Spending

Truss Tories plan to cut public spending while clinging to chaos-causing tax cuts

“So now the Tories are going to cut your already shredded local services because they destroyed the economy because they want to cut taxes for the top 1%.

“What was supposed to be a simple bribe turned out to be a gigantic financial bomb.”

That’s how socialist Guardian columnist Owen Jones Wednesday abstract recent revelations about the fiscal policy of British Prime Minister Liz Truss and other Conservative leaders.

Next reports that UK Treasury Chief Secretary Chris Philp will send letters asking government departments to identify potential ‘savings’, the Tories confirmed on TV on Wednesday that they are being asked to ‘seek financial gains’ ‘efficiency wherever they can find it’.

The pressure to cut public spending came as The Guardian revealed on Wednesday that the National Health Service (NHS) – the UK’s public healthcare system – has admitted that “dangerous roofs which could collapse at any time in hospitals across England will not be repaired until 2035” .

The admission came in response to a request from the Liberal Democrats, whose health spokeswoman and deputy leader Daisy Cooper took aim at Chancellor of the Exchequer Kwasi Kwarteng’s ‘mini-budget’, which was unveiled on Friday last and includes major tax cuts for the wealthy. , financed by additional loans.

“Kwasi Kwarteng’s first budget prioritized cutting taxes on big banks over fixing crumbling hospitals. There has been a deafening silence from the government over how it has l ‘intent to deal with dangerous ambulance waiting times or a lack of local NHS dentists, not to mention buildings at risk of collapse,’ Cooper told the newspaper. “It’s an impending disaster and Tory ministers just don’t seem to care.”

The tax plan – which sent the pound to its lowest level against the US dollar in nearly four decades and ultimately led to emergency action by the Bank of England to calm markets – has been criticized in across the UK political spectrum and around the world. , including by the credit agency Moody’s.

Even Conservative MPs are voicing their concerns. BBC reports:

Few Tory MPs comment publicly on how Chancellor Kwasi Kwarteng has handled the economic turmoil caused by his mini-budget, but they don’t mince words in confidential conversations.

Inept, humiliating, naive and reckless are just some of the words that have popped up.

Perhaps most notably, the International Monetary Fund (IMF), known around the world as “a bastion of free-market economics and fiscal austerity”, delivered a rare critique of the policy on Tuesday – which Guardian Economics editor Larry Elliott called it “a global embarrassment for Truss and Kwarteng”.

The mini-budget will “likely increase inequality”, the IMF has warned, adding that the next announcement of the full budget – which Kwarteng is expected to present in November – gives the UK government “a first opportunity…to consider ways to provide support more targeted and reassess tax measures, especially those that benefit high incomes.”

Nick Dearden, director of the British group Global Justice Now, tweeted Tuesday, “When the IMF tells you, ‘Wait guys, it’s going to be so bad for inequality that we need to rethink’, you have a serious problem.”

Economist and former Greek finance minister Yanis Varoufakis said the IMF and the US Federal Reserve feared the UK would “trigger a financial crisis” by doing to the US and other wealthy countries what ” Greece has done to the eurozone”.

“The particular center of concern (…) is the impact that the destabilization of the markets in Great Britain will have on the American treasuries, in other words on the public debt of the United States”, he said. -he declares. “Because that kind of domino effect would have pretty serious repercussions for the whole world.”

Keir Starmer, the Labor leader, said in a BBC radio interview Wednesday that Truss must urgently review the budget following “very serious” criticism from the IMF, noting that November would be too late.

According to Starmer, Truss has to explain, “How are you going to fix the problems you caused…on Friday? The government caused this on the theory, the ideology that the way we fix our country is to make the rich richer .”

Other critics have also leveled broader rebukes at the Truss-aligned ideology, with some going all the way back to former British Conservative Prime Minister Margaret Thatcher.

“September 2022 will forever be remembered as the month in which the feverish fantasies of neoliberalism came into full force,” said Guardian columnist and author George Monbiot.

Referencing a London road that is home to various think tanks, one Twitter user dubbed this September “Tufton Street Massacre Month”. Monbiot agreed.

“This disaster isn’t all about Truss and Kwarteng,” Jones stress Wednesday.

“It’s the logical endpoint of a 43-year-long Thatcherite experiment – touted by Tory MPs, right-wing newspapers and think tanks – which has brought nothing but stagnation, economic turmoil and mass insecurity,” he said. he continued. .

Summarizing the chaos since last week, Guardian Columnist and senior economics commentator Aditya Chakrabortty wrote on Wednesday:

What was supposed to be a simple bribe turned out to be a gigantic financial bombshell. The pound plunged so much that it gained a new name: shitcoin. (A wag reflected on Reddit: “Apparently the britbongs use it to buy crumpets and tea, but other than that it has no use.”) Lending rates in the markets have skyrocketed, so Halifax and other major mortgage companies had to withdraw their products. The Bank of England essentially lost control of interest rates, while pension funds and other investors started looking for money. Finally, today the bank started buying government bonds in an effort to quell the panic.

A week is a long time in financial shambles. Thanks to Kwarteng and Truss, you just got a whole lot poorer. If you own a standard variable mortgage or are looking to renew, your bills have skyrocketed. If you have a defined contribution pension or an ISA on the nest egg, you probably don’t want to check your balance. The prices of almost everything from overseas, from food to t-shirts to cars, have just gone up.

Institutionally, the credibility of the Treasury has been ruined and the monetary policy of the Bank of England destroyed.

“It’s their crisis, not ours,” Chakrabortty concluded of the Tories. “You haven’t gotten those big tax cuts, unlike Tory donors. Truss can cancel his stupid, cynical budget, step down and force a general election – and Labor should demand it.”

Meanwhile, the Tory leadership shows no signs of reconsidering its course, with Treasury Finance Secretary Andrew Griffith saying on Wednesday the proposals were the “good plans” for Britain’s economy, despite mounting evidence to the contrary.

As Britain’s Tories doubled down on their controversial policies, a coalition of civil society groups launched the End Austerity campaign and warned that next year 85% of the world’s population would be living under “deadly” measures, ranging from cuts to social programs to privatization. public services.

“This recipe for austerity has been tried and failed many times,” the campaign website says, “and has only inflicted hardship and suffering on people around the world, deepening the inequality crisis. “.