Duncan Weldon’s excellent book, Two Hundred Years of Muddling Through, an economic history of Britain from the Industrial Revolution up to the pandemic, almost had a different title: “I wouldn’t start from here”, based on the old joke about the tourist asking for directions.
That is in fact the problem facing Liz Truss and Kwasi Kwarteng as they survey the damage caused by last month’s mini-budget, and their rapidly diminishing room for manoeuvre.
As our Political Editor Nicholas Cecil reports, the Bank of England was forced this morning to widen the scope of its daily gilt (government bonds) purchase operations to include the buying of index-linked gilts – those are bonds tied to the rate of inflation. This was a result of a rise in yields yesterday, with the Bank warning of a “material risk to UK financial stability“.
As Parliament returns from conference recess, the choices facing the prime minister, short of a time machine, are to announce swingeing (the IFS calculates £60bn) public spending cuts to meet new fiscal rules – in the face of parliamentary and public opposition. Stick with the ‘growth’ plan – and dare the markets to do their worse. . Perform a fiscal U-turn that would make even François Mitterrand blush – destroying any residual authority she retains. Or – I’m not sure there is another. Muddling through may no longer be an option at this point.
To be fair, some backtracking is already well underway. The chancellor has brought forward his debt-cutting plan, and the accompanying OBR forecast, to October 31. Meanwhile, moves to install outsider Antonia Romeo as the top civil servant at the Treasury were jettisoned at the last minute in favour of HMT veteran James Bowler – rendering the political and economic damage inflicted by the sacking of Tom Scholar utterly pointless.
Yet the real problem is credibility. In the space of a month, Truss and Kwarteng have gotten to a place where there is precious little they can do or say that will satisfy the markets. Or Parliament. Or the public.
And Tory backbenchers, quite understandably, think they’d look completely ridiculous installing a third prime minister in the space of a few weeks. Nor can they be sure that Truss’s replacement wouldn’t be someone to her populist right, namely Suella Braverman. So they’re stuck. And in the meantime, the cost of borrowing continues to rise.
Elsewhere in the paper, left-wing Labour MP (and boyfriend of deputy leader Angela Rayner) Sam Tarry has been deselected and will therefore not stand as a candidate for the party in his Ilford South seat. Tarry was defeated by moderate and leader of Redbridge Council, Jas Athwal, who was barred from standing in 2019 in what many Corbynsceptics describe as a stitch-up.
While a victory for Starmer and in particular Shadow Health Secretary (and neighbouring Ilford North MP) Wes Streeting, do not expect many further such examples. It is simply quite difficult for incumbent Labour MPs not to win reselection.
In the comment pages, Anna van Praagh owes HMRC (so all of us) money, and claims to want to pay up. But it isn’t that simple, trapped as she is in a Kafka-esque nightmare.
While Melanie McDonagh, who it turns out came runner-up to Meryl Streep to play Julia Child in Nora Ephron’s criminally under-appreciated 2009 film Julie and Julia, admonishes us to put the store-bought puff pastry down because making it yourself is easy.
And finally, have you seen the video of Larry the cat taking on a fox outside No 10 Downing Street? If the PM is looking for a cabinet enforcer, she could do worse.
