The past 10 days have told us all we need to know about this Conservative government. First, they crashed the economy by handing unfunded, unnecessary tax cuts to those at the top, while undermining the very institutions that make the UK a safe place to invest. Now they’re doubling down on their failed approach.
This crisis started when the chancellor, Kwasi Kwarteng, stood up and delivered his mini-budget. The markets reacted immediately: sterling dropped 3.6% against the dollar while yields on five-year gilts increased by 50 basis points. The turmoil continued, leaving the Bank of England to take the unprecedented step of injecting £65bn into the economy to stop pension funds collapsing – just days after announcing they were winding down their programme of quantitative easing.
While the Bank of England’s actions stabilised the markets, the result of this government’s decisions will be higher inflation, higher interest rates and higher borrowing costs for taxpayers – leaving us all worse off.
Mortgages withdrawn. Pension pots decimated. Food and fuel prices climbing even higher. Hardly what I call responsible economic management. Now they want to claim it is a “global” problem. But that couldn’t be further from the truth: this is a crisis made in Downing Street. And all for what? A return to the failed idea of trickle-down economics, where you make the rich even richer and hope that somehow some of it trickles down to everyone else.
But there’s another problem, too. As a former Bank of England economist, I know how important our institutions are in providing the stability and certainty that strong, secure economies need.
The Tories have undermined the Bank of England, sacked Tom Scholar, the respected permanent secretary at the Treasury, and refused to publish the Office for Budget Responsibility (OBR) forecasts that should always go alongside a fiscal event of this scale. No wonder the markets lost confidence in them.
The prime minister likes to make out that she is strong – that she is making the difficult decisions that are right for this country.
If Liz Truss really was strong, she’d know that the right thing to do would be to admit she got things wrong and act immediately to reassure markets, businesses and families that she has a plan to get the public finances under control. She is not strong, she is weak.
But what do we get? More bluster and obfuscation.
On Friday, when the prime minister and chancellor met with the OBR, there was a glimmer of hope they had realised the error of their ways and would start to get things back on track. Instead, we were told that, despite OBR forecasts being handed to the Treasury this Friday, they wouldn’t be published for a further six weeks.
This refusal to make public a report that could provide clarity to markets and provide reassurance to the British people is misguided and harmful. That’s why I have written to the chancellor to request that he publishes the OBR forecasts in full on the 7 October. A failure to do so will suggest the government has something to hide, further undermining confidence in the UK as a safe place to invest.
The scale of the government’s chaos has shown once and for all that Labour is the party of fiscal responsibility and social justice. We will not waver in our commitment to making sure that our economy is on stable and secure ground, and that every pound of taxpayers’ money is treated with respect.
That is the only way to provide the foundations for a stronger, more secure economy that can fund our public services – public services that are already on their knees because of the decisions of successive Tory governments.
It is why, as Labour’s shadow chancellor, I set out the fiscal rules for the next Labour government, to make sure we have a clear path to sustainable finances. It is why Keir Starmer and I have set out an ambitious plan that will grow our economy, making it greener and fairer while creating good, secure jobs in all parts of the country.
That strategy includes our green prosperity plan to help Britain become a global leader in the industries of the future such as green hydrogen, floating offshore wind and electric batteries for cars. And it means scrapping and replacing the outdated system of business rates to help high streets and small businesses flourish. A very different approach from the discredited trickle down we have from the Tories.
It’s clear that this is a government that can no longer be trusted. The prime minister needs to stop prioritising saving face over saving people’s homes, recall parliament and reverse this disastrous, kamikaze budget now.
• Rachel Reeves is shadow chancellor of the exchequer
