Economy

In theory, I should be delighted about the Liz Truss project. She is saying the things I’ve been arguing for years: talking not just about lower taxes but about basic liberty and how it relates to everyday life. She’s passionate about these ideas – and sincere. I remember watching her deliver a rallying cry, a salute to the ‘Airbnb-ing, Deliveroo-eating, Uber-riding freedom fighters’. This was just over three years ago when she was a Treasury minister. Her speeches were getting punchier and her one-liners becoming newsworthy and memorable. She was turning into one of the most recognisable faces of classical liberalism in Britain – a development which clearly delighted her.

You could tell Kwasi Kwarteng was aware of his words and tone as he delivered his Conservative party conference speech to a hall full of Tory members this afternoon. It was a delicate set of circumstances, with him having had to U-turn on his plan to abolish the 45p tax rate only this morning. But perhaps more importantly he learned a lesson after the mini-Budget: his words can move markets. And he’d be loathe to push them into freefall again. Kwarteng worked hard to compensate for the total lack of lip-service he had paid to fiscal discipline in his mini-Budget. He praised the UK’s status of having the ‘second lowest

There was an article recently in the increasingly woke but still useful New Scientist which attempted to gauge the degree to which luck was responsible for who we are and, hence, an individual’s life circumstances. I think it came in third place after genes and the environment – which are also both down to luck, really, I suppose. The thesis seemed to be we pay too little attention to the role of luck when considering why one man is a millionaire and the other is a lavatory attendant or a book reviewer. I would beg to differ. Ascribing luck to one’s unfortunate position in life is very prevalent indeed and

George Osborne dreamed about it and Rishi Sunak told friends that he’d like to do it if everything went well and he was feeling brave. But this morning Kwasi Kwarteng has gone ahead and done it.  The ‘additional rate of tax’ – set up by Gordon Brown as a trap for the Tories in 2009 – has just been abolished. Right now, those earning more than £150,000 per year will pay 48.25 per cent on every pound they earn (45 per cent income tax plus 3.25 per cent National Insurance). From April next year, it will fall to 42 per cent (40 per cent income tax plus 2 per cent NI).

In the end, it could have been worse. The Federal Reserve might have followed Sweden’s lead, with a whole one point rise in interest rates, or it could have even decided to short-circuit the whole process and go straight for a 1.5 per cent increase. Instead, it opted for the safer course, imposing a 0.75 per cent increase in rates much as the market expected. Even so, it made one thing absolutely clear. It is not going to let up in its battle to bring inflation back under control – and the rest of the world will have no option but to follow its lead. The markets were primed for

The government will announce tomorrow that it will cover the costs of more than £1 in every £3 of gas consumed by businesses and households over the next six months. There has been no subsidy of a market price on this scale in British history. Estimates of the final bill for taxpayers range from £100 billion to £200 billion, or more than the annual cost of running the NHS – if the scheme for households lasts for two years, as promised, and the separate one for all businesses runs for six months, to be followed by a less ambitious business scheme for another 18 months. This is a subsidy of more

At His Majesty’s Treasury, it’s all looking a bit like Year Zero in revolutionary Cambodia. Kwasi Kwarteng’s first act was to sack the respected but ‘orthodox’ permanent secretary Sir Tom Scholar. Now the FT reports the Chancellor ordering underlings to focus ‘entirely on growth’, presumably at the expense of financial discipline. I’m picturing a locked basement of fearful officials labouring under Kwarteng’s lash to translate his forthcoming ‘fiscal event’ – tax cuts on top of massive spending to cap energy bills and unlimited borrowing to pay for it – into the sort of Whitehall language that might make it sound reasonable. Meanwhile, businesses large and small remain completely in the

Look at the chart for interest rate expectations in isolation, and you might come to the conclusion that Rishi Sunak is right about Liz Truss’s fiscal policies. In June, markets were expecting rates to peak at around 3.5 per cent next year; now they are expecting them to reach close to 4.5 per cent. Moreover, as Truss’s victory came to be seen as inevitable, the FTSE 100 plunged from 7,550 on 19 August to 7,230 this morning – a fall of 4.2 per cent. The pound has fallen from $1.22 on 10 August to $1.15 now. Markets could be forgiven some apprehension But hang on a minute. Markets have been