ALEX BRUMMER: Prime Minister Liz Truss takes the wrong turn

At the heart of the recent volatility in the financial markets is a battle of ideas. On the one hand, there was the orthodoxy of the Office for Budget Responsibility (OBR), the IMF, the OECD, the pre-Quarteng Treasury and now Keir Starmer’s Labor Party.

On the other side are the Thatcherite Institute of Economic Affairs, monetarist economists like Patrick Minford and those who believe lower taxes and more creative regulation can boost growth.

The truth is that the two approaches are not as far apart as one might think. As Oxford economics guru Professor Dieter Helm points out in the New Statesman, the combination of energy price subsidies and tax cuts is “like Keynesianism on steroids.”

There’s a bit of Chinese central planning in it because of the Chancellor’s growth targets.

After all, it was John Maynard Keynes who came up with the idea that if the private sector does not stimulate demand, then the government must step in.

Take, for example, the ideas of reforming land use laws so that industrial estates can be cleared in the name of expansion and more houses built.

This often plays a bad role as no one wants HS2 hurtling past their yard or estate on the edge of their aspic-preserved village. That is usually the case, even if it means more derrières on bars in the pub and houses for farm workers.

The idea that the existing order cannot be disturbed is ridiculous. The key is sharing profits. If local mechanisms could be found so that not only the landowner and the private home builder win, then a building permit would be issued.

In the worst case scenario, a ten-year free or heavily discounted subscription to HS2 for all those homes affected by disruption could change their minds. Or, in the case of new properties, a radiant modern gym with an Olympic-sized pool and/or a lido, as the summers heat up, may be right up your alley.

Tesco boss Terry Leahy acknowledged the need to share planning benefits when it was accused of cementing this green and pleasant land of shops after the millennium. It was amazing how approving the opposition became when a school and affordable housing were added to the project.

Liz Truss and Kwasi Kwarteng made a huge mistake when they decided they didn’t trust the OBR enough to make their proposals heard. Yet it was previous chairman Robert Chote who told the Commons Treasury Committee at the outset of Covid that it was acceptable to borrow a balloon in times of war, such as pandemics.

Ukraine, the ensuing energy catastrophe, rising inflation and interventions proposed by the Truss administration fall into this category. The mistake would be to tighten fiscal and monetary policies at the same time.

The government had little to fear. But leaving a review for ten weeks, if you’re an administration at breakneck speed, must be a blunder.

self help

While we’re on the subject of the economy, a quick word about the Bank of England promises to do whatever it takes to recover the gold market. The £65bn temporary intervention was widely interpreted as Andrew Bailey stepping in to help the pound and gold markets.

It was nothing like that. The Bank, with Treasury insurance, saved itself.

It was in the area of ​​financial stability that UK pension funds were tempted into complex derivative strategies by city-based banks and institutions that were beating some of the money abroad: out of sight and out of mind.

The fact that the pound recovered and the long gold yield plummeted was an added advantage.

It was not the purpose of the rescue.

On your brand

Who says Britain is no longer an attractive place for investment?

That most emblematic British car brand Aston Martin, with all the credit that comes with being James Bond’s car, has been a serial failure as a publicly traded company.

Forget it. Saudi Arabia, the UK’s oldest friend in the Gulf, and Chinese motorcycle giant Geely have come to the rescue by taking on part of a £654 million fundraising problem.

It is good to have admirers, even if politics and human rights are not to everyone’s taste.