The Guardian view on the UK economy: old folly or new folly
A fool repeats his folly, the Old Testament suggests, in the same way that a dog returns to its own vomit. Kwasi Kwarteng seems determined to prove that this is true. On Friday he made two false claims about his short tenure at the Treasury. The first is that his 23 September mini-budget was not a cause of the government’s current financial woes. The second is that Liz Truss forced the pace on economic policy too hard during her brief period as prime minister, while Mr Kwarteng, even more briefly her chancellor, argued for a slower approach.
Neither claim stands up. No one pretends that the mini-budget is uniquely responsible for the high levels of UK public debt that are now being invoked as the justification for next week’s looming autumn statement. There are many other large causes, some of them global, like Covid and energy costs, and others closer to home, including Brexit. The mini-budget, though, made things even worse. It triggered a run on the pound, a lurch in gilts, a Bank of England buyup emergency and a tightening of the mortgage market. It says a lot about Mr Kwarteng and Ms Truss’s doctrinaire wing of the Conservative party that, even now, they remain in denial about something the voters understand more clearly from their own experience than these discredited ministers ever did.
Ms Truss and Mr Kwarteng undoubtedly had disagreements about particular emphases in their dash for growth.
The fact that each has now tried to dump the blame for what went wrong on the other suggests that. But the two of them were co-owners of the policy, and were joined politically at the hip. Mr Kwarteng cannot escape the reality that, on the eve of the Tory party conference, he told the BBC’s Laura Kuenssberg that there were more tax cuts to come. That was said as a boast, not a warning – and it spooked the markets. Mr Kwarteng is shabbily trying to evade responsibility for the calamity of his own actions. Once again, the voters will be the judge of that.
While Mr Kwarteng spins his selfserving version of the past, the rest of the country faces the future that he and his party have bequeathed. On Friday the Office for National Statistics confirmed that the UK economy shrank in the third quarter by 0.2%. The service sector, once an engine of growth, has ground to a halt in the face of the cost of living crisis. Higher interest rates and record inflation mean the economy will shrink further by the year end, tipping Britain into an official recession that is
likely to last through 2023.
There was also confirmation on Friday that Britain has brought some of its troubles on itself. So far, it is the only country in the G7 group of leading economies whose economy has shrunk in the third quarter. All the G7 countries face the same global headwinds as Britain. The US, Canada, France, Italy and Germany, though, are all still growing. The conclusion is obvious. Britain’s particular predicament reflects the particular choices that it and its governments have made.
Jeremy Hunt, the latest of the four chancellors that Britain has burned through this year, takes a more orthodox Treasury view than Mr Kwarteng. His autumn economic statement will nonetheless be the defining financial and political moment of the Rishi Sunak government. Next Thursday will show whether it has learned the lessons not just of Mr Kwarteng’s dash for growth while Mr Hunt was on the backbenches, but also of the prolonged austerity under George Osborne when Mr Hunt served as a senior member of cabinet. The omens for change are not good. But the chancellor should remember that the best alternative to one sort of folly is never to embark on another sort.