I'm actually pleased with the mini-budget

[yubgummy]

(Cue hysterical shrieking ;) )

Macroeconomics is complex. It surprises me that within a week, there's such a strong consensus that everything about the mini-budget is literally the work of the devil. Echo chamber...

The UK basically has never recovered from the GFC and has just been stagnant and struggling for a decade. The clear theme in this budget is encouraging people to actually get out and DO something ("supply-side reform"). Tax incentives for businesses to invest in plant & machinery, reducing red tape for infrastructure investment (more North Sea licences, more onshore wind), tax cuts to base rate & NI to encourage people into work...

I would like to see more action on interest rates from the BoE, and I would like to see more detail on the Planning & Infrastructure Bill, but I want to give them a chance instead of calling for yet another change in government. Supply-side reform is a perfectly sane strategy and the UK economy does need to get moving, by which I mean, producing new and useful goods and services not just keeping the whole country on life support.

@yubgummy OP Brought the devil into discussion. I only pointed out why it’s more likely a devilish policy than a Jesus one. And Truss claims to have Christian values. Reasonable to point out that Jesus had something to say about her tax cuts for wealthy and trickle down economics policy.

And I provided some evidence to backup my point too.

Tax cuts for the wealthy and trickle-down economics? Jesus had plenty to say about that…

The moral argument is about building a stronger society through levelling up.

Truss won’t even allow scrutiny or accountability from the Office of Budget Responsibility. Maybe Truss needs some discipline?

YABU even to accuse everyone else of “hysterical shrieking”

The plan might turn out to be entirely sound and a really good direction for the UK.
The problem is that it hasn’t been costed, against all advice the tax cuts were announce without any explanation, and created a loss of confidence and a run on sterling.
Total incompetence, confidence is everything,

I thought the NI increase was reversed for many in July.

Hey worldwide governments, IMF, BoE, countless traders and bankers, hedge fund and pension fund managers, Mark Carney, renowned economists, etc. - you're all wrong - yubgummy off of Mumsnet knows the real score 😂

@Rottenapples , thank you for engaging! Appreciate the input!

I agree the timing, scrutiny, costing, etc - are all up in the air. I guess we will see in November.

Wondering if you could give your perspective as an economist, in terms of "what WOULD need to go right to make this work" - i.e. obviously there are various risks to navigate, but what's the optimistic scenario that would mean they could pull this off?

I guess BoE would need to raise interest rates, they would need to get the various infrastructure bills quickly through parliament, would they need to also actually announce spending cuts? I assume it also depends on wholesale energy prices not skyrocketing again...

I actually agree with you OP. It has the chance to work well for the country as a whole over the course of the next decade.

I also believe that if it hadn't been for Covid we would have probably seen this type of budget under Bojo. This is clearly what the Tories envisioned for a post Brexit UK.

On a personal level, it's fucking shite.

My political allegiance is Anyone But Tory and I voted remain BTW.

We’ll surely that’s the point. Cause a collapse in markets and commodities so Kwasi and his chums can swoop in and buy everything on the cheap and then sell it all back to us again at an inflated price once the markets are manipulated into rising again. Buy low, sell high, it really is that basic. Pure unmitigated greed.

They’re going to have to announce massive public spending cuts to pay for it, do you think that’s something to be pleased about, OP?

I wouldn't count on it.
Never underestimate the power of the Daily Mail on the gullible. I predict loads of headlines about immigrants will have Tory supporters flocking to back them.

You are including things that the Budget isn't accountable for.
It is not a fix-all for lowering the prices of imported goods such as food, or to lower the excessive increase in charges by the freight companies who bring food and items to our country, which in turn increases the costs of goods.

Fuel has already come down in price dramatically to what it was as its peak.

The BoE and interest rates is completely separate scenario to the budget.

Wealthy people already earning more money than they need will not be spending the money in the UK. Instead they will take another holiday abroad (which means money leaves the UK "big circle")
They still have to get abroad, using British airports, whether or not they use a British airplane company, some of their airplane ticket fee is going back to the British airport.
Plus, they're buying goods/clothes/holiday items from British retailers for their holiday abroad, using British car parks or taxis to and from the airport. All keeping people in jobs, and spending money in our own country.

or upgrade their foreign-made car (= money leaves the UK)
There's fees and charges to import cars into the UK. Also if it's a less common car in the UK, services and parts fees are higher in our garages. Hence, they're paying out more to our own car maintenance businesses, to keep their car running.

or buy more consumer goods (TVs, tablets, phones, fridges etc) few of which are made in the UK (= more money leaving the UK)
Barely anything is made in the UK anymore, but the retailer selling the goods is, who are also employing British citizens, keeping them in jobs and having the ability to increase their wages.

A weaker pound makes everything more expensive. I’m also rapidly paying down debt and am less likely to spend at the moment because the yield on my savings has improved. Great for those who have the money to save and not an inducement to spend if you can afford not to.

@yubgummy

Nothing will make "trickle down" work. It is a discredited theory that has been tried in the US and by Thatcher in the UK and it did not work. The result was the complete opposite of what was promised - the economy did not grow and the "levelling up" did not happen.

Truss and Kwarteng seem very clear about what they want to achieve. A "small state" with low taxes operating in a free market.

None of these is achievable without someone paying a terrible cost. A small state with low taxes means the destruction of public services. A limited health service, limited educational opportunities, poor council services, poor enforcement of employment and environmental laws. Basically just like America, where if you have money you can get what you want, but God forbid you should fall ill or need medical treatment, and where good housing, education and sanitation is reserved for the wealthy. Truss has no mandate for this - even "one-nation" Conservatives know that the UK population would not tolerate it.

As for the free market - when Truss talks about this she doesn't mean a free market at all. She means a rigged market, rigged in favour of the strong or the most vocal, and if necessary, rigged with the intervention of the government. When highly-skilled nurses or railway workers attempt to use their bargaining positions in order to achieve higher wages, which is what the free market should allow them to do, the government brands their elected negotiators "Union barons" and threatens them with legislation and the confiscation of their funds.

Please stop pretending like you know what's really happening, either that or you benefit from it while lower income households do not!

I'm almost scared to admit in this echo chamber, but I think you're quite right.
But people generally focus on microeconomics rather than the macro picture.

Do you mean like this…

Spain’s wealthiest British expats handed large tax cut, sparking political fury amid cost of living crisis
One unnamed British person whose Spanish villa is worth €300,000 and has worldwide investments worth €5m saw their tax bill slashed by €53,000

@CurseOfBigness It depends which Jesus you listen to.

imgur.io/gallery/bCqRp

Even if you think it's a good budget (it isn't), the comms surrounding it have been so dire that it doesn't matter. No believes these people can pull it off because the can't/won't even say how these decisions will lead to growth in a cost of living crisis.

If I were a libertarian I'd be furious my philosophy had such poor ambassadors in Truss and Kwarteng.

What exactly is in this budget which is so shocking, aside from the comms around it and the evident lack of coordination with the BoE?

The single biggest cost in it is the energy price cap - which was already announced. Next biggest is getting rid of the NI increase which Rishi only just put in, and which everyone moaned was a regressive tax which only a Tory could have come up with. Both of these had already been announced, Liz was hardly hiding her plans...

The 45p thing is only ~£2bn, vs ~£60bn for energy support. Bringing that back isn't going to save the NHS.

I'm guessing you earn a high income then OP?

They still have to get abroad, using British airports, whether or not they use a British airplane company

Almost all airlines flying from the UK are foreign owned. TUI, BA, Ryanair, Wizz etc. Most Easyjet flights are operated by their EU subsidiary. Admittedly the travellers are flying from the UK and paying UK car parking fees etc. but out of a £10,000 holiday, how much of that is spent in the UK and how much goes to the foreign airline, the hotels and the restaurants etc. abroad?

There's fees and charges to import cars into the UK. Also if it's a less common car in the UK, services and parts fees are higher in our garages. Hence, they're paying out more to our own car maintenance businesses, to keep their car running.

The UK has free trade agreements with the EU and Japan, so imported cars from these countries are not subject to fees and charges. Even brands like Hyundai, Jeep and Kia are built in the EU for the UK market. Parts fees? These are paid to the foreign manufacturer, so the UK garage doesn't profit more than if the part came from the UK. The origin of the car is irrelevant to the car maintenance business - other than to say that if UK potholes and roads get worse, there will be more work for the workshops. Perhaps that's the plan?

Barely anything is made in the UK anymore, but the retailer selling the goods is, who are also employing British citizens, keeping them in jobs and having the ability to increase their wages.

Why do you assume that the retailer is British? On line companies such as Amazon pay very little tax in the UK, even on huge amounts of UK turnover. Boots pay their tax in Switzerland. All of which again means money flowing out of the UK, reducing the amount in circulation. And selling things to each other does not grow the economy any more than cutting each other's hair does. Truss wants to cut wages and remove workers' rights - her whole theory is based on productivity increasing when "idle" British workers are forced to take any job, at any wage, in order to make ends meet.

Why have people taken on mortgages so large in relation to their earnings that they can only pay them on historically very low interest rates?

The 45p thing is only ~£2bn, vs ~£60bn for energy support.

It's not the raw cost so much as the direction of travel it symbolises. No one thinks it'll help cost of living and that's what markets care about right now.

This. People can’t see past their own (admittedly dire) circumstances. And then they accuse the government of short-termism…

Tadpoll

I guess they ha be little choice if they need to live within a sensible commute time to work , or end up losing a job or getting I'll r divorced

Yes sone will have been stupid but many are just trapped by circumstances