Market turmoil, borrowing costs up, Rachel Reeves far away – it reminds me of my own time as Chancellor

HERE we go again. Markets in turmoil. Borrowing costs going up. A Chancellor far away in a foreign land.

It reminds me of my own short-lived period as Chancellor of the Exchequer under Liz Truss in 2022.

I was summoned back from Washington and summarily dismissed. I learnt about my fate from a journalist’s Twitter account.

Rachel Reeves was damned if she did and damned if she didn’t go to China. The signal to the markets if she had stayed in Britain could have made the situation worse.

She needs to be sure of the backing of Sir Keir Starmer though.

I thought Truss had my back because I knew that if she sacked me, she would be gone in a matter of weeks. So I went to Washington, perhaps too foolishly.

Today, Reeves is under pressure. She has been often derided as “Rachel from Accounts”, which is unfair. She is only doing what her party and party leader wanted.

Labour’s problem now is that the party promised to be different

Kwarteng

Her Budget was a Labour Party Budget. She is simply being blamed for what the Labour Government have all signed up to do.

The truth is Starmer has agreed to and sanctioned everything that Reeves has done.

He is Prime Minister. He made the pledge to make our country the fastest growing economy in the G7 group of countries. A pledge the Government would rather we all forgot about.

I expect if he sacks Reeves that his remaining days at No10 would be numbered. Truss announced her resignation exactly six days after giving me the order of the boot.

It was a sorry spectacle. I had been embarrassed. She was humiliated. That is a price politicians sometimes have to pay.

Labour’s problem now is that the party promised to be different. No more sleaze — then we had the problem with Starmer’s free suits.

It also promised an end to Tory “chaos”. Now we simply have a Labour version of it.

Interest rates will stay higher for longer. Government borrowing costs are at record highs. I suspect those costs may go even higher.

The markets are not convinced that Labour has a plan for growth.

They think that extra spending can only be paid for by extra borrowing or increased taxes.

Either way, it will be another humiliation. Labour promised not to increase taxes on “working” people. It taxed businesses instead.

That sounded like a good idea — but in reality it is working people who suffer.

Labour forgets this at its peril. Now the economy, as a consequence of the Budget, faces a squeeze on businesses which will lead to lower growth.

God knows I made many mistakes. We rushed the so-called “mini-Budget”. It was too much too fast.

It spooked the markets, as they had not been tipped off, or warned, about the contents of the statement.

But at least we tried to reduce the burdens on business in order to grow the economy.

A growing economy actually means increasing tax receipts. These give us more money to pay more for public services. I make no apology for trying to encourage businesses to grow.

Higher tax rates, by contrast, put more pressure on firms and individuals.

In a high tax economy, there are fewer incentives to work and invest. This causes slower growth.

It is this nightmare markets are confronting.

The fear of the traders is that there is no plan.

The Government must be concerned. Amid all the sound and fury of the market turmoil and economic debate, we can also hear the death rattle for Labour.