Osborne’s Revenge
Izzy Finkel
In the last few days, opponents of the Truss-Kwarteng mini-budget have seen it roundly demolished, with one of its architects banished and the other seemingly retained as ornament. And yet its critics may come to regret their victory. Jeremy Hunt has scrapped most of the tax-cutting measures mooted last month and is now poking around Whitehall with his scissors, promising that no department is ‘ring-fenced’. With the reversal of the mini-budget comes a return to the logic of austerity, which is precisely – to steal David Cameron’s line – what ‘got us into this mess’.
Hunt appears to have been paying attention through the fiasco of recent weeks, and has noticed what is baffling many Britons newly obliged to study the markets: that bond-market sentiment runs on vibes. The new chancellor, who has the air of an actuary but no actual Treasury experience, has appointed an advisory council to burnish his cost-cutting credentials. They include the éminence grise of the George Osborne years, Rupert Harrison, now a fund manager but once the former-former-former-former-former-former chancellor’s chief of staff.
Harrison may have moderated his views in the intervening seven years, a period when austerity has been discredited from all angles, helped in part by the prevalence of cheap money that made it unwise not to borrow liberally to invest. He seems still to be a true believer, but in any case the purpose of his appointment was as a signal to the markets, based less on whatever he may think now than on his status as the avatar of austerity.
Sure enough, the sop to Cameron-era nostalgists seems to have done the trick, with the stabilisation in UK assets bolstering hopes that so-called bond vigilantes will tire of their sport. Winning the respect – or at least the indifference – of the markets really does matter, even if it riles some on the left as much as the right, who, clinging to vain hopes of economic sovereignty, would prefer to ignore the UK’s risk premiums.
Not all the damage inflicted by Tufton Street’s arsonists will be reversible, and even in the best-case scenario we are back in a world of underfunded public services and rising energy bills – themselves partly the result of the government’s failure to make timely capital expenditures, such as investing in gas storage facilities, when it had the chance. Hunt suggests more short-termism is to come.
The upshot is that those who used ‘unfunded tax cuts’ as an easy shorthand for everything that was wrong with the Truss-Kwarteng mini-budget may have won the battle, but the ascendancy of the logic implied by that soundbite means the war is now being fought on hostile territory.
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Chris Robinson