Tax rises would bring debts under control. The Bank of England would bring inflation back down again. The government would steadily win back the confidence of the financial markets, repair relations with the EU, remove some of the obstacles to growth and, once all that was in place, try and cut a minor tax or two. When he became Prime Minister, Rishi Sunak promised a very orthodox, centrist economic programme, and one that would have the full backing of the IMF, the financial markets and just about every respectable commentator. There is just one problem, however, and it is not exactly a minor one. It is failing, and failing badly. In truth, Rishinomics is in tatters.
Today’s inflation data was genuinely shocking. At a time when price rises are coming under control across the rest of the developed world, when the energy spike has dropped out of the index, and when global food prices are actually falling, the City expected the rate at which prices are going up to start falling significantly. Instead, it has remained stubbornly at 8.7 per cent.
Sunak promised a return to calm, sensible government. Yet his programme is completely failing
The Bank of England will have to raise interest rates tomorrow, and perhaps to 5 per cent. It looks certain they will rise to 6 per cent or higher before inflation is under control.
But the trouble doesn’t end there: public sector borrowing figures were just as bad. The government borrowed £20 billion over the course of the month just to make ends meet, almost double the same month last year, and the second highest figure for May since records began in 1993. The tax rises are not bringing in as much money as expected, and welfare spending is still wildly out of control. The books are not even close to balancing, and if rising interest rates tip the economy into a recession the numbers will get even worse.
When he replaced Liz Truss as PM, Sunak promised a return to calm, sensible government. Yet his programme is completely failing.
Inflation is running rampant, and the government does not have the willpower to bring it down. The state is spending more money than ever, for worse and worse results. The labour market is shrinking as more and more people decide not to work, with only a higher than ever level of immigration plugging the gaps. Taxes rates are running at 70-year-highs, and yet there is still no sign of borrowing coming under control.
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All Sunak has managed to do is preside over higher spending, flatling productivity and a return to the stagflation of the 1970s. In reality, it is increasingly clear that the UK needs a radical change of direction because, however sensible it might appear, Rishinomics is not the answer.