A senior member of Liz Truss’s government has said that the fall in the value of the pound is “not all bad”, claiming it has led to a surge in US tourists coming to Britain and spending on luxury goods.
Sterling plummeted to an all-time low of $1.03 against the US dollar in the wake of last week’s poorly-received, though it has since rallied to $1.12 after the Bank of England poured £65bn in to stabilise markets.
But it remains almost 30 per cent down on its value of $1.42 in the spring of 2021 and around 35 per cent down on its pre-Brexit peak of $1.71 in 2014.
The collapse in the value of sterling makes the UK a significantly cheaper destination for Americans, while increasing the price of imported goods for British consumers.
One cabinet minister told The Independent that anecdotal evidence from stores in London’s West End suggested that wealthy American tourists were increasing the frequency of their visits to the uK and spending more freely when they came.
“It’s not all bad from the pound,” said the minister. “You hear that there’s a huge surge in jewellery purchases from Americans. Everything looks cheap to them now.
“The shops on Fifth Avenue will be seeing their trade plunge.”
Speaking at a Conservative conference in Birmingham dominated by the fallout from last week’s market-crashing mini-Budget, the minister acknowledged that the presentation of the £45bn package of tax giveaways had been poorly handled.
But the MP insisted that prime minister Liz Truss still has time to win over voters and rebellious MPs by showing that her approach can deliver growth within the tight deadline of the election expected in 2024.
Opinion polls showing astounding leads of as much as 33 points for Keir Starmer’s Labour in the wake of the Budget were “soft” and could be reversed in the 20 or 24 months remaining before the election, said the minister.
“We got things wrong on the presentation, we should have explained more about what we were going to do on spending and reform at the same time,” said the minister.
“But the basic plan is right. We’ve got no choice. It’s got to work in two years, we have to bet that it will.”
The minister suggested that official forecasts may underestimate the positive impacts of chancellor Kwasi Kwarteng’s measures because experts at the Treasury and Office for Budget Responsibility do not take sufficient account of behavioural changes, such as high-paid people working longer hours if their taxes are reduced.
“The Treasury and OBR orthodoxy is a problem,” said the minister. “They have never given credence to the way that tax cuts can drive up revenues.
“That might have been part of the thinking with delaying the OBR report. They are not going to agree that it can pay for itself.”
