Your October guide to the UK economy.
What a week…
The government’s fiscal package certainly landed with a bang, but not in quite the way they were hoping. Trussonomics proved too big for markets to swallow, in the context of gas pipeline interventions by Russia and swiftly rising interest rates globally. The government’s plan amounted to additional borrowing of £80bn in 2022-23 alone (£60bn of which is the energy package), with longer term additional borrowing of £45bn per year. The longer term cost is largely driven by NI, income tax and corporation tax – the recent u-turn on the 45p income tax rate saves only £2bn.
In the short-term, substantial tax cuts provide a boost to the economy, but experience to-date has not shown these kinds of tax cuts to be effective in enhancing the economy’s capacity to grow without generating inflation. Meanwhile, the supply side reforms announced – while welcome – do not appear sufficient to
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