simon clarke, the new leveling up secretary, has been doing interviews this morning ahead of the mini-budget. Here are some of the points he has been making.
This whole term trickle-down is such a nonsense and is itself a centre-left mischaracterisation of what this government is all about. We need to grow the economy because a more successful economy is good for everybody.
As my colleague Larry Elliott explains here, what Truss is saying and doing fits exactly with the usual definition of trickle-down economics.
These zones will only happen where there is local consent and we’ve been very clear about that in the discussions we’ve been having with local authorities and mayors over recent days …
They will only happen where there is a local appetite for them to occur. There will be no top-down imposition of these zones.
The prescription here is that we get a better underlying growth that unleashes the tax receipts that will allow us to both grow the economy and also to get on top of that debt.
Rachel Reeves, the shadow chancellor, will be responding to Kwasi Kwarteng in the Commons today and, in an article in the Financial Times, she gives a flavor of what she is likely to say. Reeves says Liz Truss represents “another zigzag on a path of policy failure” rather than proper change. she says:
Liz Truss wants the British public to believe that she represents change. She and Kwasi Kwarteng even want you to believe they have a new plan. But what they are proposing is just another zigzag on a path of policy failure tracking across the past 12 years of the economy.
Just like Boris Johnson before her, the new prime minister and the chancellor are long-serving cabinet ministers. They are desperate to present themselves as agents of change, so must decry the growth plans they once supported — there have been six since the Conservatives took power in 2010, each announced with great fanfare but with little impact. Instead, the one constant over a decade of Tory government is low growth.
Reeves is particularly critical of the plan to abandon the planned increase in corporation tax. she says:
Of course we need a competitive regime, but UK levels are already below France and Germany and would remain so at the planned 25 per cent — yet UK corporate investment is still the lowest in the G7. Businesses have other priorities: in the most recent ONS survey only 2 per cent cited taxes as their main concern.
And she also says Truss is wrong to say that growing the economy matters more than worrying about how its benefits are shared. Reeves says:
Truss says she will deprioritise redistribution. But research by the IMF has shown that higher income inequality is associated with lower and more fragile growth. It is obvious why. Concentrating income among fewer people — those least likely to spend it and drive the economy forwards — undermines workers’ health and education, the crucial components of a productive workforce.
Buenos dias. At the Guardian, like the BBC, for the sake of simplicity, we’ve decided to call today’s event the mini-budget of 2022. That is clearer than calling it a “fiscal event”, as they do at the Treasury, but it’s not ideal because what we are getting is not a budget (if it were, it would be accompanied by an Office for Budget Responsibility economic forecast, probably saying it would have dangerous consequences for inflation and borrowing), and it is not going to be mini at there. In fiscal terms, it will be humongous – the biggest package of tax cuts since Nigel Lawson’s budget of 1988, according to economists.
And just as the Lawson budget shifted the political consensus around taxation for a decade, Liz Truss and her chancellor, Kwasi Kwarteng, want to smash orthodox thinking on borrowing and growth. When David Cameron became prime minister in 2010, the Conservatives beat Labor by claiming that Gordon Brown had spent too much and lost control of the public finances. Faced with Jeremy Corbyn, the Tories claimed that Corbynomics was dependent on the discovery of some non-existent “magic money tree”. Now Truss and Kwarteng are arguing that unfunded tax cuts are wise, because they will jump-start economic growth, eventually leading to higher tax revenues, even though Rishi Sunak, Kwarteng’s predecessor, explicitly rubbished this approach in his Mais lecture in February this year. Sunak said:
I am disheartened when I hear the flippant claim that ‘tax cuts always pay for themselves’. They do not. Cutting tax sustainably requires hard work, prioritisation, and the willingness to make difficult and often unpopular arguments elsewhere. And it is hard to cut taxes at a time when demands on the state are growing.
Sunak will be thoroughly disheartened today.
This may turn out to be the defining announcement of the Truss premiership, and it is extraordinarily risky. The political danger is that, even if Truss and Kwarteng can turbo-change the economy, voters will not start to notice before the next election. The economic worry is that the strategy will fail, and that they will crash the public finances.
Here is our overnight news story on what to expect, by Larry Elliott, Jessica Elgot and Richard Partington. Chancellors always like to have a surprise announcement on budget day, and it has been reported that Kwarten has left two rabbits in his hat ready to present to MPs.
In his First Edition briefing, Archie Bland has a good analysis of what is coming – and, even more importantly, a guide to what we don’t know about what will happen today.
and Richard Partington has five charts that explain the background to the mini-budget.
Kwarteng is due to make his statement to MPs at 9.30am, although if the Speaker grants an urgent question (which is unlikely), it could come later. We will be covering it here live, and then bringing you all the best reaction and analysis.
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