Recently appointed United Kingdom Prime Minister Liz Truss, who succeeded the disgraced Boris Johnson, is probably already feeling like she and her new government are exposed at the top of a mountain.
The pound sterling is at or close to an all-time low against the dollar, which in periods of uncertainty always does well. On Sept. 23, Chancellor of the Exchequer Kwasi Kwarteng, outlined his latest budget, which has been mostly criticized and even by some in the government’s own Conservative Party.
Actually, it was not a budget, but a “fiscal statement,” mere flowery language but two words that mean the Office for Budget Responsibility was not obliged to provide numbers on how much the latest government round of borrowing will cost.
The bottom line, according to many commentators I have read, seems to be that prices and inequality will increase.
Businesses will face heavier burdens.
The government’s aim is bitter medicine now can help growth and improve economic conditions in the medium and long terms.
Truss proposed sweeping change. She has only been in the prime ministerial role for less than two weeks, so she has kept her promises.
And change always prompts a period of uncertainty.
Monetary and policy organizations have spoken out. The Institute for Government called Kwarteng’s economic policy “a major gamble." The Confederation of British Industry was supportive, saying the new policy is “not perfect, it’s just the beginning, but there’s plenty business can work with.”
On Sept. 28 came a blast from the flank, with the utterly unprecedented criticism of current U.K. economic policy from no less than the International Monetary Fund, a global body headquartered in Washington, D.C.
Can you imagine if the IMF said this about the U.S. or China? The organization would be told not to interfere in domestic politics, I would imagine, or there would be calls for its disbandment.
The BBC’s economics editor, Faisal Islam, reported that the IMF’s “stinging rebuke … reflected similar concerns from the world’s major finance ministries that a crisis brewing in the U.K. could spill over into a global slowdown.”
David Frost, a former Conservative cabinet minister and now in the House of Lords, replied that the “IMF has consistently advocated highly conventional economic policies. It is following this approach that has produced years of slow growth and weak productivity.”
The gloves are off.
Considerable risk to produce a glorious future? New, bold thinking to wash away status-quo tepidness? Or more pain for businesses, mortgage borrowers and the least well off?
Or hundreds of thousands of international guests happily buying up Bargain Britain goods on our High Streets and treating themselves to a move up the segments of our hotel industry?
Sensible policy or knee-jerk rashness at odds with the Bank of England?
I studied economics, but I am no expert. Please enlighten me at tbaker@hotelnewsnow.com