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Originally Posted by Pierre
This is all on the predication that the tax cuts will be a massive failure and not encourage any growth and therefore increase earnings. Basically "the markets" are betting on UKplc to fail.
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And that prediction comes about because the markets aren't convinced that tax cuts will address inflation caused by supply issues. Things are more expensive because of a backlog from COVID, the Ukraine war, issues around imports post-Brexit and energy costs across the supply chain.
But also because they didn't provide any costings or projections on how this would help. Proper budgets have come with an analysis showing future projections of debt, deficits and growth with the assumptions unpinning it. So people can go 'oh, ok, so they're saying if they achieve 2.5% growth then the income actually remains the same' and so on.
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But if the government had done nothing, where would the stimulus for growth come from?
The economy would just stagnate further.
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I don't know but the problem is inflation so you would need to address that first. This is why Sunak was losing his mind during the debates saying you can't tax cut your way out of an inflationary spiral and all it would do is increase interest rates as the BoE becomes more aggressive in trying to combat it. Remember he wanted to do tax cuts towards the end of Parliament when he assumed inflation would have come down.
My guess is that you need to wait for the underlying issues to solve themselves and while you wait you can take measures to address the people who are in crisis with the energy bill cap, tax cuts at the lower end of the pay scale, and maybe an increase in benefits and pensions. Anything you do that increases the demand but not the supply increases inflation in theory but you also can't let people suffer.
It's not an easy problem to solve but the reaction to this 'mini-budget' seems to show at best a naive and incompetent rollout of their idea. I think
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You could say it is a gamble, and it is. But I'd rather somebody do something rather than sit on their hands.
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The problem is that it's more than the Tories losing an election at stake if the gamble is lost.