Britain’s chancellor offers up a reckless budget, fiscally and politically

In a “Fiscal statement” on September 23rd Kwasi Kwarteng, Britain’s new chancellor, promised a “new approach for a new era”. He was as good as his word. In a breezy speech lasting a little under 30 minutes, Mr Kwarteng launched the biggest fiscal intervention by any chancellor in half a century, eviscerated his party’s record in government and sent sterling plunging while gilt yields spiked. He did so in service of an economic goal he is unlikely to reach while diminishing his party’s chances of winning the next election. A new approach indeed.

A plan to spend £60bn ($65bn, and falling) in the six months from October to reduce energy bills for households and businesses was momentous. But then came the permanent measures. The basic rate of income tax will be cut to 19% from 20%. A planned corporation-tax rise to 25% will not go ahead, Mr Kwarteng told MPs. Instead, businesses will continue to pay a rate of 19%, the lowest in the G20. The highest earners enjoyed an even better deal. Taxes on those who earn over £150,000 will be reduced to 40% from 45%. No longer will Britain have higher marginal tax rates than Norway, declared Mr Kwarteng. The government expects to have to raise another £70bn (3.2% of GDP) in debt over the remainder of the financial year, with more borrowing to come.