Kwasi Kwarteng had a dream. In it a young blonde girl asked him to put his head into the mouth of a large cat. As in many dreams Kwasi did as he would never do when awake and inserted his head. He must now be troubled by that dream and the portents it relayed on an almost hourly basis.
How is it that almost everyone else in this fine but knackered land of ours can see that everything that has happened (presumably in slow motion for Mr Kwarteng, but in psychodelic fast-forward for the rest of us) was totally predictable, but he and his boss don't get it? Oh, to be a fly on Rishi Sunak's wall right now.
The pound is no longer welcome in the States. Instead we are asked to take tubes of sugared sweets, bangles and brightly coloured pencils and to brush up on our bargaining skills when we visit the other side of the Pond. Also, as the dream turned nightmare continues for the Chancellor, the International Monetary Fund (IMF) are today (Wednesday 28 September) urging the Government to “re-evaluate” their tax cutting plans, warning that the “untargeted” package threatens to stoke soaring inflation.
What the IMF and the rest of us don't understand is how the Treasury and the Bank of England can so obviously be tugging at opposite ends and in contrary directions of the same piece of rope. What is it to be? Fiscal tightness or largesse in the hope it will attract growth in the (what?) medium- to long-term. Yesterday the Fund issued a statement saying: “Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture. It is important that fiscal policy does not work at cross purposes to monetary policy.”
Yet that is what is happening in Great Britain at the moment. Presumably Kwasi Kwarteng told the Bank of England what he was planning to do in his mini-budget last week? The Mirror and bonny presenters on Good Morning Britain seemed to know what was going to happen and their sources must, at some point, drink in the same establishments. Why didn't the Bank act in tandem with the Government's financial outburst and raise interest rates by 1 per cent on the same day, to reassure markets and dampen inflationary pressures?
Janet Yellen, the American Treasury Secretary, said yesterday that the financial turmoil of recent days appeared to be confined to Britain rather than spreading to the global economy and that financial markets that had sold off sharply were “functioning well”. That must be music to the ears of the Government financial team at Team UK.
Catherine Lewis La Torre, acting chief executive of the British Business Bank, said it was planning for how it could help make up for any future shortfall in small companies’ funding. She pointed to the need for equity support for businesses rather than debt, given the threat of higher interest rates. She pointed out that smaller businesses struggle to get financing in difficult times, also warning that an economic downturn would probably lead to an increase in defaults on loans under pandemic schemes.
Back to Kwasi's dream. How does he pull off what most think is the near impossible? How does he kill inflation but stimulate growth at the same time? Exporters are pleased that the pound is so weak, but businesses need certainty and the messages emerging on a daily basis suggest the Government are not in control of policy beyond next weak. It appears they are pulling levers, scrunching up their eyes and then opening them gradually to see what the effects of their actions are.
Should Kier Starmer be buying a new suit?