It may have been less than three weeks since the government’s mini-Budget but the analogy of choice now needs to be moved forward by a decade. At first the fiscal package was reminiscent of the Conservative chancellor Anthony Barber’s disastrous “dash for growth” in the early 1970s but the situation is rapidly becoming more akin to the French Socialist François Mitterrand’s 1983 abandonment of his initial programme in the face of hostile financial markets.
No Budget in postwar British history has prompted as vicious a market reaction as that of 23 September. Investors and analysts had been braced for an expensive, and necessary, energy price freeze and had expected the new government to cancel a planned rise in corporation tax from 19 per cent to 25 per cent and to reverse the recent National Insurance increase. Those tax changes would have cost around £30bn a year, but the government went much further: stamp duty was cut, the basic rate of income tax reduced from 20p to 19p and the 45p rate on earnings over £150,000 was abolished (altogether amounting to £45bn of tax cuts).
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