The response from shadow chancellor Rachel Reeves, after new chancellor Jeremy Hunt gave his “economic update” to the Commons on Monday, perfectly captured the calamity created by September’s mini-Budget.
“There is lasting damage which these policy U-turns will not change,” Reeves said. “They have set fire to everything; now they insist it is all fine. The truth is that an arsonist is still an arsonist even if he runs back into a burning building with a bucket of water.”
We can only assume that her words were inspired by the popular internet meme that shows a cartoon dog in a trilby, sitting at a table with a mug of coffee, surrounded by searing flames and billowing smoke. “This is fine,” declares the dog, in defiance of the reality around him.
Prime minister Liz Truss and her dwindling band of backers have tried to wave away the flames, but the rest of us must somehow deal with the heat.
The latest inflation figures from the Office for National Statistics confirm that consumer price inflation reached 10.1% in September, equalling the 40-year peak seen in July. September’s inflation figure matters more than most because it provides the benchmark against which policies for the subsequent tax year are set, from April.
Much of the mainstream media commentary has focused on whether pensions and benefits flowing out of the public purse will rise in line with 10.1% inflation next year. Within property, the hot topic is whether money drawn into the public purse via business rates will go up by the same proportion.
Real estate adviser Altus Group calculated that a 10.1% hike in rates would add more than £2.7bn to England’s 2023-24 rates bill, which without intervention will rise to £29.6bn in the next tax year. That sum will be clawed from the coffers of shops, pubs, restaurants and cafés, as well as factories and offices. Or more accurately, it will be gathered from those that manage to keep the lights on over the winter and are still trading come April.
To date, there has been little word from the Truss administration on the chances of any business rates adjustment. Chancellors Kwarteng and Hunt have had other preoccupations, as we have seen.
But perhaps, if he gets a minute, Hunt might reflect on another figure from the ONS, published on 7 October. It recorded that company insolvencies across England and Wales in the second quarter of this year stood at a level last seen in 2009, in the wake of the global credit crunch. In August, the ONS relayed, more than one in 10 businesses said their risk of insolvency was moderate to severe.
Business failures in accommodation, hospitality, wholesale and retail reached their highest levels since 2012, when sector-level data began to be gathered by the Insolvency Service.
Hunt’s decision to scrap a proposed freeze on alcohol duty has added further pressure on businesses in the hospitality sector.
Whatever the soon to be ex-PM and her chancellor do from here, Reeves is unarguably correct. U-turns sometimes save political skins, but they can never turn back the clock. The shock delivered by the failed mini-Budget still reverberates, in pension funds, share prices, exchange rates, borrowing costs and business confidence.
The economy is still ablaze. If only the heat were real – it might help with those crippling fuel bills.
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