Support 100 years of independent journalism.

  1. Politics
  2. UK Politics
11 October 2022

Kwasi Kwarteng makes a cautious retreat

The Chancellor has deferred to convention with two U-turns meant to reassure the markets.

By Freddie Hayward

Kwasi Kwarteng took two important decisions yesterday. First, he brought forward the announcement of his medium-term fiscal plan, which will include forecasts from the Office for Budget Responsibility (OBR), by three weeks to 31 October. Second, he appointed the old Treasury hand James Bowler as the department’s most senior civil servant over the outsider, Antonia Romeo, who had no experience at the Treasury.

Both decisions are, in effect, U-turns. The Chancellor had refused to publish the OBR’s findings at the time of the mini-Budget, even though a report was ready, but now has had to speed up its publication in the face of market scepticism. Likewise, the appointment of Bowler as permanent secretary is an attempt to demonstrate stability at the Treasury after Kwarteng sacked his predecessor, Tom Scholar, on his third day in office.

These decisions were designed to revive the government’s withered economic credibility. But they won’t suffice. Remember, Liz Truss promised to cut taxes without cutting public spending and without increasing debt. During the Conservative leadership contest the Prime Minister said that she would “start paying down the debt in three years’ time”. On spending cuts, she said: “I’m certainly not talking about public spending cuts; what I’m talking about is raising growth.” Economic growth is the government’s ultimate aim, but even if growth is higher than current forecasts expect, a report from the Institute for Fiscal Studies suggests that “fiscal tightening of £41 billion would be required to stabilise debt”. The think tank writes: “Even reversing all of the permanent tax cuts in Kwarteng’s ‘mini-Budget’ would not be enough.” There is much uncertainty in these forecasts, in large part because we don’t know where inflation and interest rates will be in two years’ time. However, the central promise of Truss’s economic reforms – that tax cuts would be funded through growth not debt or spending cuts – is about to unravel.

All of this will affect the government’s standing among backbench Conservative MPs. When Kwarteng faces questions in the Commons this afternoon he will have to reassure them that growth is coming. Expect hints of the sort of deregulation, or “supply side” reforms, the government will introduce in an attempt to stimulate growth. The big announcements, however, will be in the medium-term fiscal plan at the end of the month. That’s when the government will have to convince its critics that it knows what it is doing. Ironically, given the government’s attempt to suppress it, this will be one of the most closely read OBR reports in years. What that report says will in large part determine whether the government’s two key arbiters – MPs and the markets – allow it to stumble on.

This piece first appeared in the Morning Call newsletter; subscribe here.

Select and enter your email address Quick and essential guide to domestic and global politics from the New Statesman's politics team. A weekly newsletter helping you fit together the pieces of the global economic slowdown. The New Statesman’s global affairs newsletter, every Monday and Friday. The New Statesman’s weekly environment email on the politics, business and culture of the climate and nature crises - in your inbox every Thursday. Our weekly culture newsletter – from books and art to pop culture and memes – sent every Friday. Your guide to the best writing across politics, ideas, books and culture - both in the New Statesman and from elsewhere - sent each Saturday. A newsletter showcasing the finest writing from the ideas section, covering political ideas, philosophy, criticism and intellectual history - sent every Wednesday. Sign up to receive information regarding NS events, subscription offers & product updates.
  • Administration / Office
  • Arts and Culture
  • Board Member
  • Business / Corporate Services
  • Client / Customer Services
  • Communications
  • Construction, Works, Engineering
  • Education, Curriculum and Teaching
  • Environment, Conservation and NRM
  • Facility / Grounds Management and Maintenance
  • Finance Management
  • Health - Medical and Nursing Management
  • HR, Training and Organisational Development
  • Information and Communications Technology
  • Information Services, Statistics, Records, Archives
  • Infrastructure Management - Transport, Utilities
  • Legal Officers and Practitioners
  • Librarians and Library Management
  • Management
  • Marketing
  • OH&S, Risk Management
  • Operations Management
  • Planning, Policy, Strategy
  • Printing, Design, Publishing, Web
  • Projects, Programs and Advisors
  • Property, Assets and Fleet Management
  • Public Relations and Media
  • Purchasing and Procurement
  • Quality Management
  • Science and Technical Research and Development
  • Security and Law Enforcement
  • Service Delivery
  • Sport and Recreation
  • Travel, Accommodation, Tourism
  • Wellbeing, Community / Social Services
Visit our privacy Policy for more information about our services, how New Statesman Media Group may use, process and share your personal data, including information on your rights in respect of your personal data and how you can unsubscribe from future marketing communications.

[See also: Liz Truss starts the parliamentary term in a desperately weak position]

Content from our partners
A better future starts at home
How to create an inclusive workplace and embrace neurodiversity
Universal Credit falls short of covering the bare essentials. That needs to change

Topics in this article : , ,