Britain’s economy has been left exposed by the latest mini-budget announced by Prime minister Liz Truss and Chancellor Kwasi Kwarteng, said an expert in a scathing op-ed. The UK’s financial situation has been going through turmoilr following the pound crash and pension funds on the brink of a collapse.
Scholar Phill Mullan wrote for Spiked that the budget introduced by the UK Government has triggered the economic crisis and “brought the UK economy’s underlying fragilities to the fore.”
He wrote: “Financial turmoil was always going to break out at some point, somewhere, especially since central banks across the world started to change tack from monetary easing to tightening.
“For more than a decade now, central banks have turned to ultra-easy monetary policies – from vast amounts of quantitative easing to keeping interest rates near zero – in order to prop up their ailing economies.
“This has spawned a number of asset bubbles and has encouraged the public and private sectors to take on ever more debt.
“Until this week, this debt had sustained a zombie economy – an economy simultaneously dependent on debt and handicapped by it.
“This situation could never have gone on indefinitely, without some form of upheaval, whether small or large.”
However, Ms Truss has admitted that there has been “disruption” in the UK economy following the mini-budget.
After unveiling £45bn of tax cuts funded by borrowing, last week the pound slumped and the Bank of England spent billions shoring up pension funds.
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Writing in The Sun, the PM insisted the Government had “acted decisively” to help people with the cost of living.
However, the announcements were not accompanied by the usual economic forecasts, which spooked investors.
Talking about the future, Mr Mullan said: “For now, it is too early to say if this week’s financial instabilities could escalate, either in Britain or even further afield.
“It is also too early to know if further rises in interest rates from the Bank of England, which are now widely expected, could cause debt-dependent businesses to collapse.
“This would, of course, have broader consequences for jobs, incomes and living standards.”
Last week, Chancellor Kwasi Kwarteng set out some of the Government’s tax and spending plans, including support for people facing high energy bills and a surprise announcement that it would scrap the 45 percent highest tax band for high earners.
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However, his mini-budget was not accompanied by a forecast from the OBR, something which helped to fuel market turmoil.
Writing in the Telegraph, the Chancellor insisted it would include a “credible plan” to get the public finances back on track, with a “commitment to spending discipline”.
“The British taxpayer expects their government to work as efficiently and effectively as possible, and we will deliver on that expectation,” he said.
Mr Mullan continued: “Assuming that Truss and Kwarteng are serious about reviving productivity growth, what could they do differently?
“The first thing they need to do is to bring ordinary people into the economic discussion. There is no easy or pain-free solution to Britain’s current economic malaise.
“A serious and responsible government would initiate a national conversation about both the underlying causes of Britain’s economic stagnation – in terms of fiscal, monetary and regulatory policies – and potential solutions.
“Most politicians may be reluctant to do this, when so many of their own policies are implicated. But given Truss’s many promises to break from past economic orthodoxy, an opportunity has been missed here.
“Britain’s economic problems are huge. We cannot just rely on emergency government interventions to stabilise the markets and offer relief to troubled households.
“We need root and branch reform of the UK economy, and to make it happen, we’ll need to bring in as many people as possible into that conversation.”