Concerns that fiscal plan may take longer to deliver than the traditional definition of three to five years

The Tory party’s reliance on trickle-down economics will leave society poorer, says Richard Tudway of the Centre for International Economics. Plus letters from Malcolm Stanton, David Plumpton and Joan FriendYanis Varoufakis offers an unsparing analysis of the delusional aspirations of the Tory political elites who control our destinies (Trickle-down Truss is carrying on the dirty work of Thatcher, Blair and Osborne, 1 October). The “doom loop” analysis says it all. Thatcherite ideological baggage is being dusted down by Liz Truss and co and presented as a solution to deep-seated problems of the governance and accountability of British state and enterprise. He might also have mentioned the dysfunctional first-past-the-post electoral system that sustains it all.Reliance on “trickle-down” economics will only deliver further tragic setbacks. There will be benefits for the wealthier classes, but a further collapse of state-funded institutions and loss of real incomes will leave the rest of society poorer. It guarantees the continuing systemic failure of the British economy. The ideologies of the Tory party are bankrupt and ruinous for the vast majority of our citizens. Time to learn from our failures and move on.

Chancellor denies reports that he will bring his medium-term fiscal plans forward to this month, despite pressure from markets and MPs

Key figures at rightwing thinktank have close links to Liz Truss and several alumni are now on her staff

Pension and insurance company says it has not been a forced seller of government bondsLegal & General, one of the UK’s largest pension and insurance firms, has sought to reassure investors, days after its pension fund clients were hit by sudden interest rate rises and market volatility.In a trading update to the stock market, the company said market volatility had increased significantly in the second half of the year, but it had not experienced any difficulties in meeting its collateral calls, and had not been a forced seller of bonds or UK government debt, known as gilts. Continue reading...

Mel Stride, chair of Treasury committee, says move could also mean smaller interest rate rises

President’s economic adviser says country must speed up reform of industries after Russia’s invasion

UK production industry could record extra-boost from US companies seeking overseas filming locations and production facilitiesThe UK’s film and TV production industry could receive an almost £3bn increase in investment by Hollywood studios and streaming companies annually by 2025, as the pound’s decline against the dollar in recent months makes Britain a bargain location for shooting big-budget movies and TV series.The UK production industry is enjoying a post-Covid boom with a record £5.6bn spent in the past year, making films such as Tom Cruise’s action title Mission: Impossible 7 and dramas including Bridgerton and Star Wars: Andor. Continue reading...

Despite scrapping the 45p tax rate, the government is clinging to £43bn of tax cuts. Public services and those on benefits will feel the painAfter the right turn, the U-turn. Despite abandoning his top rate tax cut, the chancellor, Kwasi Kwarteng, has left £43bn of his £45bn tax cuts intact. A panicked overnight climbdown does not add up to a change in strategy. He is still doubling the tax-free giveaways to those with share options, cutting £1bn from tax on dividends and sanctioning a free-for-all in bankers’ bonuses. He is also going ahead with his tax avoiders’ charter: £2bn for employees who are able to declare themselves self-employed. Still in place is the £2bn he set aside for tax-free shopping for foreign tourists and the £19bn of corporation tax cuts, which Rishi Sunak claimed did nothing for investment; and by continuing to reject a new windfall tax, the chancellor might as well be handing over billions to the oil and gas tycoons.Kwarteng’s meeting with the Office for Budget Responsibility on Friday will have killed off his belief that he could pay for his tax cuts by conjuring up 2.5% annual growth. So after the crash comes the bloodbath: an onslaught of public spending cuts bigger than Osborne’s austerity or the IMF cuts of 1976 – so severe that they will impede rather than spur growth, ruin education and undermine our most precious asset, the NHS. Lying ahead, as inflation erodes the value of departmental budgets is, according to the Resolution Foundation, a public spending cut by 2026 of between £37bn and £47bn, the equivalent of closing every English school. While the prime minister has ruled out changes to the triple lock on pensions, the typical family on universal credit – already around £1,500 short as a result of last October’s £20 a week cut and April’s lower-than-inflation uprating – will now see their losses rise to £2,000 a year if benefits are linked to earnings and not prices. No family I know can afford to lose so much.Gordon Brown was UK prime minister from 2007 to 2010 Continue reading...

After delivering a mini-budget that caused financial mayhem, the chancellor backtracked on his headline tax cut – but has the political and economic damage already been done? Heather Stewart reportsOn Friday 23 September, the new chancellor, Kwasi Kwarteng, got to his feet in the House of Commons to deliver what he called a “fiscal event”. It was an attempt to present himself to the country and show the financial markets that with the arrival of himself and Liz Truss, Britain was under new management.The result was spectacular: the pound crashed in value to a record low, Britain’s borrowing costs shot up and the bottom nearly fell out of the pension industry. The Bank of England was forced to step in with a rescue plan and even the IMF suggested a rethink was in order. Continue reading...

Guardian understands chancellor will make statement later this month, rather than in November as originally planned. This blog is now closed

Andrew Griffith tells business people at Tory conference that ‘fantastic’ Truss is right to prioritise wealth creationA Conservative Treasury minister and one of Liz Truss’s major campaign donors both said they would like to abolish inheritance tax, as they urged the prime minister to continue with her “politically brave” agenda for wealth creation.Andrew Griffith, a City minister under Kwasi Kwarteng, said tax was not his policy area but inheritance tax would be his top choice for a tax to abolish. Continue reading...

PM said she was prepared to make unpopular decisions – but then buckled, so now she will be seen as both unpopular and wrong

Chancellor’s reversal shattered his reputation and did unnecessary harm to an already weak UK economy

Tory ideology lives on | Kwarteng’s humility and contrition | A Truss moment | Conference gamble | Radioactive elementNo one should be fooled into thinking that Liz Truss and Kwasi Kwarteng have had a genuine Damascene conversion (Liz Truss abandons plan to scrap 45p top rate of income tax amid Tory revolt, 3 October). They have already demonstrated what Tory ideology is – helping the very rich and penalising those in poverty.

Report says policies of high interest rates and austerity risk triggering global recession that will hit developing nations hardestThe interest rate rises and austerity the world’s richest nations are using to fight sky-high inflation risk a painful global recession that would hurt developing countries most, the UN has warned.In its annual trade and development report, the UN Conference on Trade and Development (Unctad) said a drive by major central banks to ramp up rates in response to soaring prices represented an “imprudent gamble” that could dangerously backfire. Continue reading...

Sterling has recovered its mini-budget losses, but traders and economists warn debacle has hurt UK

After tax U-turn, economists urge chancellor to backtrack on other controversial plans in mini-budget

Chancellor addresses Tory conference hours after abandoning plan to ditch 45% top rate

Kwasi Kwarteng and Liz Truss will be hoping move reverses some of effects of mini-budget

Despite the screeching U-turn on income tax, the PM still needs to regain the confidence of her backbenchers

Social media awash with people poking fun at PM, chancellor, and others who backed cut to 45p tax rate

Government makes U-turn over proposal to abolish top-rate tax cut after growing backlash over mini-budget

Kwasi Kwarteng has suggested Liz Truss took the decision to U-turn on the plan to scrap the 45% top rate of income tax. During an interview on BBC Breakfast, the UK chancellor said: 'The prime minister decided not to proceed with the abolition [of the 45p rate].' When repeatedly pressed to clarify the sequence of events, he said the pair had talked and came to the conclusion together

Latest updates: Michael Gove says Truss should abandon plan to scrap 45% top rate of tax as large crowds protest in Birmingham

Campaigners say low-income countries urgently need debt relief on foreign borrowings as their interest rates soarFears of a deepening global debt crisis have been highlighted by research showing that low-income countries are paying rocketing interest on their foreign borrowing.Analysis by the campaign group Debt Justice found that, while interest rates have been rising for rich and poor countries since the start of 2022, increases have been particularly severe for some of the most vulnerable poorer nations. Continue reading...

First time regulator drafted to high-level meetings on measures to tackle meltdown that followed mini-budgetThe Pensions Regulator has for the first time been drafted into high-level emergency talks led by the Treasury and Bank of England as they examine measures to calm financial markets in the wake of the meltdown which followed Kwasi Kwarteng’s mini-budget.The watchdog, which oversees the £1.5tn pension sector, is understood to have been summoned into closed-door meetings of the Authorities’ Response Framework (ARF), which are triggered when an “incident or threat” could cause major disruption to financial services in the UK. Continue reading...

Thanks to Truss and Kwarteng, the country is now far riskier for the investors who finance our trade and budget deficitsLiz Truss became prime minister promising to shake things up and she has certainly done that. In less than a month, the new government has sent interest rates soaring, crashed the pound, torpedoed the property market, made recession inevitable and left her party on course for a defeat of epic proportions at the next election. Not bad for starters. The encore will have to be good to match the debut performance.As the economist Mohamed El-Erian has noted, the mayhem since Kwasi Kwarteng’s mini-budget was more typical of the stuff that happens in developing countries than in rich, developed nations. Continue reading...

Few seem willing to change parties in the home of the fabled swing-voting ‘Worcester woman’ but Liz Truss’s days may be numberedIf most people, when it comes down to it, are relatively apathetic about politics, almost everyone takes notice of economics. Not inverted yield curves or endogenous growth theory, but the pound in their pocket, the mortgage, salary and pension.That’s a rule that history tells us no politician can afford to ignore. And it’s one that Liz Truss will doubtless be keenly aware of, after a week in which the markets all but buried her chancellor’s mini-budget statement, sterling went into free-fall and an attempt to spark growth by cutting taxes for the rich had all the markings of a policy suicide-bomb. Continue reading...

The chancellor appears unwilling to reverse any of the measures in his mini-budget. If he is to survive, it may be down to factors beyond his controlKwasi Kwarteng’s inept handling of the government’s finances since he took office last month has left Liz Truss cornered. The prime minister must play for time and piece together a rescue plan by the end of November, along with a more rounded budget that preserves her tax-cutting agenda while also appearing responsible to financial markets watchful for the next misstep.Treasury officials, rudderless after the departure of two permanent secretaries (Tom Scholar and deputy Charles Roxburgh) in the space of four months, will be under pressure to find a formula that also satisfies the cautious instincts of the government’s independent economic forecaster, the Office for Budget Responsibility (OBR), which is inclined to dismiss policy “quick wins” as ineffectual until evidence proves otherwise. Continue reading...

With its new ‘freedom’, the UK had the opportunity to invent a fresh economic model, some said. We’ve now begun to see the resultsSome “plan for growth”. Millions face futures they neither deserved nor were prepared for, so suddenly has disaster hit. Mortgage payers will be unexpectedly hammered. All homeowners face a sharp fall in house prices in which most of their wealth is held. Worse, those dependent on functioning public services and benefits confront privation and even destitution.Compelled to find up to £40bn of spending cuts in November to pay for Liz Truss’s unwanted tax cuts, the Treasury has to cripple the state to restore financial credibility. Capital investment, the science budget, new schools and hospitals, uprating benefits and public sector wages in line with inflation – forget them all. Instead of a stimulus to growth, Britain faces intense economic and social dislocation and ongoing stagflation. Austerity is back, this time on an epic scale. Continue reading...

The arrogance of the prime minister and chancellor looks to have been their undoingThe ghosts of British economic crises past are raising their spectral heads. Memories are being evoked of the ill-conceived and ill-fated “dashes for growth” under Conservative chancellor Reginald Maudling in 1962-64, Anthony Barber in 1972-74 and my old friend Nigel Lawson in 1988-89.Yes, they too were Tory chancellors. They usually are. When Gordon Brown, Labour chancellor from 1997 to 2007, was reported as promising “no more boom and bust” he was teased and widely misquoted. What he insisted he actually said was “no more Tory boom and bust”. Continue reading...

As ethnic diversity becomes the new normal in politics, ideas should be the focus of discussionThere were so many ways to criticise Kwasi Kwarteng last week. The authenticity of his ethnicity was not one of them. The MP Rupa Huq lost the Labour whip after calling Kwarteng “superficially black” at a Labour conference fringe meeting – an unacceptably prejudiced conclusion to draw from her observation that he has more in common with other privately educated colleagues than with her black constituents on a housing estate.Because I was chairing that fringe meeting, co-hosted by British Future and the new Black Equity Organisation, I felt compelled to challenge those remarks, asserting that Kwarteng was black British, black African and recognisably black. The audience applauded this warning that Labour needs a clear red line between politics and prejudice, reinforced by the race activist Chantelle Lunt. A simple golden rule would help. Don’t criticise a black Conservative in ways you would not criticise a white Conservative. If a critique of Kwarteng could be made of, say, Jacob Rees-Mogg too, carry on. If it depends on his race, desist.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 250 words to be considered for publication, email it to us at observer.letters@observer.co.uk Continue reading...

Cutting services to fund tax cuts for the very wealthy is not only cruel amid a cost of living crisis, it’s also unmandated‘A reverse Robin Hood” was how the Radio Nottingham presenter Sarah Julian characterised the first major fiscal intervention of Liz Truss’s premiership when the prime minister did an interview round with BBC local radio stations last week. They know a thing or two about Robin Hood in Nottinghamshire, and if Julian’s characterisation of a government taking from the poor to line the wallets of the rich was apt at the time of the interview last Thursday, it has only become more so as ministers have dropped further hints about how Truss and her chancellor Kwasi Kwarteng intend to try to make the books add up.As we set out in this column last week, the inappropriately dubbed “mini-budget” – it set out the biggest programme of tax cuts in decades – straightforwardly redistributes money from less affluent households to some of the richest people in Britain. Over the last decade, Conservative chancellors have cut back the tax credits and benefits that are so vital to low-paid parents and people with disabilities, even as they handed out generous income tax cuts that have disproportionately benefited more affluent families. Poorer households are consequently in desperate need of a financial boost to help them cope with rising energy, housing and food costs. Instead, alongside a package to freeze energy prices at a level equivalent to £2,500 for the typical household, Truss announced £45bn of tax cuts that would see people with income of £1m a year becoming £40,000 a year better off, without saying how she would fund them. The borrowing required to finance the cuts would saddle a younger generation with decades of debt repayments, and the anticipated increase in interest rates required to cool inflation as a result of this fiscal loosening will further hit lower-income households through higher mortgage repayments and rents. Continue reading...

The fallout from the mini-budget is adding to high street jitters in the run-up to what is traditionally the busiest time of the yearWill it be a merry Christmas? It will certainly be one of the most uncertain ever for businesses. Inflation, the war in Ukraine and an erratic new cabinet are only adding to the jitters around Covid. And who knows whether England and Wales will bring joy or pain to football fans during the World Cup in Qatar.Retailers were already feeling nervous before Liz Truss and Kwasi Kwarteng launched their mini-budget for growth – and sent the pound into freefall and mortgage rates soaring. Continue reading...

Do Liz Truss and Kwasi Kwarteng fully comprehend the destruction they unleashed? The evidence is not encouragingThe Treasury is an institution with a sense of history. Officials, as a matter of course, have a deep knowledge and understanding of economic crises of the past. The “pound in your pocket” devaluation of November 1967, the expansionary “Barber boom” initiated by the budget of March 1972, the IMF bailout of September 1976 and our ejection from the ERM in September 1992 will be all too familiar as case studies of failure from which lessons should be learned. To add to that list – perhaps the worst of the lot – will be Kwasi Kwarteng’s economic statement of 23 September 2022.Culpability, of course, lies with ministers. A chancellor of the exchequer should have a feel for what the market will tolerate and the sense not to push their luck. Nonetheless, it would be no surprise if there is some soul-searching among senior officials as to whether more could have been done to warn the politicians that £45bn of unfunded tax cuts would break the markets’ patience. It did not help, of course, that their boss – Permanent Secretary Tom Scholar – had just been sacked for being insufficiently positive.David Gauke was lord chancellor and secretary of state for justice from 2018 to 2019 Continue reading...

Britannia Unchained, co-written with Kwasi Kwarteng, highlights the influence of free market thinktank IEA on governmentWhile the pound plummeted along with Tory poll ratings last week, there was one obscure winner from the government’s disastrous “mini-budget”.Liz Truss’s and Kwasi Kwarteng’s 2012 free-market treatise Britannia Unchained has shot up the sales charts, hitting the top spot on Amazon rankings for books on “economic conditions”. It costs £19.55 for the paperback. Continue reading...

The prime minister and her chancellor face the wrath of the markets• You can order your own copy of this cartoon Continue reading...

Finance ministers of Wales, Scotland and Northern Ireland say government must ‘restore confidence in our public finances’

Stories of the under-fire chancellor’s self-assurance abound. Colleagues see him as unlikely to back down without a fightIn recent years, Bill Gates held a roundtable discussion to which Kwasi Kwarteng was invited as a senior minister.The billionaire was hosting the meeting, surrounded by high-profile guests. But according to observers, when Kwarteng turned up, he began to act as if he was the one in charge of the meeting “offering his opinion on everything” and “lecturing” Gates about the businessman’s own expert subject. It was “bizarre and embarrassing” to watch, according to one person with knowledge of the episode. Continue reading...

Britain has endured 40 years of decline thanks to this faulty economic theory. Will Keir Starmer finally kill it off?If Kwasi Kwarteng’s mini-budget survives the storm it triggered, a banker on a million-pound annual salary stands to receive £50,000 of income tax relief – on top of the extra bonuses the bank can throw in, now that the Liz Truss government has removed the cap on them. Meanwhile, a Deliveroo rider gets a pep talk on the emancipatory value of aspiring to be wealthy, presumably as an incentive to pedal harder. This is the gist of the government’s growth strategy or, according to former Brexit minister David Frost, its antidote to stagnation and defeatism.While it’s tempting to draw the obvious analogy between zombie ideas such as the trickle-down growth effect, and the classic Hollywood horror film Night of the Living Dead, a more appropriate response to the seriousness of the situation is to follow the banker’s extra cash. The government claims the banker will invest it, thus promoting growth. If it were not a blatant lie, it might have passed as a touching example of unfounded faith. But unlike Adam Smith’s bakers, butchers and brewers, who would invest any spare cash into better and more bread, ale and meat, the banker will buy into some fund that will, in turn, purchase shares, derivatives and bonds.Yanis Varoufakis is the leader of MeRA25 in Greece’s parliament, a former finance minister of Greece, and author of Another Now Continue reading...

‘Not everyone will like what we are doing’, PM says of tax cut pledges but says she is determined to see them throughLiz Truss has admitted that the mini-budget delivered by her government last week did cause “disruption”, after it was followed by a series of economic shocks, including the pound falling to an all-time low against the dollar.The prime minister said the government had a “clear plan” and acknowledged that the policies may be unpopular. Continue reading...

Seven people in 45% tax bracket that chancellor is abolishing share how they feel about decisionInternational markets, voters, members of the Conservative party and experts have reacted with dismay to Kwasi Kwarteng’s “fiscal event” last Friday, when the chancellor announced that the top tax rate of 45% would be abolished.Here, seven high earners who will benefit from this tax cut share how they feel about it, and what they will do with the money. Continue reading...

The new prime minister began September promising a ‘new era’ for Britain. One economic crisis later, she has deliveredBritain’s new prime minister, Liz Truss, has been in office for less than a month, but her premiership is already deep in crisis, while Britain teeters on the brink of recession.Truss took over from Boris Johnson at the start of September and was immediately plunged in at the deep end, with the death of Queen Elizabeth II. But the 10-day national period of mourning came to an end abruptly. Continue reading...

£1bn scheme is latest to scramble to raise cash after chancellor’s tax-cutting mini-budget sparks turmoil

Huge policy changes are needed to get UK back on track – so early publication would give an incomplete picture

Tory MPs call for market reassurance but PM and chancellor won’t publish OBR projections – ready next week – until late NovemberLiz Truss and Kwasi Kwarteng will refuse to release independent analysis of their tax plans until more than six weeks after receiving them, despite more calls from Tory MPs for Downing Street to reassure the markets.The prime minister and chancellor said they would only publish the independent forecasts on 23 November alongside a fiscal statement, despite them being ready on 7 October. Continue reading...

Liz Truss’s policies have put the Tories behind Labour by 30 points. Without reversing course she will be in office but not in powerAn ideologically extreme party that makes unpopular policy choices far removed from the position of most voters will reap the inevitable consequence in terms of public opinion. Liz Truss decided to bet against such thinking, and has lost badly. Squandering the Tory reputation for fiscal prudence will ensure the spectre of Black Wednesday hangs over its party conference.The mistake was Kwasi Kwarteng’s plan for growth. The public, accurately, saw it as unfair, foisting higher mortgage payments on many while millionaires get a £55,000 handout. The Labour party has opened up a 30-point poll lead over the Tories. Sensing danger, Ms Truss and Mr Kwarteng did hold emergency talks with the Office for Budget Responsibility on Friday. But the move smacked of desperation. Her government, rightly, looks finished before it gets a chance to get started. Continue reading...

Net savings remain unchanged at a figure below pre-pandemic level in sign of stress on family budgetsSpending on credit cards leaped £700m in August as households borrowed heavily to cope with the cost of living crisis.The increase at a time of heightened anxiety about rising energy bills pushed the annual growth rate in spending on credit cards to 12.9%, its joint highest level since 2005, according to Bank of England data. Continue reading...

The new chancellor has been caught up in international controversy after announcing sweeping tax cuts in a mini-budget which resulted in a plunge in the pound, soaring mortgage rates and a £65bn intervention by the Bank of England to bail out pension funds. We look back at a week of market turmoil