared with A-levels.
We should also expect the department to fare better in the Autumn Statement than other ministries: if anyone is getting a real-terms spending increase on November 17, it will be the DfE.
Now try this
Chuku’s, London’s first Nigerian tapas restaurant, is facing closure. If you were planning to go (and you should), now is the time to book a table.
However you spend it, have a lovely weekend.
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