Macroeconomics: UK economy, IB Economics

Nils Pratley drives yet another stake into the heart of Trussonomics - pointing out the extent of the policy folly that the mini-Budget delivered. The policy U-turns are embarrassing and illustrate the extent to which her economic policy was built on sand. And reliant upon incompetent builders. 

He's clear that the open-ended nature of the support for the energy sector was an act of extreme folly - and he's right.  

The Guardian takes no little pleasure in highlighting those commentators who were quick to praise the mini-Budget and who are now presumably looking for large quantities of humble pie to consume. 

The Chancellor's statement on the Telegraph YouTube channel  - presumably the Prime Minister hasn't made a statement about it because (a) it would completely undermine her credibility (b) her public speaking is so wooden that it would give the impression that the UK, as well as Kyiv, was under attack by kamikaze drones. 

Faisal Islam pulls no punches. The headline says it all. 

Well, well, well.

Credibility, transparency, accountability - three keystones of successful policymaking. Does this imply that the government is going to start from scratch? And if so, what does it mean for the Prime Minister's credibility?

Well I never, another U-turn. I've lost count of how many have been made in the last fortnight. However, it seems as though the cut in corporation tax announced in the mini-Budget to 19% is going to be reversed and returned to 25%. 

Who would have thought it. Well, the markets have - it seems as though bond prices and yields and foreign exchange markets have already factored in yet another U-turn. 

According to some, he's the most intellectually-gifted Chancellor since Gladstone. I've met him - but not Gladstone. He's not. 

And the past week may have irreparably damaged the credibility of economic policy making under the current government, and as a result reduced the likelihood of achieving higher economic growth. 

Pantomime season has come early to Birmingham. 

The 45p tax rate? It's behind you. Oh no it's not; oh yes it is.

Seriously two questions remain: who advises these people? Or are they such ideologues that they formulate policy in a vacuum?

So much for an oven ready Brexit: it seems that the Prime Minister had scarcely got Brexit out of the boot of his car, and come nowhere near to reading the cooking instructions. This article details government U-turns on post-Brexit controls. 

Businesses think that the government has made one U-turn too many. They should try working in education - either way, the impact of the coronavirus pandemic continues to adversely affect the UK economy.

Wowsers! Here's what the U-turn on energy prices could mean for the average household - reaching the equivalent of £4,347 per year from April to June next year before declining over the rest of the year. 

However, even though Cornwall Insight expects the price of energy to fall to £3,722 from October next year, that is nearly £2,500 more than they were year earlier. And that's going to push an awful lot of households into fuel poverty. 

"An economic Suez" screams the Guardian noting the extent to which the government's U-turn represents the most embarrassing governmental climbdown in 70 years. 

Worse still, it argues that the tenor of the new Chancellor's announcement is such that we're going to experience another round of austerity, with tax increases and cuts to public services - and, once again, the poorest and the most vulnerable being asked to bear most of the burden. 

And, for now at least, markets have given today's announcement a favourable reception. The pound is up and borrowing costs have fallen, both in contrast to the reception given to the mini-Budget.

Fairy tale economics Rishi Sunak called it: with hindsight he was right. 

The U-turn could hardly have been more complete - two-thirds of tax cuts from the mini-Budget gone and the notion of Trussonomics dead in the water, with only the rolling back of the earlier rise in National Insurance and the changes to Stamp Duty remaining. 

Are these changes going to be enough to restore the government and the Prime Minister's credibility though? I'd doubt it.

Philip Inman looks at the mini-Budget and other tax cuts that might be on the point of being reversed and what this might mean for public finances, and the Chancellor's reputation. 

If the CEO of Royal Dutch Shell is suggesting that windfall taxes are inevitable, then you'd have to say that it's likely to happen. 

And given that the current government has such a penchant for U-turns, and seems to need increased revenues to help fund tax cuts, I wouldn't be at all surprised to hear the screeching of brakes. Again.  

It seems that the U-turn on the 45p tax rate has been well-received by markets - although it only accounts for £2bn of the tax cuts offered in the recent mini-Budget.

It seems to have both stabilised the pound and reduced government borrowing costs - both important as far as economic stability are concerned. 

However, I suspect that the political damage has already been done - and frankly the fallout is well-deserved. It goes down as one of the most thoughtless policy interventions in my lifetime. 

They're not for turning. Yet.

Policymaking is an intricate and tricky thing. However, to have had such an effect within three weeks of coming into office is unprecedented in my lifetime. 

And then you have the great question: how should the current government react? Hold their nerve? Or perform a U-turn? 

Both are fraught with difficulty, with every day that the government chooses the former, making any future loss of credibility from the latter ever greater. 

The Guardian argues that the U-turn over the furlough scheme has failed to save a number of jobs that otherwise would have been protected, noting the record rise in redundancies in the last quarter.

That said, it seems that it's quite a tough case to argue - only 33,000 people were removed from company payrolls last month - although the Bank of England do expect unemployment to reach nearly 8% next year.