Kwarteng is sticking to his guns on tax and spending cuts. But what he really needs is luck
Kwasi Kwarteng’s inept handling of the government’s finances since he took office last month has left Liz Truss cornered. The prime minister must play for time and piece together a rescue plan by the end of November, along with a more rounded budget that preserves her tax-cutting agenda while also appearing responsible to financial markets watchful for the next misstep.
Treasury officials, rudderless after the departure of two permanent secretaries (Tom Scholar and deputy Charles Roxburgh) in the space of four months, will be under pressure to find a formula that also satisfies the cautious instincts of the government’s independent economic forecaster, the Office for Budget Responsibility (OBR), which is inclined to dismiss policy “quick wins” as ineffectual until evidence proves otherwise.
Under pressure from backbench MPs, Truss’s team must first take in hand a politically naive chancellor who, left to his own devices in the week before the mini-budget, loaded the list of proposals with measures going beyond anything previously signalled to the City.
Kwarteng will want to claw back the credibility he has squandered, but may find that difficult when his lack of political and financial acumen, and especially his failure to judge the market reaction to a spending spree in the midst of an already difficult economic situation, leaves him almost friendless among economists and the institutions that hold sway in these matters, chief among them the OBR.
Colleagues say he is listening to advice as he searches for a way through the wreckage. But with mortgage rates soaring, pension funds at risk and the pound vulnerable to speculators the next time there is bad economic news, Kwarteng’s legacy, after just seven days of active
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