The miscalculations exposed by Kwarteng and Truss’s Budget

The Chancellor’s first ‘fiscal event’ has revealed two major miscalculations – one by most of the political class and the other by the government.

The political class broadly didn’t think Liz Truss’s government would actually push forward with its campaign pledges. It did. The government, for its part, appears to have badly underestimated the sceptical reaction of the markets to its economic agenda.

Let’s take these in turn. First, anyone who is shocked by discussion of higher interest rates wasn’t paying attention during the leadership campaign. The attacks on ‘Treasury orthodoxy’ were frequent and explicit. Rishi Sunak insisted it was inappropriate to take aim at the Bank, while Truss called time on what she perceived as failed monetary policy. ‘We have inflation because of our monetary policy,’ Truss said at the start of the race – an attack on the vast money-printing that took place during the pandemic and a swipe at the Bank of England’s management abilities.