23 September 2022 – today’s press releases

  • Fiscal statement: Not a plan but “a recipe for disaster”
  • A Budget for the Mega Rich at the Expense of Ordinary Citizens
  • Debt dossier: Five times Truss and Kwarteng warned unsustainable borrowing could cripple the economy
  • Ed Davey: “Billionaires’ budget” shows Chancellor doesn’t have a clue

Fiscal statement: Not a plan but “a recipe for disaster”

Responding to the Chancellor’s fiscal statement today, Liberal Democrat Treasury Spokesperson Sarah Olney said:

This statement was an admission of failure from a Conservative government that is totally out of touch with the British people. It is not a plan, but a recipe for disaster that will leave families suffering from soaring prices while banks and oil and gas companies rake in huge profits.

Instead of a real plan to grow the economy, the Conservatives are reheating the same old failed policies and lifting the cap on bankers’ bonuses.

Handing billions of pounds of tax cuts to banks and multinational companies will do nothing to help people get a GP appointment when they need it, give our children a better education; and make our streets safer.

It’s clear that Kwasi Kwarteng and the Conservatives are taking the British people for granted and have no plan to deal with soaring energy bills, sky-high petrol prices and rising food costs.

A Budget for the Mega Rich at the Expense of Ordinary Citizens

Responding to the Conservatives’ mini budget, Welsh Liberal Democrat Leader Jane Dodds MS has labelled the plans announced as “a hideously out-of-touch’ budget designed to benefit the mega rich at the expense of ordinary citizens”.

Commenting Jane Dodds MS said:

What we have seen today is gross negligence. The Conservatives are intent on a budget that robs the poor to pay for the mega rich.

Someone on £200,000 a year will benefit by an extra £3,000 a year meanwhile those on the breadline will continue to struggle. It is almost criminal and completely detached from reality.

Cuts to cooperation tax, the removal of the bankers’ bonus cap and the abolishing of the top band of income tax for those earning over £150,000 will do absolutely nothing to help the average family this winter.

The Conservatives are reheating the same policies they’ve tried for the last 7 years that haven’t worked and have instead left the UK with stagnant growth, widening inequality and one of the lowest productivity rates in Europe.

This is the most financially irresponsible budget I have ever seen laid out and it will inevitably lead to either cuts in public services or more debt for our children and grandchildren through increased borrowing.

We need a general election immediately to remove this irresponsible and reckless Conservative Government out of power.

Debt dossier: Five times Truss and Kwarteng warned unsustainable borrowing could cripple the economy

The Liberal Democrats have published a “debt dossier” highlighting five times both Liz Truss and Kwasi Kwarteng warned about the risk to the economy from soaring government borrowing.

Kwasi Kwarteng warned in a paper in 2012 that growing debt could lead to a “vicious cycle of increasing interest payments, higher deficits, higher taxes and greater public anger.”

The Chancellor also warned in another article in 2012 that “Governments often run a structural deficit to boost the economy with greater spending and lower tax. Unfortunately, this…has a poor track record”.

Meanwhile Liz Truss gave a speech in 2018 where she said that “high debt can dissuade investors,” and that setting up the OBR had helped to “put Britain on a path to lower debt.”

And in the book they co-authored in 2011, both Truss and Kwarteng said that “huge deficits” can be “very debilitating to the country”.

Liberal Democrat Cabinet Office Spokesperson Christine Jardine MP said:

Liz Truss and Kwasi Kwarteng both spent years warning about the risks to families and businesses from ballooning government debt. Now they are recklessly ignoring their own warnings, ducking scrutiny and trashing the Conservative Party’s reputation on the economy.

This latest Conservative line-up is completely out of touch with reality and with the British people. The pound is plummeting, prices in the shops are soaring while struggling families are left worried about how they will get through the winter.

Debt dossier

Vicious cycle:” Growing debt could lead to a ““vicious cycle of increasing interest payments, higher deficits, higher taxes and greater public anger.,” Kwasi Kwarteng and Jonathan Dupont, Institute for Economic Affairs, 31 May 2012

Poor track record”: “Governments often run a structural deficit to boost the economy with greater spending and lower tax. Unfortunately, this…has a poor track record. ” Kwasi Kwarteng, Institute for Economic Affairs, 31 May 2012

Boom and bust”: “high debt can dissuade investors…Setting up the OBR and developing our fiscal rules have helped us counter this tendency, and put Britain on a path to lower debt…there’s the option pursued by some other Western nations…let fiscal responsibility slide and allow the deficit to balloon. We’ve been there before. It leads to boom and bust.” Liz Truss speech to LSE, 26 June 2018

It’s working people who suffer”: “Getting debt down means more jobs, more security and better services. If we don’t, it’s working people who suffer,” Liz Truss on Twitter, 17 July 2018

Huge deficits… very debilitating to the country”: “More generally, the widely oscillating nature of British politics, in which Labour governments spend only to run up huge deficits which Conservative governments then have to pare down, is very debilitating to the country.” Kwasi Kwarteng, Liz Truss, Dominic Raab and Chris Skidmore in After the Coalition, 2011

Ed Davey: “Billionaires’ budget” shows Chancellor doesn’t have a clue

Liberal Democrat Leader Ed Davey has slammed today’s fiscal statement as a “billionaire’s budget,” saying it shows the Conservatives are completely out of touch.

It comes after analysis by the Resolution Foundation found half of the government’s tax cuts will go to the wealthiest 5% of the population.

Liberal Democrat Leader Ed Davey said:

This was the billionaire’s budget, showing the Conservatives are completely out of touch with families struggling to pay the bills.

They have no plan for people facing soaring prices or for high streets on the brink of collapse. The Chancellor showed today he doesn’t have a clue.

Handing money to banks and the richest corporations while refusing to support those struggling to make ends meet is the behaviour of a pantomime villain, not a government serious about fairness and prosperity.

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  • Robert Harrison 24th Sep '22 - 7:21am

    Good to see that the party is highlighting the effect that raising the national debt will have on the economy – and throwing Kwarteng and Truss’s words back at them. Our children and our grandchildren will be paying off this debt for years to come.

    Basic economics suggests that borrowing money to invest (such as a mortgage on a house, a career development loan) is justifiable, but that financing day-to-day spending by talking out a loan (or overdrafts, credit card debt) is a recipe for disaster.

    Reminds me of the waste of the tax revenues from North Sea oil and gas in the seventies. Norway invested their revenue in a state investment fund; UK funded tax cuts.

  • Peter Martin 24th Sep '22 - 7:31am

    Whatever the faults of the present government policy it is worth getting our criticisms right. The idea that our “children and our grandchildren will be paying off this debt for years to come” is obviously not true. Their standard of living will be determined by the goods and services they produce. The distribution of those will be determined by their, hopefully, elected government.

    The post war generation did well enough in economic terms. They weren’t greatly burdened by war debts.

  • Chris Haigh 24th Sep '22 - 3:35pm

    Peter- between 1948 and 2022 the value of money has fallen by 4,500 per cent mainly due to Barber and Lawson. Is that good or bad ?

  • So we can put it less dramatically: the GOVERNMENT will be paying interest on the new debt for many years to come.

    That isn’t necessarily a good thing.

  • Robert Harrison 24th Sep ’22 – 7:21am:
    Reminds me of the waste of the tax revenues from North Sea oil and gas in the seventies. Norway invested their revenue in a state investment fund; UK funded tax cuts.

    Nothing wrong with tax cuts if they encourage more growth and investment.

    The government is reported to be considering a sovereign wealth fund…

    ‘Fracking profits to be diverted into sovereign wealth fund in plan to drive growth’ [24th. September]:

    Officials have drawn up plans for a Norway-style state-backed fund that would also accept investments from pension schemes and would focus on backing long-term projects.

    It could be used for national infrastructure investment and to drive growth in the Government’s new “investment zones”, while also providing the Treasury with access to cheaper credit as interest rates rise.

    A source close to discussions about the fund said it may be partly funded with royalties collected from fracking and oil and gas extraction in the North Sea.

  • Peter Martin 25th Sep '22 - 8:54am

    @ Chris Moore,

    The Government is getting the better of the deal providing interest rates are lower than inflation. The Government/BOE pays what interest rates it wants and what it considers appropriate in the interests of the economy. If the Government wants 0% it can have 0%, as we have just (almost) seen during the Pandemic when rates were 0.1% in the short term and not much more for longer term bonds.

    @ Chris Haigh,

    Good question. But there are lots of other good questions to ask too. We could have loaves costing a penny each with wages for the lower paid being one penny per hour. Would that be better than what we have now?

    There’s probably never been a period historically when there has been as much economic growth as we’ve seen in the 70 years or so. But neither has there been a period of so much inflation. Is this just a co-incidence?

    @ Jeff,

    “… if they encourage more growth and investment”

    That’s a big IF ! Who would want to invest in a new business if the average person doesn’t have the spending power to be a good customer?

    Someone in Government has been reading up on MMT! Govt doesn’t need to raise money in taxation or even by selling bonds to be able to spend it. However, they might like to have another look at the chapter that explains that this is only possible within the limits physically available resources.

  • Chris Moore 25th Sep '22 - 8:42pm

    1. The interest rate at which the government issues bonds is circumscribed by a range of factors. It’s not just a matter of government choice.

    Say inflation rises to 12% and looks like staying in double figures.

    Now Government decides to issue bonds at 0%. Oh dear, very few takers. “But that’s the rate we want. Come on, eat our lovely useless swindle bonds.” Very few takers.

    Oh dear. “We now offer them at 2%. That’s the rate we want.” Ditto result. And so on.

    This is just one example.

  • Peter Martin 25th Sep ’22 – 8:54am:
    Who would want to invest in a new business if the average person doesn’t have the spending power to be a good customer?

    If the investment makes a business more productive and competitive then import substitution can enable expansion even when customers have limited spending power. Also there’s a rapidly growing potential for exports – the UK already has FTAs covering 98 countries (more than any other country).

  • Peter Martin 26th Sep '22 - 1:46pm

    @ Chris Moore,

    Interest rates are a matter of Government/BoE choice. Short term rates are set simply by the decision of the monetary committee of the Bank of England. Longer term rates are set by manipulating the bond market. If Govt wants lower rates, it instructs the BoE to enter the secondary market as a buyer and so forces up bond prices.

    The Government isn’t doing that so much now because it wants higher rates to discourage borrowing and keep the pound from falling even further.

  • Interest rates are a matter of Government/BoE choice.
    Not anymore, the (investment) market is telling the UK government what rates it wants on the bonds the UK government is wanting to issue to finance its spending plans.
    The BoE has already had to step in the buy up low paying government debt so investors can swap it for new high paying debt…

    It is looking like not ‘if’ but ‘when’ the next administration will be going cap in hand to the IMF to bail the UK out of yet another Tory debacle…

  • Peter Martin 29th Sep '22 - 9:00am

    @ Roland,

    I’m not quite sure how the bond “market” can tell the UK government anything. We have buyers who would like the best possible return on their purchase and we have a government who could by-pass them completely by instructing the BoE to enter the market as a buyer. Effectively this, QE, is 0% borrowing by the Government.

    Govt has done this before, after the 2008 GFC and again during the Covid crisis. It could do so again if it wanted to. At present the Govt are reluctant but I did notice that there was a £65 billion “intervention” yesterday by the BoE which forced down interest rates. It’s not being reported as QE but if it wasn’t that, what was it?

    Sure we could borrow some US dollars to prop up the pound temporarily from the IMF if we wanted to. George Soros would love that! They’d all end up in his coffers.

    There’s no doubt that the BoE and Treasury are like a pilot and co-pilot fighting over the controls at the moment. Fasten your seat belts because we could crash!

  • Peter Martin 29th Sep ’22 – 9:00am:
    …the BoE and Treasury are like a pilot and co-pilot fighting over the controls…

    Yes, Kwarteng’s budget puts the government ahead of the approach path while the BoE is dangerously behind.

    ‘Liz Truss must hold her nerve as the world tips into a calamitous recession’:

    Cheered on by politicians, central banks kept interest rates low, favoured borrowers over savers, printed money with abandon and engineered an artificial boom in house prices, tech firm stocks, crypto-currencies, bond markets, art and more. […]

    Yet it was a Potemkin economy, a facade, a con. Much of the “growth” and wealth weren’t real. The UK was stagnating, not booming. House prices “enriched” the haves while infuriating the have-nots. It was a bubble at best, and a Ponzi scheme at worst, keeping zombie projects alive and fuelling obscene malinvestment. […]

    This madcap experiment is now ending, killed off by a money printing overdose from Covid,… […]

    The necessary transition from cheap to rational money will be traumatic and could trigger a vicious global recession, higher unemployment and bankruptcies. Long-term mortgages are already at 7.1 per cent in America as the old order crumbles, and financial markets are in turmoil worldwide.

    This is the context for the punishment beating meted out to Britain. The readjustment that every other country will also undertake – especially much higher borrowing costs – has taken place in accelerated form in the UK, triggered by the financial markets’ ridiculous reaction to the Budget.

  • @Peter – The markets yesterday told the UK government, they weren’t buying. The BoE intervention was according to some reports an intervention to allow pension funds to sell low yield bonds – hence have funds and a funding requirement to buy the new higher yield bonds. But you are right Truss & Co. think high-levels of debt are a good thing and so may well throw money aka QE into the market.

    My expectation is for GBP to fall below the USD in the coming days.

  • Peter Martin 30th Sep '22 - 12:52pm

    @ Roland @ Jeff,

    Probably the pound will recover somewhat. Economically, the decisions to uncap bankers’ bonuses and even reduce the top rate of income tax to 40% are neither here nor there. Politically, though, they are devastating for this right wingTory government. At a time when they should be at least making some effort to appeal to everyone, and asking us all to pull together to get the country through a difficult time they have chosen to direct their handouts to the top end of town.

    I do notice that the media has started to refer to Wednesday’s BoE intervention as QE which has reduced longer term interest rates from rising too quickly. it is a surprise, especially as the Monetary Committee of the BoE has just voted to end QE and put it into reverse ie Quantitative Tightening. It does indicate, though, that someone at the BoE does know what they are doing! If they hadn’t acted so quickly there could have been an avalanche like collapse of a large part of the financial system.

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