It is no overstatement to say that financial markets have delivered a “devastating judgement” on Kwasi Kwarteng’s tax-cutting mini-Budget, says Adam Tooze in The Guardian. The pound has collapsed to “historic lows”, and investors have sold off UK government debt, driving the price of bonds down and the effective interest rate up at a pace “not seen since the currency crises of the 1950s”. It’s hard not to read this as a “comprehensive loss of confidence” in the pound and UK assets.
Yet despite a clear signal that financial markets don’t buy his “doomed experiment”, the Chancellor has promised even more tax cuts. What is Kwarteng really up to? “The answer is public spending cuts.” US Republicans call it “starving the beast” – cutting taxes so drastically you create an “irresistible pressure” to shrink the size of the state. George Osborne used an imaginary panic in the bond markets to justify austerity in 2010; today UK bonds really are considered riskier than those issued by Europe’s traditional economic basket cases, Italy and Greece. Truss and Kwarteng may not have thought the markets would respond to their plans with such alarm. But we should certainly expect them to use the crisis they have created to further their “misbegotten vision of a small-state revolution”.
📈📉 “It’s a bird! It’s a plane! No, it’s a genuine economic debate in a Western democracy,” says The Wall Street Journal. Whatever you think of the government’s plans, British voters do at least have a proper choice in the next election. On one side are “pro-investment, pro-growth” Tories; on the other, Starmer’s Labour party, which is “doubling down on subsidies for green energy” and pushing huge green infrastructure projects in the hope of boosting economic activity. “The differences between the parties haven’t been this clear for years.”