Portes: “true believers have been disillusioned”

The ABC’s flagship 7.30 programme features a segment about the political and economic “mayhem” in the UK since Chancellor Kwasi Kwarteng’s mini-budget. Following a week of market mayhem and an embarrassing U-turn on giving tax cuts to the rich, UK Prime Minister Liz Truss has been trying to assure her colleagues she is the right person for the job.

London Business School Professor Richard Portes provides his views on what he terms are the Conservative Party’s “faith-based economics”, explaining that the markets were upset by the size of unfunded expenditures, the side-lining of the Office for Budget Responsibility (OBR), the overall lack of transparency, and the evident conflict between monetary and fiscal policies which was the key message of the IMF’s intervention.

The chaos in the gilts markets and exchange-rate slump reflected the inconsistencies of policy, which now include the Bank of England buying gilts while raising policy rates). “This U-turn doesn’t change that. But the true believers in the faith will have been disillusioned and the government’s credibility further damaged,” says Portes.

The ABC 7.30 news programme, ‘Tough Time’, may be viewed here.