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Levelling up goes into reverse

Tories abandon levelling up and tank the economy

I’ve railed against Treasury orthodoxies for many a year, so watching the new Prime Minister and Chancellor throw out the rule book has been interesting, writes Jonathan Edwards MP.

While I and others called on the British Government to use rock bottom borrowing costs of the 2010-20 period to invest in infrastructure to boost long-term productivity, Truss and Kwarteng have borrowed to offer a short-term sugar rush of tax cuts for the richest in society.

Since the last election, the public purse has taken a bashing from Covid support and the £150bn plan to take the edge off inflationary pressures on food and heating.

Coupled with concerns that the UK’s experiment in splendid economic isolationism from Europe isn’t quite going to plan, it was inevitable that the unfunded tax cuts for the richest announced in the Budget last week would result in international speculators sharpening their swords.

Loss of confidence in the currency as the pound crashed to its lowest ever recorded against the dollar; the rising cost of government debt to a level higher than Italy and Greece, and Central Bank commitments to do whatever it takes in terms of monetary tightening – aka increasing interest rates – will all create significant economic headwinds and devour the

household budgets of working people.

Such is the state of panic in the Bank of England that – as I write – they have announced an unprecedented Government bond-buying programme to prevent a “material risk” to UK financial stability.

It’s unprecedented because, as one economist put it, “the Bank of England is saving the British economy from the British Government”.

I don’t know either the Prime Minister or the Chancellor personally; however, I suspect this wasn’t in the “First 100 days of Office” plan.

They are in deep economic and political trouble with no obvious face-saving way out.

One analyst explained the current state of economic policy as driving a car with both feet on the accelerator (fiscal policy) and brake (monetary policy) simultaneously.

Although I would argue that the British Government are pressing the wrong accelerator, the uncomfortable reality is that it appears we are about to enter the nadir of stagflation – economic stagnation coupled with inflation.

Sharing wealth becomes a more topical political issue in such an environment.

The Resolution Foundation eviscerated last week’s Budget.

Its analysis provides a heart-wrenching breakdown of the grotesquely unfair nature of the personal tax changes announced.

The richest 5% will see tax gains of over £9000 per year, but the poorest 5% will see almost no benefit.

On a geographical basis, the average gains for people living in the South-East of England are three times larger than the average for people living in Wales, the north-West of England or Yorkshire.

Last Friday, the Government put levelling up firmly into reverse gear.

The consequences: widening geographical and individual wealth disparity within the UK.

Unionists should beware.

The case for the United Kingdom as a political entity collapses when the ‘have nots’ conclude they are being conned.

The people of Wales are firmly in the ‘have nots’ bracket.

The only solution is for Wales to demand control over the fiscal leavers, allowing us to generate our own wealth and more fairly distribute its proceeds.

I’m sure I’ve heard this phrase before; maybe I saw it on the side of a bus: it’s time for Wales to “take back control”.