Politics: untax the rich

By Richard North - September 24, 2022

As a direct result of Kwasi Modo’s not-a-budget, the lovely Nicola Shaw, the newly appointed CEO of Yorkshire Water, is at least £80,000 better off, without so much as twitching a muscle.

Meanwhile, the Guardian’s John Crace has discovered the third law of politics, or a variation of it: “Every time you think the government couldn’t possibly sink any lower it finds new, creative ways of doing so”.

The first law of politics, of course, is never trust a Tory. The second is: always obey the first law. Under the circumstances, this seems sound advice, not least because The Replacement’s idea of “trickle down” economics is to make the rich, such as Nicola Shaw, that much richer, with a five percent cut in the upper band of income tax, while awarding the plebs a mere one percent – which the super-rich also enjoy.

Another result of the giveaway not-a-budget was to spark a £411 billion borrowing surge which immediately triggered a run on the pound – crashing it to its lowest level against the dollar for 37 years. This triggered talk of the Bank of England needing to meet in emergency session and the markets betting on a full one percent hike in interest rates.

Further interest hikes would almost certainly drive up inflation – and mortgage rates – wiping out any relief the plebs might have gained from Kwasi’s modest generosity. This will leave them reliant for any actual financial improvement on the mythical trickle-down effect and the growth in GDP that is supposed to happen, of which The Replacement is so gripped.

But what is so startling about this not-a-budget is that the summer of droughts and outrage over fat-cat water company CEOs has passed without making the slightest impact on The Replacement. Not content with enriching still further those self-same fat-cat CEOs, she has given Kwasi the go-ahead to lift the cap on bankers’ bonuses.

As Freedland in the Guardian observes, the generosity towards the amply blessed has been “breathtaking” – as if the number one problem confronting Britain today was that bankers aren’t rich enough.

Obviously, it’ll be Cristal magnums all round in the City, he writes, but Labour HQ should also raise a glass: they’ve just been handed an attack line that cannot fail. The Conservative predecessors of Truss and Kwarteng had no principled objection to letting bankers receive telephone-number bonuses but held off because they knew the optics were so screamingly awful. The new duo has no such restraint.

They have delivered the biggest tax cuts in half a century, outstripping the landmark Nigel Lawson budget of 1988 – and their largesse is aimed squarely at the top, he adds. Kwarteng decided it was those in the highest tax bracket who needed help, so he abolished the top rate altogether. That will hand an average £10,000 to the highest-earning 600,000 people in the country: literally the one percent.

It comes to something when the Guardian has a better take on Tory politics than the Tories themselves, but as the iron grip of inflation and increased energy charges drives more and more into the slough of poverty, this rich persons’ giveaway plus the future publicity on six-figure bankers’ bonuses will cast a political cloud which will make the end of days look like a summer storm.

Whether he realises it or not, Kwasi Modo has written not only The Replacement’s political obituary but had driven a nail deep into the coffin of what is left of the Conservative Party.

That much is so evident that even some Tory MPs have noticed, with some slating the not-a-budget as “politically toxic and economically dubious” – signalled by the distinct lack of enthusiasm in the government benches when Kwasi delivered his speech.

Observers noted that the normally ebullient benches that roar behind a chancellor as they make a fiscal statement to the Commons were more hushed yesterday. Several present said few order papers were waved and there was only a smattering of comments of “hear, hear”, allegedly orchestrated by party whips.

Cited by the Guardian, an anonymous Tory MP said: “I completely despair, because I’m a member of a party that stands up for the squeezed middle not the very rich”.

In what was seen as a sign of the level of discontent, several Conservatives rose in the Commons chamber to aim barbed and hostile interventions at Kwasi. Mel Stride, the chair of the Treasury select committee and former campaign manager for Rishi Sunak’s leadership bid, said there was a “vast void” in the mini-budget.

Stride criticised the Treasury’s refusal to publish fresh economic forecasts from the Office for Budget Responsibility based on the measures unveiled this week, saying the markets were getting “twitchy” and “now is the time for transparency” to “provide a calmness”.

As the pound fell further against the dollar, the former attorney general Jeremy Wright said growth depended on confidence, and that would “evaporate” if the benefits of tax cuts were outweighed by mortgage repayments rising due to higher interest rates.

In fact, for many, any future benefits from Kawsi’s largesse have already been wiped out by the interest rate rise delivered this week by the Bank of England.

And, despite media twittering over The Replacement’s energy package, not enough has been made of the singular fact that household energy costs have more than doubled since October. The modest tax relief for the plebs, on offer from the chancellor, doesn’t even catch up with existing price increases.

Such is the magnitude of the own goal perpetrated by The Replacement and her chancellor that Matthew Parris – not exactly a Miss Trussed fan – is having a field day.

“Huge opportunities rarely come dressed as huge opportunities”, he writes, but then expresses doubts on whether Labour can rise to the occasion. If they are brave, he says, Starmer and his shadow chancellor, Rachel Reeves, could now risk sounding the trumpet for good housekeeping. “Never in my lifetime”, he adds, “have the gods of politics offered Labour such a chance to shame the Tories as fiscal bed-wetters”.

Today’s breezy statement by Kwasi, he avers, a bull in a budgetary china shop, “presents the opposition with an opportunity to outflank the Tories on the side of prudence. Yes. Labour, prudence. Tories, spendthrifts. That way round”.

Even the paper so often called the Torygraph has its moments, warning that the not-a-budget has done little to unite the Tories. If Miss Trussed had hoped it would prove enough to unite the Conservative Party behind her, she only had to look over her shoulder in the Commons chamber to get her answer, it tells us.

The failed leadership candidate, Rishi Sunak, the man who dismissed her economic plan as a “fairytale”, was nowhere to be seen. Having spent much of the week chewing the fat with MPs in Parliament’s tea rooms and cafes, he stayed away from his rival’s big moment. Says the paper, the sight of Sunak cheering or even nodding from the backbenches would have been a powerful signal to his supporters to get behind Miss Trussed.

Instead, we are told, his absence confirmed what Tory MPs already knew – the prime minister is on borrowed time as far as a large rump of the parliamentary party is concerned.

“People will keep their mouths shut for now”, one Sunak supporter said. “But she has just taken one of the biggest political gambles since the Second World War – and she is doing it without the support of a lot of MPs who backed others for leader, and even without the support of some of her own people”.

“The fact is that if this plan fails it will burn the Conservatives’ reputation for economic competence for an entire generation. It feels existential”, this worried Sunak supporter concluded.

Needless to say, the economic hoodlums of the IEA are delighted, which is as good a condemnation as you will probably ever get. With recession already baked into the economy, the only way is down, and the Trussed has gambled her political future away.