ALEX BRUMMER: New Chancellor Jeremy Hunt must embrace growth

Kwasi Kwarteng’s dramatic early withdrawal from the annual IMF meeting in Washington, on a soggy night, is one of those moments that has become part of economic folklore.

Kwarteng’s farewell message was that he was on his way to working out the UK’s medium-term budgetary plans.

The reality is that it was for a merciless dismissal by an old friend – and another whooping U-turn for the hapless government of Liz Truss. Kwarteng will go down in the history books as Britain’s shortest-serving Chancellor, spending just 38 days at HM Treasury, with the exception of another Tory Ian Macleod, who died in office.

It must be a brutal disappointment to the brilliant Old Etonian who was so ambitious to change Britain’s slow coach economy for the better that he climbed the hurdles at the first barrier.

Now Truss is looking to quickly return to the country’s more fiscally conventional roots with the pick of twice-failed leadership candidate Jeremy Hunt.

There is a bit of a history of disappointing chancellors being followed by more competent incumbents – Roy Jenkins after Jim Callaghan, Ken Clarke after Norman Lamont and others. Hunt could play this role, but could fail because his prime minister isn’t holding out.

So far, the Truss administration has withdrawn on two tax fronts. It has scrapped the largely symbolic cut in the top income tax rate from 45 percent to 40 percent and has reverted to Rishi Sunak’s plan to raise corporate tax from 19 percent to 25 percent.

In many ways this was the central proposal in the mini-Budget. This is hugely important for the UK as it aims to remain attractive to foreign investment in the post-Brexit era and finance its growing external deficit.

But the biggest failures were those of the administration. The abrupt resignation of Treasury Department chief executive Tom Scholar and the mule head’s decision not to accept an early assessment of the tax event by the Office for Budget Responsibility was a devastating mistake. It brought the markets to paroxysm. As a writer who embraced Truss-Kwarteng’s fiscal event and determination to give the supply side of the economy a chance to boost productivity and growth, this is a mea culpa.

In my eagerness to see entrepreneurship, entrepreneurship and unleashing unleashed, I failed to recognize the confidence that financial markets and global observers place in tax compliance.

Joe Biden’s administration may be able to get away with its $2 trillion (yes, $2 trillion!) largely unfunded and misnamed Inflation Reduction Act, but that’s not a luxury an untied pound can afford in turbulent times. to afford.

Yet there is a paradox to see Kwarteng trudging through the corridors of the International Monetary Fund this week to get lectures from some of those he met about the debauchery of his ideas. US Treasury Secretary Janet Yellen arrived in the room to meet Kwarteng excitedly. She wanted British fiscal and monetary policy to work together and for the independence of British institutions to be reaffirmed. Fed Chair Jay Powell chose to lecture the former chancellor about the need to work on the demand side of the economy, causing production and consumption to bubble along with supply-side measures.

And IMF director Kristalina Georgieva spoke about the need for monetary and fiscal policies to work together in the fight against inflation.

It was a punitive experience for a chancellor who was not used to being challenged.

Given the UK’s lagging productivity, it would be a shame if other supply-side reforms were buried. VAT shopping for foreign visitors is a must. The IR35 effort to get freelancers into the tax grid should be abolished. And one way to mitigate the rollback of the corporate tax hike is to extend the “super deduction,” or some version of it, to encourage R&D, training and other capital expenditures.

The case for ‘investment zones’ is sharply made from Teesside, and in the past Liverpool and Canary Wharf, but it takes determination and leadership to bring them to fruition. Teesside and free ports had the full support of Rishi Sunak, and previous efforts to revive forgotten corners of the country had Michael Heseltine.

Whether the current deeply weakened Tory government has the bandwidth to pursue such ideas is an open question.

But it’s their best chance to escape the bleak story.