Chancellor Kwasi Kwarteng's Growth Plan sounds ambitious but it needs to reassure both markets and ordinary Britons that their economic security is in safe hands, investment analysts have said.
Speaking as the chancellor unveiled a package of more than 30 measures to tackle high energy bills, drive down inflation and cut taxes to drive growth, while maintaining responsible public finances, commentators have welcomed the boldness but warned it might not be enough.
In his mini-Budget today (September 23), Kwarteng said igniting growth by lowering taxes and cutting regulation was this government’s central mission.
He said the plan would encourage business investment, drive growth, create jobs, improve living standards for everyone and promote confidence in the UK economy.
But Garry White, chief investment commentator at Charles Stanley, said: "Although Prime Minister Liz Truss [was] silent, the words coming out of Mr Kwarteng’s mouth will cement opinion surrounding the new British government – boosting confidence or casting a long shadow.
“There will a sigh of relief across the boardrooms of Britain if the proposed measures to help UK companies survive – and invest through – a bitter winter of spiralling costs come to fruition."
The UK government borrowed a further £11.8bn in August, and the cost of servicing the debt mountain reached a record £8.2bn. Meanwhile, the Bank of England has raised rates yet again to tackle persistently high inflation.
Because of this, White said he believed the ‘fiscal event’s’ focus on growth should reassure many in financial and money markets that the likely economic boost will compensate, at least in part, for the cost of these support measures.
But he added: "They will also want to be convinced that these measures are enough to get the British economy through yet another challenging period.
During his speech to the Commons, Kwarteng said: "Growth is not as high as it needs to be, which has made it harder to pay for public services, requiring taxes to rise.
“This cycle of stagnation has led to the tax burden being forecast to reach the highest levels since the late 1940s.
“We are determined to break that cycle. We need a new approach for a new era focused on growth."
White said: "The message will need to convince households that they are receiving real help but be combined with a message of fiscal prudence amid a necessary increase in government spending. Whitehall’s spinners are probably now in top gear.”
He said: "The measures will help specific sectors and the UK corporate base more widely, but Kwarteng will need to convince financial markets that the additional surge the country’s post-Covid debt is manageable at a time the world could be moving into recession."
White explained that an economic slowdown often resulted in companies slashing investment in new products and services, as business try and balance the books as their profitability shrinks.