On Friday the 23rd, Kwasi Kwarteng announced his Mini-Budget to the House of Commons. Cutting taxes by £45 billion across the next four years and raising borrowing by £72 billion to pay for Liz Truss’s energy price subsidies, the Chancellor scrapped Rishi Sunak’s increases in corporation tax and national insurance, removed the cap in bankers’ bonuses, and doubled the stamp-duty threshold.
However, Kwarteng shocked the Commons and the watching media by unexpectedly announcing both the abolition of the 45p top rate of income tax and introducing a cut in the basic rate by one percentage point form the next year. “Jesus Christ!”, a Tory MP was reportedly heard to cry from the public gallery. The Chancellor toasted his policies in the Two Chairman that evening.
Within the hour of Kwarteng’s announcement, sterling had begun to tank on international markets. It reached $1.09 – the lowest level since the mid-80s – by the close of trading. Rachel Reeves derided it as “casino economics”. Allister Heath described the Budget as “the greatest [he had] ever seen” in the next day’s Daily Telegraph. The IEA urged the Government not to “take its foot off the pedal”.
Asked about the Budget on BBC Breakfast the next morning, Chris Philp, the new Chief Secretary to the Treasury, described claims the Government’s tax cuts would help the richest most as the “politics of envy”. Truss had sacked Tom Scholar as head of the Treasury, refused to publish an independent assessment of her policies until November, and had scrapped Number 10’s polling operation.
With acknowledgments to Harry Cole and James Heale‘s Out of the Blue: the Inside Story of the Unexpected Rise and Rapid Fall of Liz Truss