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Lizonomics: Fiscal cake or crumbs for all

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Published on 26 September 2022

Feeling the squeeze
Feeling the squeeze

The pound has fallen to a record low, millions are struggling to pay their energy bills and people are facing a cost-of-living crisis unlike anything in a generation.

Here, Derek Watson Associate Professor in Cultural Management at the University of Sunderland, discusses how the mini-budget appears to have had a massive fall-out.

 

“Liz Truss’s leadership has radically rebranded the Conservative’s reputation from one of prudence with public spending to that of growth.

“Friday’s announcement of £45bn tax cuts heralds the largest fiscal portfolio of tax cuts in 50 years, all aimed at fuelling opportunity.

“The corollary seeks to increase household disposable income to further stimulate economic activity and increased tax revenues which suggests that the prima facie is cake for all.

“On September 6th, Liz Truss was handed the keys to number 10; with it came the political conundrum to manage energy bills which were growing 18 times faster than wages, rising food prices, a flawed rubric in forecasting inflation rates, a Covid debt of approximately 500bn, resolving Johnson’s Brexit fudging, including the Northern Ireland Protocol, an escalating war in Ukraine, and the consequences of deflated international stock markets in response to a pending global recession.

“Friday’s mini budget statement was greeted with nervousness and reflected in sterling falling. However, there is general agreement that the economy is in need of growth, but this is dependent on a sustainable and inclusive strategy, and it is clearly a high-risk policy gamble costing 100bn a year of public borrowing which may act as an economic catalyst in putting pressure on the Bank of England to further raise base rates to suppress inflation.

“Those opposed to the Lizonomics, have openly voiced criticism at the portfolio of tax cuts that only favour the wealthy and leave at best crumbs for the majority.

“Firstly, lifting of the banker’s cap will only serve to agitate taxpayers. Secondly, the Institute of Fiscal Studies (IFS) state that only those over £150K will be net beneficiaries by 2026.

“The imbalance is also reflected in those who earn £200K who stand to gain £5,220 whilst those on £20K will gained £157, which will be lost in increased food and energy costs.

“Thirdly, the suspension of stamp duty for properties up to £250K and the increased threshold of £425,00 for first-time buyers, will further drive-up property prices, thus pricing out first-time buyers and rewarding the affluent South East.

“The Institute for Fiscal Studies (IFS) are of the view that tax cuts, combined with higher spending, would in all probability lead to a ballooning of UK national debt long after the government terminates energy subsidies.

“They are equally sceptical in the Government’s ambitions in attaining a parallel growth increase which resulted in the British economy superseding its debt burden. Such sentiments are also echoed by President Joe Biden, who openly tweeted he was “sick and tired” of a trickle-down economics and rejects the premise that cutting corporate tax benefits the majority, stating “it never works”, as evidenced under the Regan administration.

“Liz Truss is certainly going for broke but needs to be mindful that tax cuts alone will not generate sustained growth. It is one of winning the confidence of the sceptical public, in providing a broad-based stable recipe for growth such as, viable investment in terms of skills, enriched education, reduced NHS waiting lists, accessible doctor appointments, safer streets, and a long-term solution to energy costs.

“Like all previously serving prime ministers, it’s not just about governing the country but equally about leaving a positive legacy. Like it or not many have tried and failed to emulate the Thatcher legacy and with three former prime ministers in six years, the Conservative party will not hesitate in ousting their leaders who fail to deliver on timely promises. The clock is ticking.”

 

 

 

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