Triggering a market panic with your first budget, pushing pension funds to the brink of disaster, causing mortgage mayhem and the pound to plummet, inducing an emergency Bank of England intervention and a threat of a credit rating downgrade, then executing a rapid u-turn on a key tax policy – the abolition of the 45 per cent rate of tax – to defuse the risk of a humiliating defeat in parliament is one way to secure your own page in the history books. But will Kwasi Kwarteng’s dire start to his time in office also temper some of the other aspects of the new cabinet’s shock-and-awe style approach to economic strategy?
In some ways, it already has. First, in his address to Tory conference this week, the chancellor notably commented that his economic growth strategy would be underpinned by the UK’s strong institutional framework, including the “independent Bank of England” and the Office for Budget Responsibility (OBR), two institutions which the new chancellor and prime minister previously appeared to hold in disdain. That is an important olive branch given that the negative reaction to September's infamous 'mini' Budget stemmed as much from unease over the unorthodox method of delivery as it did from alarm over the lack of clarity on how £160bn of fiscal loosening would be funded. There will clearly be no more hints about clipping the wings of the Bank, if only to avoid a furore of even greater magnitude than the one we’ve just witnessed. It should now be crystal clear to the occupants of Number 10 and 11 Downing Street that such a move would further dent confidence in the UK and reinforce the view that it is an unsafe place to invest. The chancellor will presumably henceforth always show his work to the OBR.
Kwarteng assured conference attendees that he would have an “ironclad grip on fiscal discipline”, to quell the jibes that the Tories are no longer the party of fiscal prudence. If he and Liz Truss thought a series of tax cuts would be met with resounding applause, they were wrong. It’s difficult to buy Kwarteng's excuse that he was pushed by the energy crisis into announcing the giveaways in the manner he did. No. These tax cuts were intended as a big statement.