MAMOKETE LIJANE: Disastrous budget of UK’s Kwarteng shows dangers of policy adventurism
The Growth Plan delivered higher inflation and borrowing costs, an outraged polity and anything but growth
The UK’s newly minted chancellor of the exchequer, Kwasi Kwarteng, presented his maiden mini-budget, the “Growth Plan”, on September 23. It was ostensibly designed to give much-needed assistance, via fiscal transfers, to businesses and households negatively affected by an energy price shock. It also included lower taxes for high-income earners and corporates. The intention was to protect the UK economy from the ravages of higher energy prices, and to raise the potential growth rate of the country, still struggling with Brexit drag.
These objectives look reasonable enough, though the ideological foundations of the plan can be debated. However, Kwarteng failed to outline how these tax cuts and new outlays would be financed. Economists immediately calculated that the “Growth Plan” would mean the UK government would have to borrow 1.7% of GDP in the coming fiscal year. This, on top of the planned rollback of central bank balance sheet holdings, implied a material rise in the...
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