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Word in your ear chancellor | accountingweb
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A word in your ear, Chancellor…

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The new Chancellor of the Exchequer seems to have found himself in something of a minefield. Philip Fisher has a few helpful suggestions for Kwasi Kwarteng.

5th Oct 2022
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If a prospective prime minister approaches you and offers you the plum role of Chancellor of the Exchequer, how could anyone say no?

However, less than a month into the role, it would come as no surprise to learn that Kwasi Kwarteng is having second thoughts. Finding himself forced into a merry-go-round of U-turns with every prospect that there will be more to come can’t be much fun.

Already, his prime minister has stated categorically that she would not consider providing any support for those suffering from ballooning energy prices – and then changed her mind.

Then she was instrumental in plans to cut taxes willy-nilly before making her next-door neighbour back down on the abolition of the additional rate of income tax.

As this article is being written, it appears that the Chancellor’s attempt to get some breathing space until late November to develop his policies before revealing them in a second not-Budget, this time supported by the Office for Budget Responsibility, will be superseded by something much sooner.

All in all, if I were acting as Liz Truss’s right-hand man then, to put it mildly, I might be considering my position and future prospects.

So, were it me, here are some of the thoughts that would be going through my head.

Personal issues

Ever since Eton and Cambridge days, Kwarteng has clearly regarded himself as a Master of the Universe and taken others along with the premise.

It must therefore come as something of a shock to find himself derided in the media as policies that he has agreed with his new best friend, the prime minister, are dropped.

To make it worse, it’s quite clear that “Lose Trust” (isn’t speech recognition software wonderful?) is untrustworthy and happily passes off responsibility for decisions that go wrong, rather than manning up and taking it on the chin. Forgive the irony but in the good old days, a truss was supposed to be a support.

The Chancellor should also learn from others’ mistakes. When Rishi Sunak had the job, he got hot water after attending a party that dumped him in the midst of a police investigation leading to a fine for criminal behaviour.

Parties are clearly anathema to Chancellors who want to have a future. It was probably unwise for KK to share expensive champagne bottles with friendly hedge-fund supremos who have just made billions thanks to his trashing of the economy in the mini-Budget.

Career

Many of us find ourselves in dead-end jobs that will cause reputational damage and little else but headaches. Sometimes, these are a good investment for the future.

However, if I were KK then this might be the moment to consider something with a little more stability and longevity, perhaps taking up the reins as the manager of an ailing Premier league football team?

Policies

There is a difference between coming up with striking headline ideas and forming fully fledged policies that do not leak like a sieve.

If he hasn’t already, KK needs to learn that lesson in a hurry. Quite frankly, his media appearances and those by the prime minister have been a severe embarrassment since it is so clear that they are making things up as they go along.

Flinging money at the super-rich was never going to look good, but creating a massive fiscal black hole with no idea about how to fill it makes you look like a complete idiot.

If nothing else, it would have been sensible to know where the money was coming from before spending it. Even if the answer was cutting expenditure that could not be cut or, even better, reducing benefits for those who are already far below the breadline following a doubling of energy costs and the inception of rampant inflation, largely resulting from your own actions.

I can’t imagine that anyone would disagree with the principle of generating additional growth but, if accountants are anything to go by, and we probably are, the main stumbling block is a need to expand the workforce at a time when recruitment is nigh on impossible.

One hates to suggest it, but the obvious solution is to promote immigration and the simplest way would be to get back into bed (or at least the bedroom) with the EU.

Taxation

There is no question that developing a coherent fiscal policy to save the economy is an imperative.

However, trying to buck every known system by taking a massive gamble with other people’s money was never going to look good.

Therefore, if I were KK I would try one or more of the following:

  1. To the extent that you are going to lower taxes, the fairest route would be by increasing personal allowances.
  2. This could be partially paid for by reducing the level at which they begin to diminish and then disappear.
  3. One point where I agree with KK is that the 45% tax rate is inappropriate. Perhaps he could try raising it to 50% and make the super-rich increase productivity to maintain their net income?
  4. Cutting corporation taxes is also a waste of time and investment beliefs might be far better directed.
  5. Introduce a windfall tax on energy companies and also hedge funds.
  6. Rather than ditching the Office of Tax Simplification, beef it up. I can’t believe that any reader would not subscribe to that view.

A final message

In the final analysis, if I were Kwasi Kwarteng, I would learn to:

  • Keep my mouth shut.
  • Fully develop policies before announcing them.
  • Trust nobody, especially someone whose career is on the skids.
  • Consider how your plans will look to normal people, not just your champagne-swilling pals.

Replies (4)

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By KazDriver1
07th Oct 2022 09:52

Sage advice. Now .......... will he listen? I am not holding my breath.

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By Mike18
07th Oct 2022 10:44

I agree with Philip. Just to add, this terrible tandem (Truss and Kwarteng) hasn't made any mistakes. They meant everything, and only reversed just enough to buy more time.

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By User deleted
07th Oct 2022 12:42

Sounds like Starmer & Raynor helped to write this. They also do nothing but criticise without a single hint of any credible policy of their own.

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By tedbuck
10th Oct 2022 10:37

What is needed is a dose of reality. People must learn that sometimes there is no answer to a problem other than living with it. If holidays and the gym and the restaurant have to go by the by to pay the fuel bills then so be it - once things return to normal (if they do) then we can get on with life but throwing money at the situation isn't going to solve it in the long run. If things don't get back to normal then we'll all be atomic dust and won't be bothered anyway.
We really cannot expect the nanny state to come to the rescue all the time and leave the bill for our children to pick up. They won't be grateful.
Advice to the Chancellor - abandon MTD for ITSA and put the people involved on it to work getting HMRC to do its proper job. Then go through the Civil Service and get rid of all the jobsworths building empires and making more and more rules to slow us all down. Gordon Brown set lots of them on so set them off and let them earn a living instead of stopping everyone else from doing just that.
Teach people self reliance like they used to do 50 years ago.

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