The Conservative Party

[west didsblue]

All very sound and logical thinking. However, your whole argument is predicated on the assumption that the markets will continue to look negatively upon the Tories' plan. I am not at all sure that this is the case. There was an initial shock and immediate drop in the value of the pound, but that quickly recovered. You might argue that is because of expectation of higher interest rates and that may well be a part of it. But on the other hand sudden drops (or rises) in the value of currencies (or stocks for that matter) are pretty much always followed by a swift movement in the opposite direction shortly afterwards. Markets usually overreact - you see it all the time. Something will be at say 10.00 one day, some news comes in and it drops to 9.00 immediately, and then next day it's back up to 9.8 (or whatever).

I don't think you can say with any certainty that the pound won't be moving upwards over the next few weeks. The BoE said it would move further if necessary. It may not be necessary.

Seems to me people on here are VERY much too quick to throw the towel in. People were calling the plan a failure after less than 1 working day, which IMO is a ridiculous attitude. Sure, you can disagree with it in any timescale you like, but you cannot call it a failure until its demonstrated to be a failure, and at best it will take several months - a year or more potentially - until we can see whether this is working or not. New investment into the UK and new confidence in the UK isn't something that you can magic up. You might argue it's never going to happen and you may well be right. But we don't know yet.

There is no prospect of the pound going up without a rise in interest rates simply because they are proposing to increase the deficit to an unsustainable level, and the bond / gilt markets have already moved in the wrong direction which means servicing that debt will cost much more than it would have done. It's a reckless gamble by Kwarteng that a discredited strategy that has never worked will suddenly lay an egg this time. As Einstein said "Insanity is doing the same thing over and over and expecting different results". That's what Kwarteng is doing. It's insane.

 

[supercity88]

All very sound and logical thinking. However, your whole argument is predicated on the assumption that the markets will continue to look negatively upon the Tories' plan. I am not at all sure that this is the case. There was an initial shock and immediate drop in the value of the pound, but that quickly recovered. You might argue that is because of expectation of higher interest rates and that may well be a part of it. But on the other hand sudden drops (or rises) in the value of currencies (or stocks for that matter) are pretty much always followed by a swift movement in the opposite direction shortly afterwards. Markets usually overreact - you see it all the time. Something will be at say 10.00 one day, some news comes in and it drops to 9.00 immediately, and then next day it's back up to 9.8 (or whatever).

I don't think you can say with any certainty that the pound won't be moving upwards over the next few weeks. The BoE said it would act further if necessary. It may not be necessary.

Seems to me people on here are VERY much too quick to throw the towel in. People were calling the plan a failure after less than 1 working day, which IMO is a ridiculous attitude. Sure, you can disagree with it in any timescale you like, but you cannot call it a failure until its demonstrated to be a failure, and at best it will take several months - a year or more potentially - until we can see whether this is working or not. New investment into the UK and new confidence in the UK isn't something that you can magic up. You might argue it's never going to happen and you may well be right. But we don't know yet.

EDIT: You have also to consider that at some point speculators will start to think the pound is so low that buying Sterling is a good bet, and it will start to rise. Bear markets don't last forever and we've been in a Sterling bear market for the past 18 months. Ditto, many analysts are saying the dollar is over-valued and it's been on a bull run for too long.

You've got to remember what the purpose of the mini-budget was. It was an attempt to stimulate the economy and was put to the nation as something that would help everyone. What has actually happened is the rich have had a wonderful tax break, the pound has crashed and now investors will cash in on that and the pound will rise because of potential interest rates rising. If interest rates do rise, the rich win again.

The economic strategy of tax cuts for the rich is tried and tested. It doesn't work. It's the same as throwing yourself out of a plane without a parachute. I'm sure people have tried that before. It doesn't work. It won't work this time either.

The pound might recover, interest rates might not be hiked but ultimately this mini-budget will not address the issues that face the nation. And until the pound does recover, it's just caused prices to go up making costs go up for everyone. That net gain from the tax break vs. cost rise might still work out for rich people. It doesn't for the majority of us.

 

[Chippy_boy]

There is no prospect of the pound going up without a rise in interest rates simply because they are proposing to increase the deficit to an unsustainable level, and the bond / gilt markets have already moved in the wrong direction which means servicing that debt will cost much more than it would have done. It's a reckless gamble by Kwarteng that a discredited strategy that has never worked will suddenly lay an egg this time. As Einstein said "Insanity is doing the same thing over and over and expecting different results". That's what Kwarteng is doing. It's insane.

You may be right. We'll see. UK debt lower than all of the G7 except Germany and Canada, so maybe once the markets have calmed down, things might turn around.

 

[Chippy_boy]

You've got to remember what the purpose of the mini-budget was. It was an attempt to stimulate the economy and was put to the nation as something that would help everyone. What has actually happened is the rich have had a wonderful tax break, the pound has crashed and now investors will cash in on that and the pound will rise because of potential interest rates rising. If interest rates do rise, the rich win again.

The economic strategy of tax cuts for the rich is tried and tested. It doesn't work. It's the same as throwing yourself out of a plane without a parachute. I'm sure people have tried that before. It doesn't work. It won't work this time either.

The pound might recover, interest rates might not be hiked but ultimately this mini-budget will not address the issues that face the nation. And until the pound does recover, it's just caused prices to go up making costs go up for everyone. That net gain from the tax break vs. cost rise might still work out for rich people. It doesn't for the majority of us.

Perhaps I am stereotyping you and that may be unfair but you seem to be another one who is obsessed with "the rich" and how well they are doing or not doing.

The cut in tax rates for the highest paid likely was small beer in terms of overall cost to the exchequer. Hardly anyone pays it and the ones who earn WAY more than £150k per year are very often people with their own businesses who can manage their affairs in much more creative ways than saps like you and me on PAYE. So it probably makes bugger all difference to them.

There's a pretty reasonable likelihood that the tax receipts from those over £150k don't decline much at all, just like when the rate was cut from 50p to 45p. So this idea that the government have spent a fortune on lining the back pockets of their chums, is not only flawed, it does come across as being somewhat bitter. Maybe take a chill pill about it. I am not one of these rich people but I really could not give a toss, other than I am generally in favour of the government taking less money off everyone, so I regard tax cuts as a good thing in principle.

 

[The Light Was Yellow Sir]

There is no prospect of the pound going up without a rise in interest rates simply because they are proposing to increase the deficit to an unsustainable level, and the bond / gilt markets have already moved in the wrong direction which means servicing that debt will cost much more than it would have done. It's a reckless gamble by Kwarteng that a discredited strategy that has never worked will suddenly lay an egg this time. As Einstein said "Insanity is doing the same thing over and over and expecting different results". That's what Kwarteng is doing. It's insane.

I suspect it will recover once the unmandated massive cuts to public services are announced in November. The only way to avoid that is to completely u turn on the tax cuts and I can’t see them doing that. The only thing that might do it are if enough Tory MP’s vote against the tax changes, although that would lead to more time wasting on the government benches. That being said, she could then use any defeat to cut and run for an election based on tax cuts and reducing the size of the state.

As an aside though, I find it fascinating how quickly both the current members of the government and the press are trying to push the narrative that this is a brand new government that had nothing whatsoever to do with the past iterations of recent governments.

 

[paulchapo]

1.08 before the budget announcement, I think? However, irrelevant in the overall scheme of things. It might be 0.98 in a fortnight or 1.20.

EDIT: Sorry, you're right. I looked at the wrong bit of the chart.

Exchanging money is always a gamble. A week or so before I arrived here it was 1.16, when I arrived 1.12, which dropped to 1.10 after about a week. Then 1.07 after the budget. Luckily I passed a place doing 1.09 so changed a couple of hundred up. It's probably a couple of beers but better in my pocket. I should learn my lesson if it peaks at around 1.16 stock up, it has rarely gone above that since Brexit.

 

[The Light Was Yellow Sir]

Perhaps I am stereotyping you and that may be unfair but you seem to be another one who is obsessed with "the rich" and how well they are doing or not doing.

The cut in tax rates for the highest paid likely was small beer in terms of overall cost to the exchequer. Hardly anyone pays it and the ones who earn WAY more than £150k per year are very often people with their own businesses who can manage their affairs in much more creative ways than saps like you and me on PAYE. So it probably makes bugger all difference to them.

There's a pretty reasonable likelihood that the tax receipts from those over £150k don't decline much at all, just like when the rate was cut from 50p to 45p. So this idea that the government have spent a fortune on lining the back pockets of their chums, is not only flawed, it does come across as being somewhat bitter. Maybe take a chill pill about it. I am not one of these rich people but I really could not give a toss, other than I am generally in favour of the government taking less money off everyone, so I regard tax cuts as a good thing in principle.

Let’s assume what you say is true and it makes no difference, whatsoever. In that case, why touch it at all?

 

[Chippy_boy]

Let’s assume what you say is true and it makes no difference, whatsoever. In that case, why touch it at all?

This question was raised earlier and of course I don't know because I am not close to government. But my guess is for two reasons: Mainly because in theory it makes the UK a more attractive place for high earners to want to base themselves and pay tax. So an incentive for inward investment in much the same way as the corporation tax cut. And secondly because it fits with Tory ideology of low taxes. They can't afford to cut the basic rate much because so many people pay it and there is no "upside" in terms of greater compliance, i.e. everyone is on PAYE anyway. IIRC less than 1% were paying the 45% rate, so they could afford to cut that more deeply, AND as I say it might not cost anything at all if we get more people paying it as we did when we cut from 50p to 45p

BUT, and its a huge BUT, I really do think it was an utterly stupid thing to do. It looks terrible even if it costs us nothing.

 

[Gareth Barry Conlon]

 

[Blue Maverick]

Wait until next October when the government have to find about £20 billion in back payments for public sector pensions! They really haven’t got a clue.