It’s hard to think of any newly appointed finance minister of a developed country who has made such a catastrophic mess of his own brief and trashed the currency along with his own reputation in a matter of days. Kwasi Kwarteng has achieved an extraordinary record by his reckless stupidity. He will be lucky to survive until Christmas. It is being claimed that he and Truss were warned what might happen but went ahead with the mini-budget anyway.
Liz Truss has set herself up against the Treasury, the Bank of England, global markets, the EU and now apparently the International Monetary Fund (IMF). Last night they issued a statement critical of the plans set out by Kwarteng in the Commons last Friday in what The Telegraph has called a “Highly unusual move by world's lender of last resort.”
The IMF said it was “closely monitoring recent economic developments in the UK and are engaged with the authorities" and warned that the fiscal stimulus risked undermining the Bank of England’s efforts to curb inflation.
I would have thought trying to inflate the economy while your own central bank is doing the opposite is never a wise move but the government’s response was to double down on it.
Truss is not known for being flexible, she apparently had to be persuaded after a shouting match with her chancellor, to issue a statement on Monday to try and calm the markets. The PM is nothing if not stubborn and in response to the IMF’s intervention, a Treasury spokesman said the chancellor will issue his medium-term fiscal plan on November 23rd. It's like the fire brigade telling you they plan to send a fire engine in a month or two when the flames are leaping out of your bedroom window now.
A spokesman for the IMF said Mr Kwarteng's announcement in November would “present an early opportunity for the UK Government to consider ways to provide support that is more targeted and reevaluate the tax measures, especially those that benefit high-income earners”. In other words, to reverse his plans.
It is extremely rare for the IMF to intervene in a developed country’s economic policy.
But more importantly perhaps, one of the credit rating agencies also waded in. Moody's said last night that Kwarteng's plans raised "the spectre of a downgrade to the UK's outlook" and branded the mini-Budget "credit negative".
Moody's said it was now not expecting economic growth to return to its potential until 2026, and cut its forecasts for GDP growth next year. It said the unfunded tax cuts would lead to "structurally higher deficits".
Needless to say, rent-a-gob Lord Frost, never short of a comment to make any bad situation even worse, told The Telegraph: "The IMF has consistently advocated highly conventional economic policies. It is following this approach that has produced years of slow growth and weak productivity.
"The only way forward for Britain is lower taxes, spending restraint, and significant economic reform. Liz Truss and Kwasi Kwarteng are rightly focused on delivering this and they should tune out the criticism from those who are still in the intellectual world of Gordon Brown."
John Redwood has also weighed in this morning, rejecting the IMF’s warnings.
This is typical of the Brexiteers isn’t it? Dismiss the experts and any methods which are proven to work in favour of their own quack remedies, particularly on subjects they know little or nothing about. It is the classic English disease of favouring the amateur dilettante before people who know what they’re doing.
It’s only the true believers in Brexit - a rapidly dwindling band - who can see the promised land.
I noted a few Brexit-supporting commentators were trying to prop up support for Kwarteng by pointing to any small uptick in the value of Sterling yesterday as sign of a recovery. Unfortunately, that didn’t prevent the currency from ending down slightly again last night and struggling this morning to get above $1.07. It’s bobbing around between $1.06 and $1.07 as I write this morning like a drowning man about to go under again.
The entirely self-made crisis is far from over and the IMF's warnings are not likely to offer the pound a life-line.
I honestly think we are seeing the end of the Conservative party. Labour has a 17-point lead, they have a decent leader in Kier Starmer who looks capable and serious and things are going from bad to worse for Truss. She may not actually get to the next GE which they are certain to lose.
How will the party ever come back from Brexit and a run on the pound with the IMF having to step in? What will the Tories Unique Selling Point be after such a display of incompetence?
I am not convinced she or anyone in government even now truly understands the scale of the problems facing us this winter. As a small vignette, read this tweet from ITV's investigations correspondent Daniel Hewitt:
It’s hard to overstate how scared people are right now. Filming in North Tyneside today, the first 2 people I met - a shopkeeper of 30 years who said he may have to close, and a working 60 year old who can’t pay her energy bill - burst into tears when I asked how they’re coping.
— Daniel Hewitt (@DanielHewittITV) September 27, 2022
Think about that. The first two people he spoke to in Tyneside both began to cry when asked how they're coping. I do not ever remember such times in my whole life, I really don't.
The wall will soon turn red again.
