During the economic crisis of 1964, prime minister Harold Wilson memorably remarked that a week is a long time in politics. In the economic crisis of 2022, we could perhaps update the saying – a weekend is plenty long enough to machine-gun yourself in the foot.
As Monday came around this week it became clear that Friday’s mini-Budget was a major catastrophe. The horrified market reaction led to a substantially devalued pound, sharp criticism from the International Monetary Fund, government borrowing costs raised higher than those faced by Italy or Greece and the prospect of a large upward shift in interest rates to come.
Mortgage offers have been hastily pulled from the market and everyone with an existing fixed-rate mortgage has switched from fear of their winter heating bills to frantic alarm about the looming end of their current arrangement.
The stamp duty adjustments made in Kwasi Kwarteng’s fiscal event, designed to give the housing market a boost, now seem like the optimistic bets of a sucker at a card game.
Initial reaction to the mini-Budget from the property sector had been largely warm, with many applauding Kwarteng’s focus on stimulating growth, and welcoming initiatives such as investment zones designed to foster levelling up with a range of incentives and reliefs.
But just a few days later, that sense of cautious optimism had evaporated.
That this week of market turmoil happened to coincide with the Labour Party conference is, presumably, sheer coincidence. But Sir Keir Starmer could not have dreamed of a better opportunity to portray his party as trustworthy and fiscally competent.
Kwarteng’s lack of action on business rates – mentioned only in the context of investment zones in the mini-Budget – provided another open goal for Labour. Shadow chancellor Rachel Reeves happily put that one away, promising to “cut – and eventually entirely scrap” the current system of commercial premises taxation.
In its place, she pledged a system that “will incentivise investment, feature more frequent revaluations, and instant reductions in bills where property values fall, reward businesses that move into empty premises [and] encourage, not penalise, green improvements to businesses”.
Of course, the obvious hurdle that Labour has to clear to put this or any other pledge into action is actually winning a general election, a task at which it has a poor track record.
But this week YouGov reported that 45% of voters would back Labour if an election were held tomorrow, with only 28% set to vote Conservative. The pollster added that this 17-point advantage is, apparently, “the highest Labour lead YouGov has ever recorded” since it began polling in 2001. [Update: in the latest YouGov poll, Labour has substantially increased its lead.]
According to elections expert Sir John Curtice, a Labour lead of that scale is sufficient to translate into an overall majority. And according to YouGov, a Labour majority at the next election is now expected by 35% of Britons, compared with 15% who expect the Tories to be returned with a majority.
So, should we all start pondering the likely impact of a Starmer administration on our own businesses?
Maybe. As the saying goes, a week is a long time. Nobody has a clue where sentiment – or the economy – will have wound up by the time we actually go to the polls in December 2024 or before. Plenty of time for things to get better. Or worse.