In his first major act as chancellor, Kwasi Kwarteng had an opportunity to steady an economy that has been rocked by the pandemic, the Ukraine war, the energy crisis and years of his own party’s mismanagement.
He also had a nation of workers struggling with low pay and the soaring cost of living, and public services in dire need of investment. “Help is coming” he declared. But for who?
Myth: Friday’s announcement was not a budget
Fact: Despite calling Friday’s announcement a “growth plan”, not a budget, the chancellor’s announcements were one of the biggest fiscal events in the past decade
These are massive changes to economic policy, but the semantic sleight of hand has allowed the new Conservative government to escape proper scrutiny.
Usually, the Office for Budget Responsibility assesses budgets and lets people see robust numbers setting out the impact of each policy. The chancellor, however, has avoided oversight. Perhaps the Conservatives are afraid of scrutiny because they know that their irresponsible plans don’t add up.
Myth: This budget will help to grow the economy
Fact: It is absurd to hear the new Chancellor call this mini budget a “plan for growth” when the defining feature of our economy, after 12 years of Conservative government, is a lack of growth. And the negative impact of these new proposals has already been significant
The pound nosedived during Friday’s announcement, crashing further to record lows the following Monday. This will push prices and inflation even higher and leave Britain poorer. Businesses already struggling to keep afloat with rising energy costs risk bankruptcy, and public services will be stretched even more thinly.
And all of this comes with a huge price tag: to fund their tax giveaways, the government is borrowing record amounts. The Institute for Fiscal Studies (IFS) forecasts that borrowing will be over £110 billion – almost 4% of GDP – including almost £45 billion borrowed just to pay for the tax cuts for the wealthiest.
Myth: Trickle down economics will help everyone
Fact: Trickle down economics is a discredited ideology that has been proven time and again not to work. Giving people at the top more money does not result in everyone getting a share: it makes the rich richer and the poor poorer
Friday’s budget includes massive tax cuts for the wealthiest in society – meaning someone earning £1 million will be £55,000 richer each year, while a low-paid worker already struggling to pay their bills will gain just £157.
Myth: Trade unions are holding back the economy
Fact: The chancellor used his budget announcement to attack “militant trade unions”, vowing to make it harder to strike. But the UK already has the strictest anti-trade union legislation in western Europe
Instead of demonising unions and seeing them as the enemy, the chancellor should be talking to unions about ways to improve pay and solve problems. Strikes are a symptom of over a decade of pay restraint and the current cost-of-living crisis. By threatening every employment right won through the membership of the EU, ministers are showing a blatant disregard for the health, safety and well-being of working people.
