Two followed by twelve zeros’

The UK has a big problem to face down. Is it all down to Liz Truss?

euronews.com

provides a helpful time line to the current situation in terms of the of the Conservative Party familicides’ we have been spectators to. It makes interesting reading:

Thursday 7 July: Prime Minister Boris Johnson announces his resignation after one scandal too many prompts droves of top government officials to quit. He steps down immediately as Tory party leader but will stay on in Downing Street until a successor is chosen.

Sunday 10 July: Foreign Secretary Liz Truss enters the party leadership contest, joining a crowded field of 11 candidates in the race to succeed Johnson. Launching her campaign with an article in the Telegraph, she pledges to cut taxes "from day one" if she wins.

Wednesday 13 July: By the second round of voting among Conservative MPs, Truss is in third place with 64 votes in a field that has been narrowed to six candidates. The frontrunner, Britain's finance minister Rishi Sunak, has 101 votes.

Wednesday 20 July: The day afteranother round sees Truss close the gap, the final vote among MPs sees the foreign secretary narrowly overtake rival Penny Mordaunt to face a run-off for the leadership with Sunak. The outcome will be decided by Conservative Party members after a summer campaign. Whereas Sunak has topped each poll among lawmakers, Truss is more popular with the party’s grassroots and is a favourite of its right wing.

Monday 25 July: TV debate between the two rivals. Truss promises again to cut taxes as soon as she takes office, using borrowing to pay for it. Sunak says he would get inflation under control first, arguing that Truss’s plan would increase the public debt and leave people worse off in the long run. Tempers flare as Sunak says "it’s not moral" to pass the bills on to future generations. Truss dismisses that as "Project Fear".

Monday 15 August: Both candidates' economic plans are attacked as "pure fantasy" by Paul Johnson of the Institute for Fiscal Studies (IFS). "Apparently, we can have our cake and eat it," he writes. "They seem to think they can promise tax cuts without any hint that this might matter for the quality of public services or the level of borrowing and debt."

Wednesday 17 August: Truss continues to resist direct aid for households to cope with soaring energy costs.

Friday 26 August: Truss appears to soften her stance on handouts as it's revealed that consumers face an 80% hike in energy costs come October. "I will take decisive action on entering No 10 to provide immediate support,"

Monday 5 September: The Conservative leadership result confirms victory for Truss, who wins 81,326 votes among party members, ahead of Rishi Sunak's 60,399.

Tuesday 6 September: Boris Johnson tenders his resignation to the Queen at Balmoral, her Scottish residence. Shortly afterwards the monarch receives Liz Truss who isconfirmed as prime minister, the UK's fourth in six years. In her first address in Downing Street, she says her first priority is to "get Britain working again" with a "bold plan to grow the economy through tax cuts".

Wednesday 7 September: Liz Truss announces her new cabinet, notable for a strong presence of loyalists who had backed her for the premiership. At her first session of Prime Minister's Questions, she promises immediate help for households and businesses over energy costs, but she rules out a windfall tax on energy firms.

Thursday 8 September: A cap on domestic energy prices is confirmed. The cost is not stated but estimates put it at over €115 billion. The Treasury confirms that the ministry's most senior civil servant, Tom Scholar, has been sacked, despite warnings that his experience would be needed.

Thursday 8 September: Queen Elizabeth II dies aged 96, prompting an 11-day period of national mourning until her funeral, during which daily politics is put aside.

Friday 23 September: Finance minister Kwasi Kwarteng presents his Growth Plan — dubbed a "mini-budget" — to parliament. On top of the massive energy support plan, it involves sweeping tax cuts the chancellor says will boost economic growth and generate increased revenue without involving spending cuts. There are few details on the costs or the impact on the government’s own targets for reducing deficits and borrowing. Over the weekend Kwarteng hints at more tax cuts to come.

Monday 26 September: The pound falls to an all-time low against the US dollar. The cost of borrowing for the UK rises sharply amid turmoil on financial markets. The Bank of England is forced to intervene to prop up the bond market and stop a wider economic crisis. A top US central bank official warns the UK's fiscal plan could negatively impact the wider European and global economy.

Tuesday 27 September: Opposition Labour leader Sir Keir Starmer accuses the government of having "lost control of the British economy".

Thursday 29 September: Truss defends the government's tax-cutting plan, saying it is needed "to improve growth levels in the economy".

Saturday 1 October: On the eve of the Conservative Party conference, Truss appeals to voters, accepting that her plan "involves difficult decisions and does involve disruption in the short term" She insists she is doing what she believes is "right for the country", promising that the government "will keep an iron grip on the national finances".

Sunday 2 October: Truss admits she should have done more to "lay the ground"for her economic plan, but stands by her package. Opinion polls show Labour with a commanding lead as internal dissent grows within Tory ranks.

Monday 3 October: Kwarteng announces a U-turn on plans to cut the 45p rate of tax on earnings above €172,000 a year, which had been dubbed a tax cut for the rich.

Tuesday 4 October: Truss faces a fresh political rebellion after refusing to rule out cutting benefits to the UK's poorest people, in an interview with the BBC. In her speech to the party conference, she says "I get it, and I have listened" over the top tax rate, but stands by her overall plan and blasts opponents as the "anti-growth coalition".

Monday 10 October: Kwarteng says he will release the government’s detailed fiscal plans on 31 October, three weeks earlier than scheduled. The government's failure to detail how it will pay for its tax cuts has been blamed for the rollercoaster ride on the markets.

Tuesday 11 October: The government says renewable power companies in England and Wales will face what's described as a windfall tax from early next year, in another apparent U-turn.

Wednesday 12 October: The Bank of England confirms it will stop supporting the bond market on Friday. The news has caused the pound to fall further. Official figures show the UK economy shrank unexpectedly in August, reinforcing fears of an impending recession. As pressure grows on the government to explain how it intends to plug the hole in the public finances, Truss raises more eyebrows when she rules out cuts in public spending.

Thursday 13 October: World financial leaders criticise the UK's plans at a meeting in Washington, attended by Kwarteng and Bank of England Governor Andrew Bailey. Questioned on his position, the finance minister says he is "not going anywhere". Later he leaves unexpectedly early to return to London, where the prime minister has been holding talks with unhappy government MPs.

Friday 14 October: Confirmation that Truss has sacked Kwarteng follows his arrival back in London. He will be replaced by former health and foreign secretary Jeremy Hunt. Truss appears before reporters to announce a U-turn on a plan to scrap a rise in corporation tax. She says she is "incredibly sorry" to see Kwarteng go but acted in the national interest to ensure stability.

Monday 17th October: Hunt announces the trashing of Truss’s electoral pitch and economic plan in a bid to calm financial markets.

Updates:

Wednesday 19th October: Suella Braverman quits as Home Secretary and Chief Whip seemingly resigned and then stayed following a chaotic vote in the House of Commons

Thursday 20th October - Liz Truss resigned as Prime Minister - Game over, reset the pieces and roll the dice - two six's to start the game again

So its clear – the current state of chaos and financial ruin is all down to Truss?

The answer to this is “No"., but She has certainly not helped and the timeline of events laid out above is a spectacular statement of incompetence. But beyond this we are witnessing naked political point-scoring by all stripes of the political class alongside a mixture of panic by those in politics and the central banking system who seem to have convinced themselves that inflation and meaningful interest rates were things in the history books and, simple opportunism by elements of the money markets who are doing very nicely thank you from the instabilities that are currently ripping through the markets. All egged on by media outlets who seem to have little or no interest in examining the detail of the full journey by which we have arrived at this destination or the route out.

To illustrate; the opposition parties and large parts of the mainstream media narrative is to paint Britain as an outlier, a basket case, within the world in terms of its fiscal failures, but look back to January:- before the current Conservative meltdown gained real traction UK inflation was in the region of 5-6%.; but it was 7.5% U.S. and 5% in the EU. wind forward to August - the figures were; UK – 9.9%, US - 8.3% and EU 10.1%

The fact is the EU is in no better state than the U.K. with it's averged rate masking the likes of Netherlands (13.7%). Poland (14.8%) and Estonia (25.2%) the fact is many EU member states are in far worse situations than the UK.

The US has been reacting to inflationary pressure with interest rates pushing higher than the U.K. for months putting pressure on the value of the pound as its rates rose hence by September the Pound, which is linked by markets to the Dollar, in no small part as a result of the imbalance in rates had fallen from $1.37 to $1.13 and the interest rate on 30-year UK Government bonds had risen from 1% to 3.5% as the Bank of England’s base rate lagged month on month in the wake of the US Fed's actions.

Consider debt to GDP; the UK has throughout being far from the worst amongst major economic players. In short: the problems faced are not just issues for the UK and have been in plain sight long before Truss took centre stage.

Is it not the case that the Truss debacle is just the final catalyst in a situation that has been building for at least a decade. Is the actual situation that exists simply the final accounting of a decade of la-la land fiscal management?

What ever the reasons and there is a sequence of decent ones to point at; the 2008 banking crash, the COVID pandemic, the war in Ukraine, the simple fact is that the fiscal pressures are no suprise and the UK government, with the support of and encouragement of the opposition parties, have as a simple satement of fact been spending more than they took in taxes every single year for the last twenty years. Today their borrowings since 2001 total to some £2 trillion (and counting) – that is a number that stars with 2 and follows it with 000, 000,000,000 (12 zeros). A number that is hard to comprehend and translate so to make it an easier number to grasp - it' translates to around £30,000 debt for each person in the UK.

None of this seems to have settled in the consciousness of the general public whose memory of inflation and meaningful intererst rates has faded. Again is this no suprise given a 30-year-old who took out a mortgage in 2022 would have been a child when interest rates were last at historically normal levels – around 6% .

Our 30 year old example was not even born when inflation last exceeded 6% .

It is not hard to see how in this age of low interest and inflation backed by a seeming limitless government ability to create money property prices have been driven ever upwards, mortgages increased to totally unsustainable multiples of earnings and so to map how the current sudden change in fiscal temperature has created the havoc it has in such a small passage of time.

We need a serious reset and a serious policy for economic growth – reverting to the status quo of the recent past will at best kick the can a little further down the road whilst doing nothing to address the problems. Are our current crop of identikit politicians up to the task?

Unfortunately I see nothing in the current leaderships, policies of our political parties or responses of our representaive members of parliament to indicate either the willing or ability to take the steps necessary to break the current spiral of unsupportable government spending and taxation policies.

Do you?