Kwasi Kwarteng faces opposition from the markets, the Bank of England and even his own MPs
on September 23rd Kwasi Kwarteng, Britain’s new chancellor, promised a “new approach for a new era”. He was as good as his word. In a breezy speech lasting a little under 30 minutes, Mr Kwarteng launched the biggest fiscal intervention by any chancellor in half a century, eviscerated his party’s record in government and sent sterling plunging while gilt yields spiked.
Those decisions put the Conservative government at war with its own recent past. A cut to national insurance, a payroll tax, comes barely a year after it was introduced by Boris Johnson, the former prime minister, and Rishi Sunak, the ex-chancellor. The increase to corporation tax had not even come into force by the time Mr Kwarteng pledged to nix it. Proposed increases on alcohol duty introduced by Mr Sunak will be scrapped.
Mr Kwarteng’s policy is the inverse of the David Cameron years, when the party bet on tight spending while money was cheap. The Bank of England has already raised interest rates sharply in an attempt to contain inflation, which has reached 9.9% thanks largely to rocketing energy prices. Now it must offset the economic sugar rush of a bigger deficit. At the start of August, market prices suggested rates would peak at around 2.8% in 2023.
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