Analysis: We Are All Guinea Pigs In Kwasi Kwarteng's Economic Experiment

The chancellor announced huge tax cuts for the well-off as he bet the farm on growth.
Kwasi Kwarteng has announced huge tax cuts for the rich.
Kwasi Kwarteng has announced huge tax cuts for the rich.
Tim Raggett

Liz Truss wasn’t bluffing when she said she was willing to make “unpopular” decisions.

Make no mistake about it, her chancellor Kwasi Kwarteng’s announcement of tax cuts for the rich is a huge economic experiment - and potentially politically toxic.

Treasury sources say it’s all about “growing the size of the pie”, or the UK economy as a whole, which in turn will create - they hope - more jobs, higher wages, increased tax receipts and better public services.

But the main headline from the not-so-mini-budget is the huge tax cut for the rich, which will see 660,000 higher-earners pocketing an average £10,000 a year.

Or, to put it another way, if you are lucky enough to earn £1 million, the chancellor has just cut your tax bill by £55,000 - which is twice the UK average wage.

Trying selling that one to Red Wall voters.

Chuck in the lifting of the cap on bankers’ bonuses and no wonder one Westminster insider dubbed it it “a budget for fat cats”.

Treasury sources were, unsurprisingly, eager to point to the fact that the basic rate of income tax will be cut to 19p from next April.

“The entire country has received a tax cut today and everyone will benefit from economic growth,” said one.

But with no analysis by the Office for Budget Responsibility, we have no way of knowing when - or if - Kwarteng’s gamble will actually pay off.

That means everyone in the country is now effectively a guinea pig in the “new” government’s economic experiment.

For all our sakes, we’d better hope it pays off.

Close

What's Hot