Good news. The lady is for turning. Liz Truss has had a nightmare week. She galvanised her chancellor, Kwasi Kwarteng, to produce a crazily ideological budget shorn of the normal checks and balances. The head of the Treasury was sacked, the Bank of England ignored, Whitehall’s official factcheckers stifled and the cabinet left in the dark. It was 2012’s “omnishambles” budget all over again. The nation must thank “the markets” and backbench Tories for stopping the most gratuitous of Kwarteng’s tax cuts, the 45% band, albeit saving the Treasury a mere £2bn.
That is just a beginning. Truss is living on borrowed time and capitulated to “the message” from party backbenchers over the weekend. Since Kwarteng’s budget was incomplete and lopsided he now has an opportunity to correct it, and in spades. The future growth on which it is based depends on a “supply-side plan”, so far undisclosed. So too is the means by which the plan and its related tax cuts are to be financed.
It is naive to expect that an instant surge of economic growth will arise from a mishmash of deregulating planning, subsidising freeports, reforming childcare, boosting immigrant visas and digging up the countryside. All have merit but most contain red rags to Tory bulls now on the rampage. To plead the virtue of unpopular toughness, as Truss did at the weekend, might work if she meant to stick to it. Now she merely invites another humiliating reverse. Truss’s predecessor Theresa May warned against the Tory party being seen as “the nasty party”. The planning changes alone risk depicting it as the ugly party.
As for paying the price, never before can a chancellor have presented parliament with such an “unbalanced” budget. To take one example, energy subsidies are in chaos as a result of Nato’s ineffective sanctions on Russia. In the rest of Europe last week, EU treasuries came together to call energy companies to order for their massive windfall profits. An emergency cap was put on production prices and surplus revenues are to be siphoned off, to an estimated total of €140bn (£123bn). The cooperation steadied European markets, while Ireland’s energy consumers can already look to benefit from up to €2bn (£1.75bn).
In contrast, inert Britain flounders on, with energy companies free to sting consumers and pocket the profits. Truss is right that windfall taxes are in principle bad, but this is an emergency. One power station, Drax, has so far received £6bn of government money to produce “green energy” by burning wood. Yet Truss will do nothing to curb energy profits soaring by tens of billions.
All she and Kwarteng have so far offered to pay for their fiscal extravagances is an iron grip on public spending, including our old friend red tape. Yet a return to austerity will be explosive. The result will be hordes of doctors, nurses, teachers, carers, police, farmers, small businesses and everyone else descending in fury on Downing Street – and with an election in the offing. The message will be loud and clear. Don’t cut taxes when you can’t afford it. U-turn again, Truss. You have shown us you can do it.
Simon Jenkins is a Guardian columnist
