In fact, this was the largest tax giveaway in modern times, one of the larger increases in public borrowing for noninvestment purposes, and it also marked a philosophical departure from the general approach that the Coalition and Conservative governments have followed since 2010.
The Truss government has even been thinking aloud about ending Treasury orthodoxy”, breaking the department up, and making the Bank of England pay as much attention to growth as it does, in principle, to inflation. Some of this thinking was reflected in the chancellor’s plan for growth”. It was a bold and, in the hands of Kwarteng, a brash set of measures. Will it work?
History has some answers. There have been three previous notable examples of such a dash for growth” an attempt to use the public finances and the tax system to unleash” the British economy, escape the habits of austerity and break the stop-go or boom-and-bust cycle. They enjoyed mixed success.
There were three, all under Tory governments. The first was in 1963. The then Macmillan government was beleaguered, unable to get into the European Community to help boost trade, and the economy seemed stuck in relative decline. So Reginald Maudling set out a series of measures to boost public spending, cut taxes and make credit easier all designed to boost output to such an extent that economies of scale and an investment boom would soon transform productivity levels and international competitiveness. He also had an eye on a general election that could not be long delayed, and which eventually arrived in 1964.
It failed. The substantial fiscal stimulus overheated the economy, pushed inflation up, sucked in imports of consumer goods as much as raw materials) and there was a sterling crisis.
This story is from the September 24, 2022 edition of The Independent.
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This story is from the September 24, 2022 edition of The Independent.
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