Five things to watch out for in the mini-budget | Sam Coats | Politics News
Every minute Kwasi Kwarteng is up at the dispatch box on Friday – and he is expected to speak for at least 20 – the Chancellor will cost the taxpayer at least £2billion.
Accompanied by a few pages of Treasury costs — but no formal forecast from the Office of Budget Responsibility — the unusual weekend session could determine whether or not Liz Truss’s premiership is successful.
As politics resume at full speed, here are five things to watch:
The Chancellor will present his mini-budget at 9.30am – watch and follow live
New ministers tell their predecessors they were wrong
Without naming names, Mr Kwarteng’s statement will make it clear that Boris Johnson’s government must bear a great deal of responsibility for the country’s ills.
Team Truss believes that the direction needs to change, that their mission is clearer, their communication strategy more precise and the ideological purpose more obvious.
The new Number 10 – who, ironically, has more than a decade of cabinet experience – believes the May and Johnson years pursued the wrong goals, lacked focus and led the country to suffer from levels of declining growth for most of the past decade. .
“Friday is about defining a new approach to the economy,” a government source said bluntly.
“The approach so far has not worked.”
Not a good time for former Tory chancellors, who are said to have failed.
This should come as no surprise to keen observers of the new Truss administration – during his reshuffle, the new prime minister made it clear that loyalty trumps competence.
Two weeks ago, on his first day as prime minister, Rishi Sunak supporter Grant Shapps approached Ms Truss to see if he would stay on as transport secretary.
As she set out the reasons for her dismissal, she nevertheless told Mr Shapps that he was ‘one of the most capable secretaries of state in the government’ and ‘probably the best communicator in the government’ – but because that he did not support her, there was “No room at the inn”.
That judgment ricocheted through conservative ranks, inflaming already bubbly anger over some reshuffle decisions.
Friends of Mr Shapps, however, suggest he is more stolid than most, appreciating the direct approach and expecting to be back in government before long.
But the message was clear – Truss wanted to surround himself with believers.
The new A-Team gets to work
The government has a new central mission: to ensure “trend” growth of 2.5% in the medium term.
This is defined by a new “economic quadruple” – a quartet of ministers who determine how to get there.
Sitting alongside the prime minister at these meetings is his chancellor, Mr Kwarteng, a long-time colleague, ideological ally and fellow Greenwich member based in south-east London.
There is also Leveling Secretary Simon Clarke, whose importance to this administration should not be underestimated as the architect of the comprehensive strategy known throughout Whitehall for the confidence of the new Prime Minister.
Business Secretary Jacob Rees Mogg attends most meetings, but not all. Sometimes, Deputy Prime Minister Thérèse Coffey is there too or in place of the others.
This is where the new plan for Britain is hammered out at top speed. For some economists and supporters of his rival Mr. Sunak, this is unorthodox.
High Bank of England interest rates are a problem
Mr Kwarteng will use Friday’s growth statement to follow through on well-followed campaign promises to reverse the rise in corporation tax and reverse the rise in National Insurance, now likely coupled with cuts in human rights stamp, together costing tens of billions of pounds.
This is all designed to fuel economic growth to try to avoid a post-Ukraine, post-Covid downturn or recession.
But while the government is borrowing tens of billions to stimulate primary growth and increase demand, the Bank of England is doing the opposite, raising interest rates sharply this week to dampen demand and reduce inflation – currently at five times the official target of 2%.
Let’s take a political example: this week, the government will borrow billions to fuel the housing market with a reduction in stamp duties.
It will be announced 24 hours after the Bank of England made mortgages more expensive with an interest rate hike, locking millions into variable rate deals and those with fixed rate deals ending in the financial misery.
“I have no way of explaining this or reconciling these things,” said a Whitehall official involved in the talks.
Ministers – who privately worry about high interest rates – need a better explanation than this.
It’s all about deregulation – just look at the investment zones
Friday will see another sea change in political direction in the middle of Parliament and an iconic Truss policy will demonstrate this – the ‘investment zones’, which will be at the heart of his new ‘leveling up’ vision.
These mutant and more radical descendants of the free ports will be installed in 40 regions of the country. Here, lower environmental and planning standards mean development could be cheaper and construction easier, while taxes for businesses and residents will also be lower.
Residents are unlikely to benefit from income tax reductions in investment zones, but National Insurance relief could still be passed on to employees.
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This could mark a massive transformation in parts of the country, depending on their size – in theory a new investment zone could cover an entire region of the town hall the size of Greater Manchester, although initially most should be part of council areas.
It will also depend on the large number of rules and regulations that residents and local businesses inside these areas will no longer have to follow.
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Any attempt to abandon environmental and planning rules has led to rebellion at local and national level. Will the new investment zones be a means of circumventing the communes and the Parliament to avoid such an outcry during the concreting of the countryside?
MPs have been called by ministers over the past two days to tell them their constituencies have been chosen, even before the policy was officially announced, such is the rush to prepare some of them for a photo op at a party conference in less than a fortnight.
Ms Truss wants to appear, shovel in hand, possibly standing next to West Midlands Mayor Andy Street in one of these newly announced areas, making it clear what she stands for.
Tees Valley Mayor Ben Houchen, long a Tory favorite in Johnson’s time, has vehemently backed Mr Sunak so he may be a lesser recipient of government largesse and favors this year.
Already 40 councils have been approached to be involved, and most are likely to say yes.
Suffice it to mention that from 2010 to 2015 David Cameron’s coalition government – of which Ms Truss was a member – also created ‘enterprise zones’, although they died out years later with little apparent lasting success or benefit.
If Michael Gove did it, expect him to be undone
Boris Johnson’s ‘upgrade’ slogan may have survived, but what it means in practice has already changed.
All over Whitehall, Johnson and Gove the plans for the era are being abandoned, nowhere more actively than at the Department of Leveling Up where the more commanding philosophy of interventionism, raising living standards and strengthening public services, is replaced by an approach centered on deregulation.
Some are now suggesting that Mr Gove’s plans – worked until his sacking as upgrade secretary in July – look like ‘socialism’ compared to the Truss team’s new approach.
The Johnson-era Leveling and Regeneration Bill before Parliament – an assortment of measures to track improvements in local communities and improve local democracy – is about to be gutted.
Areas like Oxford and Cambridge – which Mr Gove said could attract private investment without government help – could even now become investment zones. The Blue Wall could benefit from it.
Other Gove pet projects through the ages could also be disbanded. High schools – which he kept under control as education secretary – are now set to grow.
The strong affinity with the American government, which he has always advocated, is now being put to the test. His approach to post-Brexit green issues since he was environment secretary could be undone.
Nothing he touched is particularly safe.
Will it work? It depends on three groups – voters, Tory MPs and the markets.
The first did not have the chance to digest the change.
The latter are not yet in full form.
“The feeling is not mutineer,” said a Sunak supporter. “We think we’re sacrificing our economic credibility and we’ll lose, but we can’t bother fighting it at this point.”
The third audience – the financial markets – may be the most delicate in the immediate term.
Today it emerged that the cost of government borrowing rose to its highest level in August since monthly records began in 1997 as inflation pushed up interest payments on government debt.
Could the most ideological free-market government of a generation fall under the spell of investors because of the scale of their borrowing?