This week we saw Liz Truss go back to the future as she dusted off Margaret Thatcher’s policy solutions to try and fix the UK economy.
Truss and chancellor Kwasi Kwarteng have opted for huge tax cuts as their method of jolting the UK into growth and these policies come straight from Thatcher’s playbook. However, the UK is no longer a high-tax economy with a very rigid labour market. Had Thatcher been in power today, would she have applied her 1980s’ policies to an economy that looks very different and faces a host of different problems?
Markets reacted badly to the chancellor’s announcements as gilts sold off sharply on the prospect of the huge increase in government borrowing needed to pay for the tax cuts. Equities have also fallen on the back of a drop in services and manufacturing output and depressed consumer confidence. Truss and Kwarteng are gambling that their tax cuts are strong enough to power the UK’s flux capacitor and generate sufficient future economic growth to cover their short-term cost. So far the time machine has managed to push sterling back to levels last seen in the early 80s.
For the following stories, please click on this link*
- UK– Kwarteng’s tax cuts send shock waves through markets
- Rates – Central Banks take concerted action to tackle inflation
- Currencies: Rising dollar causes problems around the world
(*Please note, The contents of this e-shot been prepared for general information only. It does not contain all of the information which an investor may require in order to make an investment decision. If you are unsure whether this is a suitable investment you should speak to your financial adviser. This information is not guaranteed to be correct, complete, or accurate. FE Research is a division of Financial Express Investments Ltd, registration number 03110696, which is authorised and regulated by the Financial Conduct Authority (FRN 209967). For our full disclaimer please visit www.financialexpress.net/uk/disclaimer. Data Sourced from FE Analytics, and Bloomberg Finance LP.)
