Kamikwazi Mini-Budget Forces U-Turn

The Houses of Parliament seen from a nearby bridge as traffic passes by
Author: Samuel Beckingham
Updated: Oct 05, 2022
3 minutes read

The Chancellor, Kwasi Kwarteng, has gone back on the highly unpopular decision to cut the 45% top rate of tax. This comes after over a week of market turmoil and reinforcement behind the decision.

According to some, the u-turn was inevitable, but the damage has already been done. Despite calling it “a little turbulence”, Kwarteng has changed his mind on scrapping the 45% top rate of tax and wishes to move on.

He and Truss both sent out a message saying, “We get it and we have listened”, but journalists and analysts have their doubts. Could we now be seeing a series of u-turns after more public outcry over unfairness in the cost of living and energy crises?

While humiliating, the u-turn has both economic and political consequences. You can see why they both disappeared for a few days after the announcement, but doubling down on their claims when later questioned made matters worse. This caused the pound to fall in value, increased the cost of government borrowing and shocked the market to the point where mortgage products were pulled.

According to a YouGov poll, 72% of Britons didn’t agree with abolishing the top rate of tax when it was announced, while 65% now agree with the u-turn. This made the Kamikwazi mini-budget the least well received financial statement of any Conservative government since they took power in 2010.

The markets were spooked by unfunded tax cuts that might have led to higher inflation and provoked a tougher response from the Bank of England, who already bailed them out with £65 billion worth of bonds.

On top of this, Kwarteng is facing allegations of profit making, having met with previous employers and friends alike, foreseeing the plummet of the pound. His former boss, Chrispin Odey, is a massive Convervative donor and Brexiteer, having made a massive fortune by betting against the value of the pound and the Conservative policies he supported during Brexit. This has raised concerns about misconduct, where the moniker “Kamikwazi” feels apposite.

Unfortunately, these people believe in trickle down economics, which has never worked, because it serves to line their pockets and the money stays at the top level. Higher earners who suddenly earn more tend to hoard their wealth, which creates an issue with distribution. This is one of the reasons why so many people didn’t support cutting the top rate of tax. History has shown us that trickle down economics helps no one but the rich, grows inequality and has no significant effect on jobs or growth.

Failing to share costings of the mini-budget until November was also an unwise move that had a detrimental impact on government support and sent the economic markets into turmoil. It’s a mistake that they won’t admit or apologise for, but had the potential to be avoidable.

The first major u-turn isn’t encouraging, especially as it’s within the first month of office. While Truss admitted that she listens, the series of car crash radio interviews last week prove otherwise, having repeated false claims on household bills being no higher than £2,500 instead of admitting the mini-budget crashed the economy, like she was being asked at the time.

In order to protect her position as Prime Minister, Truss could easily use Kwarteng as a scapegoat should the need call for it. It’s possible we could see another Boris in office, unwilling to step down and relinquish power.