Via Peter McIlvenna from London
If you read through the history of British Prime Ministers you will realize that our current chaotic situation is quite unprecedented. Such “outside” interference in British Political life was once the sole preserve of Kings and Queens. But now that ability to interfere is coming from much further afield.
Liz Truss beat the early front runner, Rishi Sunak, to secure the leadership crown of the Conservative Party (Conservative in Name Only) and replace Boris Johnson as the occupant of No.10. She entered Downing Street for the first time as Prime Minister on the 6th September. The events of the last few weeks are even more surprising considering Britain took two weeks out to mourn the loss of our longest-reigning Monarch, Queen Elizabeth II. Her loss is deeply felt by the majority of the UK as she was deeply loved and respected. Her passing has and will have a profound impact on the British psyche and future.
Her new Chancellor, Kwasi Kwarteng, delivered his mini budget and all hell broke loose. What was so unacceptable to the money markets and the IMF and the Bank of England? He announced tax cuts! Yes he reverted back to normal Conservative fiscal policy by allowing the public to keep more of their money to spend as they see fit. Since David Cameron won the General election in 2010, ending 13 years of Labour rule, the tax take has increased and increased. The Conservatives have always been the party of low tax and low spend yet the tax take has hit a post War high and spending has rocketed out of control.
So who is behind this attack on a new Prime Minister who wants to be Conservative and cut taxes? The IMF attacked the government spending plans at the end of September. They took the very unusual step of criticizing the UK economic policy. “Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture,” the IMF said. “It is important that fiscal policy does not work at cross purposes to monetary policy.” Then three days ago the IMF renewed its attacks, without naming the UK specifically, by criticizing unfunded tax cuts. “The need to rebuild buffers and reduce debt makes this doubly important. The pandemic gave us a vivid illustration of why fiscal space matters and how crucial it is to address pre-existing vulnerabilities,” said Georgiva who leads the IMF. “Policymakers have an incredibly narrow path to walk—there is no room for missteps. Get it wrong and the challenges of the present could mutate into worse problems – prolonged low growth, entrenched inflation, or even sovereign debt crises with the risk of contagion.”
Mark Carney, the former governor of the Bank of England was next to attack the tax plans. He said that Liz Truss had spent and made tax cuts without any credible plan to get borrowing back on a sustainable footing. He went on to say that her plans were ‘working at cross-purposes with the Bank’.
All of this talk was on the back of the ructions in the financial markets. Globalization is now built an unsustainable debt pile made worse by the destructive lockdowns worldwide. Printing money seems to be the illogical solution to the hole we find ourselves in.
Sleepy Joe is the latest public figure to attack the British government Yesterday he launched an unprecedented attack calling her tax plans a mistake.
The writing seems to be on the wall. Britain cannot have a conservative Prime Minister that is socially conservative and believes in a small state and low tax economy. Such an approach is simply not allowed today. Where does this leave the UK and the rest of the Western World? The answer to that will surely become apparent in due course.
Peter McIlvenna
