Trying to write a concise article about UK Fiscal Policy in the middle of October 2022 is a bit like reporting the final score of an aggressively close Rugby Match at halftime.

I delayed writing as long as I could, giving Chancellor (n+1) Jeremy Hunt time to lay out his “emergency statement” unravelling absolutely everything Liz Truss has put in motion since her elevation to the premiership. But, in the wake of increasing political instability, I fear how many statements might yet follow...

The question we want answered is – what does it all mean for the UK economy? How are we going to drive growth and restore financial credibility?

The current economic debacle facing the UK is much more than just a polycrises of domestic leadership misjudgements, failing services, anaemic growth, tumbling productivity, sub-optimal investment, surging mortgage rates and consumer price misery. There is also the global angle whereby high-interest rates, high debt levels, and persistent inflation may be a feature for a decade. We don’t yet know just how destructive and destabilising the consequences may yet be. (Clue – horrible!)

It’s not worth repeating the cataclysm of failure and policy mistakes since Truss was appointed Prime Minister by a small number of rich, aged, white conservative men in her party. But, give Truss and Kwasi Kwarteng some credit: their objectives were good – recognising the UK needed new, disruptive approaches and policies to drive growth and improve productivity.

Their goal was to smash the orthodoxy and transform the UK’s lethargic low-growth, low-wage and low-productivity economy into a hi-energy hi-growth economic powerhouse. (Conveniently they skipped over how Conservative Party has been in power for the last 12 years, during which time the value of the UK economy has fallen from 90% of Germany’s to 70%. Brexit? Let’s not even go there!)

Then it got messy. Recognising the UK is a lethargic stifled economy was hardly a Sherlock Holmes moment for anyone remotely familiar with economic reality. But Truss and Kwarteng thought they’d uniquely stumbled on some great economic insight – and naively decided only they were qualified to propose solutions. It was dangerously destructive arrogance. What they did next may have condemned the UK to penury for a generation.

Their strategy and policy announcements were beyond shambolic – untested, regressive, ill-advised and downright pig-ignorant of any economic or market reality. There was no strategy, no grand plan, just desperate hopes expressed as irrefutable facts. The UK’s financial reputation took millennia to establish. It took Kwasi Kwarteng less than 30 minutes to demolish it.

The really upsetting thing is – prior to 23 September 2022 (the date of Kwarteng mass-suiciding the UK economy) it would have been entirely possible to have presented a cogent, credible and workable plan to bail out the UK energy crisis and promote growth via a series of specific taxes, borrowing and policies.

The morning before Hunt presented his plan, Tesco Chairman John Allan, a highly respected British business leader, told the BBC’s Laura Kuenssberg the Conservatives have no growth plan, but: “We have seen the beginnings, I think, of a quite plausible growth plan from Labour. At the moment their ideas are on the table, and many are actionable and attractive.”  His views are generally shared across the City of London – where previously support for Labour was considered a capital offence.

We all know how it played out for Truss and Kwarteng. They have left the UK as a global financial laughing stock. By focusing the eyes of the world on our financial crisis, umpteen doors and policy options that could have offered effective ways for the UK to navigate its way through the multiple crises now upon us are now closed.  They have made finding a solution so much more difficult.

Jeremy Hunt “courageously” stepped into the breach, playing his new chancellor “can’t be sacked” card to unwind the illiteracy of Trussonomics, but he can’t wipe away the indelible stain it's left on the economic outlook for the nation. He clearly upset Truss - No 10 started actively briefing against him almost from the start. The only Truss “policy” to survive was the removal of the banker bonus cap… Why? Did his scriptwriter miss it?

Hunt, and many traditional, orthodox Tories, believe Truss and Kwarteng failed because they didn’t balance the budget, thus upsetting the markets. That’s a massive mistake. Take your pick of the many reasons markets lost confidence in them:

• Markets sold off because the mini-budget was chaotic and dangerously ill-informed.
• Markets sold off because it was patently unfair and regressive.
• Markets sold off not just because there were unfunded spending plans, but because the proposed tax cuts blithely assumed “trickle-down” economics would up UK growth by 2% per annum.
• Markets sold off because there was no clarity or vision of the policies to drive growth.

The new problem is Hunt has ditched Truss’s growth plans and presented a new mini-statement committing the UK to financial conservatism – effectively switching policy from Growth to Austerity. Hunt and the rest of his party have hunkered down, convinced the only way to restore the financial stability of the UK is to address the £70 bn hole in the accounts (they created) is tax hikes and spending cuts.

Austerity is never a route to growth.

One of my chums is fellow Scotsman Professor Mark Blyth, Rhodes Professor of International Economics at Brown University. His 2013 book, Austerity: The History of a Dangerous Idea, picks apart the notion of austerity will boost growth by slashing debt. “In general, the deployment of austerity as an economic policy has been as effective in bringing us peace, prosperity, and crucially, a sustained reduction of debt, as the Mongol Golden Horde was in furthering the development of Olympic dressage.”

Blyth goes on to show how Austerity doesn’t work, it increases inequality, and it can’t work in a competitive global economy where prices and currencies are volatile. He asks: “Is everybody supposed to run current account surpluses? If so, with whom—Martians? And if everybody does indeed try to run a savings surplus, what else can be the outcome but a permanent global depression?”

I spoke to Mark following Hunt’s statement and his disbelief was palatable: “The UK’s growth model, such as it was, was built around asset protection for the south and nationalism for the north. When you can’t even do the asset protection right anymore, what’s the point? And if you think further cuts to a welfare state that is already one of the worst in the OECD will bring back growth I would ask you to look at what happened the last time you tried this with Osborne for a bit of a reality check. Benefit Street and ’strivers vs skivers’ makes for good tabloid headlines but does nothing for GVA (Gross Value Added).”

Yet cutting debt and services provided by Big Government is default libertarian conservatism and will appeal to all 81326 party members who voted for Truss as Prime Minister of the UK. They may be happy.

The rest of us are not. 12 years is a long, long time in politics. Time for a change.

In February, the then Chancellor of the Exchequer Rishi Sunak announced that eligible UK households would be offered a £400 discount to help with energy bills from October. However, this month, it was announced that, in January 2023, a new energy price cap will see bills reach as much as £4,266 per year.   

Speaking on BBC Radio 4’s Today programme, Martin Lewis commented, “We’ve heard mutterings from the Rishi Sunak camp that he would increase the previous handouts that were given, but if he were to be consistent he would have to essentially double every number in that package.

“He will effectively need, if he wants to make this work, to double the numbers, especially for the poorest.”

This week, business secretary Kwasi Kwarteng and chancellor Nadhim Zahawai are set to ask energy company executives to submit a breakdown of their expected profits and payouts in an attempt to find an appropriate solution.

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The introduction of such a measure would see millions of households paying a fifth less in income tax, with those on the average UK salary of £32,000 saving approximately £777 per year. Sunak said this would be the “largest cut to income tax in 30 years” and called the move “responsible.”

The former chancellor said the commitment would be delivered by the end of the next parliament if he wins the Conservative leadership race.

Speaking to BBC Radio 4’s Today programme, Sunak said, “Now the last week or so of this contest we’ve been focused on the here and now about how best to fight inflation and I think everyone knows where we stand on that and we have different points of view.”

“But, as chancellor, I was very keen to make sure that I started cutting taxes and what I’ve announced today builds on that and that’s because I believe in rewarding work and the best way for the government to signal that is to cut people’s income tax.”

"And in this parliament as chancellor, I already said we’re going to cut income tax for the first time in almost 15 years and, as prime minister, I want to go further than that and cut income tax at the basic rate by a fifth to 16p, but I want to do that in a way that’s responsible.”

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“I want to be one of the most competitive countries in the world for investment,” Zahawi commented, arguing that corporation tax was the “one tax [investors] can compare globally.”

“I want to make sure we’re as competitive as we can be while maintaining fiscal discipline,”  he added. 

The new Chancellor also said his priority would be rebuilding and growing the UK economy as the country grapples with record-high inflation and the looming threat of recession. The UK is currently facing the worst cost-of-living crisis in decades. 

Despite reshuffling his cabinet, Prime Minister Boris Johnson is still facing significant doubts over his future as the country’s leader.

This latest Number 10 scandal emerged as it was confirmed on Tuesday that the Prime Minister had been previously informed about an investigation into the inappropriate conduct of MP Chris Pincher, who he appointed as deputy chief whip.

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Government sources have not denied reports that Sunak will use his announcement later on Thursday to scrap the requirement to repay a previously announced £200 discount on energy bills for households, or that he could possibly increase the grant to as much as £400 per household. 

Additional measures, such as announcing an increase in the warm home discount scheme for low-income households, are also expected. The government may also bring forward a planned increase in benefits that had been expected next year.

Earlier in the month, Boris Johnson refused to rule out a windfall tax when questioned by Ferrari, though the prime minister said he did not like them. He added, “I didn’t think they’re the right thing. I don’t think they’re the right way forward. I want those companies to make big, big investments.”

According to the most recent data from the Office for National Statistics (ONS) on Wednesday, the consumer price index (CPI) measure of inflation rose to 9%, the highest it's been since calculations began in 1997. Additionally, the ONS estimates that CPI hasn’t been higher since 1982 when it peaked at around 11%. This is up from a 30-year high of 7% seen in March.

Chancellor of the Exchequer Rishi Sunak commented, "Countries around the world are dealing with rising inflation. Today’s inflation numbers are driven by the energy price cap rise in April, which in turn is driven by higher global energy prices.”

"We cannot protect people completely from these global challenges but are providing significant support where we can, and stand ready to take further action," the chancellor continued. 

Inflation is expected to rise again in April, possibly over 8%, due to the 54% increase in the energy price cap at the start of the month. 

Record-high increases in vehicle fuel prices pushed inflation higher. Average petrol prices sat at 160.2p per litre in March 2022, compared with 123.7 pence per litre in March 2021. Diesel prices hit 170.5p per litre in March after Russia’s unprovoked attack on Ukraine raised oil prices. 

Gas prices, meanwhile, were 28.3% higher in March than a year ago, with electricity up by 19.2%. These figures do not include the recent increase in the energy price cap. 

Addressing the UK’s spiralling cost of living crisis, Chancellor of the Exchequer Rishi Sunak has said, “I know this is a worrying time for many families, which is why we are taking action to ease the burdens by providing support worth around £22bn in this financial year, including for the most vulnerable through our Household Support fund.”

"We're also helping as many people as possible into work – the best way for families to gain economic security in the longer term."

The TUC said that pay and benefits will be “swallowed up” by higher bills and 30-year-high inflation, estimating that energy bills will increase at least 10 times faster than wages this year.   

The TUC has called on Sunak to announce fresh economic support, including new grants paid for by a windfall tax on energy company profits, an increase to the minimum wage to at least £10 per hour, and a boost in Universal Credit.

“People shouldn’t be struggling to cover the basics, but millions of families have been pushed to breaking point by spiralling bills and soaring inflation,” TUC general secretary Frances O’Grady. “This is a living standards emergency. Rishi Sunak must come back to Parliament and present an emergency budget. We need a proper package of economic support for families.”

Across the week, protests against the spiralling cost of living are scheduled for various parts of the country, including Newcastle, Manchester, Liverpool, Peterborough, and Cambridge. 

Ian Allinson from Manchester TUC, said: “We can’t go on like this. The government can find money when it wants, wasting billions on useless PPE and writing off loans. If we stand together we can prevent the government, employers and landlords from driving more people into poverty.”

Chancellor of the Exchequer Rishi Sunak is expected to make an announcement in a matter of weeks about a new regulatory regime for cryptocurrencies. While details of the plans are still in the works, sources who spoke to CNBC say the plans are likely to be favourable to the industry and will provide the sector with increased legal clarity. 

Treasury officials have reportedly shown a readiness to comprehend the complex nature of the crypto market and stablecoins, with the department having held discussions with several firms and trade groups. 

The move by the Treasury is largely being viewed as a response to US President Joe Biden’s new executive order calling for coordination from various federal agencies on regulatory cryptocurrencies. 

Experts have described the White House’s move as “long overdue” and “extremely positive.” 

Speaking in the House of Commons on Wednesday, Sunak pledged support to the UK’s hardest-hit families and said he was committed to building a “stronger, more secure economy for the United Kingdom.”

The Chancellor announced a cut to fuel duty to combat spiralling prices at petrol pumps after Russia’s unprovoked attack on Ukraine further exacerbated costs. There will be a temporary 5p per litre reduction until March 2023, a rate cut that is the largest on record. 

However, Shadow Chancellor of the Exchequer Rachel Reeves said that households require more than a temporary 5p reduction: “Even a 5p reduction in fuel duty will only reduce filling up the car with petrol by £2. So, I don't think that really rises to the scale of the challenge," Reeves said.

In addition to these measures, Sunak also announced that the Government would be pausing VAT on energy efficiency measures such as solar panels and heat pumps for five years. Meanwhile, the Household Support Fund will be doubled to £1 billion from April. The extra £500 million will allow councils to further support low-income families. 

According to the Office for National Statistics (ONS), consumer prices rose by 6.2% year-on-year in February after a 5.5% rise in January. This is its highest rate since March 1992. 

The UK now has the second-highest annual inflation rate among Group Seven countries, behind only the US which hit a four-decade-high of 7.5% in January of this year. 

The ONS pointed to UK household energy bills, which were up almost 25% on a year ago, and petrol as the biggest drivers of February’s price hike. The ONS also warned that food prices were rising across the board in a further blow to low-income households.

“The UK economy has shown relative strength during the last few years, but we can expect more pressure if the rising commodity (energy, food, agriculture) costs are not tackled soon enough, as well as if the planned increase in National Insurance goes ahead,” commented Lecturer in Finance Dr Nikolaos Antypas. 

“Overall, we should expect measures to minimise the unavoidable economic suffering for the most vulnerable UK residents instead of net positive measures for all socioeconomic strata.”

Analysis of Office for National Statistics data by the TaxPayers’ Alliance has revealed that the lifeline tax bill for the average household in the UK is equivalent to 18 years of work. Meanwhile, the study showed that the bottom 20% of households with an income of £19,171 will need 24 years of income to pay their lifetime bill. 

The findings come as Prime Minister Boris Johnson and the Chancellor of the Exchequer Rishi Sunak are urged to reconsider a planned increase in National Insurance set to go ahead in April this year. However, last week, Johnson and Sunak defended the tax hike, arguing that it is vital for the country’s Covid-19 recovery. 

The study revealed that, even before the planned hike, the average UK household is set to pay close to £180,000 in employer and employee National Insurance contributions over a lifetime. 

Chief executive of the TaxPayers’ Alliance, John O’Connell, said: “With the tax burden at a 70-year high, typical families are now tax millionaires.”

“Taxpayers already toiling half their working lives just to pay off the taxman cannot be asked to endure any further crippling tax hikes. Planned rises, like the national insurance hikes, must be scrapped.”