Blink and you’d have missed them, but a year on from Liz Truss and Kwasi Kwarteng’s widely derided clanger of a ‘mini Budget’, housebuilders and estate agents are still reporting the aftermath. Imagine if the former prime minister and chancellor had unleashed a ‘maxi Budget’?
Truss’s fleeting tenure at No 10 was marked by two traumatic events: the death of the Queen and what briefly felt like a near-death experience for the housing market. Her Late Majesty endured 15 PMs across her epic 70-year reign, while Truss achieved what none of her predecessors since Sir Winston Churchill had, serving two monarchs, in her mere 45 days in power.
The fiscal statement, more accurately titled ‘The Growth Plan’, was delivered by Kwarteng on 23 September. It was bold stuff, delivered in the aftermath of Covid-19, the Russian invasion of Ukraine and the consequent cost-of-living crisis, centring on £45bn of tax cuts. Financial markets took fright on the assumption that these were unfunded: the pound tanked and government borrowing rates soared, requiring lenders to withdraw swathes of mortgages, replacing them with more expensive products. Shares in some of the biggest housebuilders slumped by more than 20% over the following week.
Kwarteng has all but disappeared from polite society, but in recent days Truss has been attempting to mount something of a comeback tour ahead of her soothingly titled book, Ten Years to Save the West.
In a speech at the Institute for Government think tank this month, she conceded that “she tried to do things in a rush” (an understatement, having been elected as leader a mere 18 days earlier) and that she could not deliver her and Kwasi’s vision due to the “political and economic establishment” (she might have a point there, particularly regarding the Treasury).
Head in the sand
But her bigger miscalculation by most accounts was refusing to allow the Office for Budget Responsibility (OBR) to publish an accompanying economic forecast. It was a bit like avoiding your friends spilling the beans on what happened in the finale of Succession by sticking your fingers in both ears and loudly singing “na, na, na, naa-naa”. She really should have allowed it: the OBR’s record for prescience is far from consistent.
But, a year on, the spectacular rise and fall of ‘Trussonomics’ has become a bit of a catch-all excuse in housebuilders’ and agents’ trading statements. Almost all the plans – including cutting basic income tax from 20% to 19%, the controversial removal of the top 45% tier and the reversal of the planned hike in corporation tax from 19% to 25% – were binned within weeks.
The reality is the housebuilding market started chugging along relatively nicely three months later, albeit with the help of incentives such as Persimmon’s Boxing Day offer of 10-month interest-free mortgages. That brief run was stymied around May when inflation and Bank of England rates started climbing, with would-be buyers apparently opting to take the plunge on a foreign holiday instead of a new home.
Inflation rather than unfunded tax cuts is now the focus for the ever-fickle financial markets. Ten-year gilt yields have been yo-yoing with every shred of inflation data – with housebuilders’ shares going in the opposite direction – but they’ve been at or above the post-Truss highs in recent weeks. Inflation data this Wednesday showed a fall from 6.8% to 6.7%, when most economists had expected 7.1%; gilt yields fell and housebuilders soared in the hope that the following day’s Bank of England decision just might show a pause in rate rises.
We’ll never know whether, had they employed a bit more timing and presentational savvy, the star-crossed leavers could have delivered the super-charged growth through tax cuts (lest it be forgotten, a key ingredient in Ireland’s economic success). A few ‘Liz Truss was right’ polemics are now surfacing, not least from Ms Truss herself.
But sometimes it is convenient to keep a derided ex-PM forever in purgatory. Earlier, in 2022, the FT’s Robert Shrimsley penned a column, ‘Why nothing can redeem Neville Chamberlain’ – a byword for cowardly appeasement of the Nazis in the 1930s. Historians have attempted to paint a more nuanced picture of a realistic and canny operator, he mused, but as a nation we’re always going to cling to the Churchillian legend than any Chamberlainian fact.
For companies or politicians, it’s always useful to have a handy scapegoat. Shrimsley concluded: “There is no way back for Chamberlain. He is simply too useful as he is.”
Alastair Stewart is an equities analyst and consultant