The shadow of Liz Truss’s calamitous premiership continues to loom large over the UK economy, as markets responded anxiously to Labour’s first budget in over a decade. Despite Chancellor Rachel Reeves’s efforts to chart a path of fiscal responsibility, the specter of last autumn’s disastrous “mini-budget” still haunts the halls of Westminster and the trading floors of the City.
Darren Jones, Chief Secretary to the Treasury, acknowledged the lingering trauma inflicted by Truss’s ill-fated economic experiment, telling Sky News, “I think we’ve all got PTSD from Liz Truss.” The former Prime Minister’s decision to dismiss the Treasury’s top official and bypass independent scrutiny of her tax-slashing plans sent shockwaves through the markets, the aftershocks of which are still being felt today.
A Tale of Two Budgets
In stark contrast to the chaos unleashed by Truss, Reeves has sought to reassure investors and the public alike by subjecting her budget to the rigorous analysis of the Office for Budget Responsibility (OBR). The Chancellor’s commitment to transparency and adherence to fiscal rules has been welcomed by many as a necessary step towards restoring economic stability.
We’re in a very, very different world. We’ve got verified reports from the independent OBR that say we meet our fiscal rules earlier than had been planned originally, 2027-2028, that those tough fiscal rules mean there is a fiscal consolidation and that strong approach to public spending.
– Darren Jones, Chief Secretary to the Treasury
Yet, despite these assurances, the markets have not been entirely placated. The scale of extra borrowing outlined in Reeves’s budget – an average of £32bn per year – has led to increased yields on government bonds as traders grapple with the implications of Labour’s plans. The pound, too, has fallen against the dollar in the wake of the budget announcement.
The Spectre of Austerity
While Reeves has been keen to emphasize her commitment to responsible spending, some experts have warned that her budget may not go far enough. The Resolution Foundation, an economic think tank, has cautioned that an additional £9bn in tax rises may be necessary to avoid a return to austerity measures in critical public services.
The headline budget tax rise in employer national insurance contributions is expected to impact working people, as firms curb wage increases, cut hours, and reduce profits to absorb the additional costs.
– Analysis by the Resolution Foundation
The specter of spending cuts looms large over a nation still reeling from the impact of the COVID-19 pandemic and the cost-of-living crisis. With many households and businesses already struggling to make ends meet, the prospect of further belt-tightening is a bitter pill to swallow.
The Road Ahead
As the dust settles on Labour’s first budget, the challenges facing the UK economy remain significant. Rebuilding market confidence, stimulating growth, and protecting the most vulnerable in society will require a delicate balancing act from Reeves and her team.
The ghosts of Truss’s legacy may yet haunt the Treasury for some time to come, but the Chancellor remains resolute in her determination to steer the nation towards calmer economic waters. Only time will tell if her efforts will be enough to exorcise the demons of the past and secure a brighter future for all.
