What is Kwasi Kwarteng really up to? One answer: this is a reckless gamble to shrink the state | Adam Tooze

In the US they call it starving the beast' - cut taxes and, as revenue decreases, you create irresistible pressure for austerity

Markets have delivered a devastating judgment on Kwasi Kwarteng's tax-cutting mini-budget. The pound has collapsed to historic lows. And investors have sold UK government debt, driving the price of bonds down and the effective interest upwards at a rate not seen since the currency crises of the 1950s. The combination of the two is particularly worrying because it signals what some fear could become a comprehensive loss of confidence in the pound and UK assets.

You might ask how it could be otherwise. How did the government expect the markets to react when it followed a giant energy crisis-fighting package, roughly costed at 150bn, with a further 45bn in tax cuts that primarily benefit the rich? It also delivered this news at a time when inflation is running faster than at any point since the 1970s and flouted the need for vetting by the Office for Budget Responsibility. What did it expect?

Adam Tooze is an economic historian at Columbia University and the author of Crashed: How a Decade of Financial Crises Changed the World

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