About a year ago, Kwasi Kwarteng stood in the House of Commons to announce a “mini budget,” which was reported to be the biggest set of tax cuts in 50 years. The £45 billion cost of the proposed package came in addition to the Government’s previously announced Energy Price Guarantee Scheme which, at the time, was estimated to cost possibly north of £100 billion.
The initial response of the public to the mini budget was mostly positive, with polling in the immediate aftermath finding the public supported most of the measures announced.
However, in the absence of an estimate from the Office of Budget Responsibility (OBR) on the effect of the plan on the public finances and with the markets surprised by the reported scale of the announced measures (as well as a lower than expected increase in the Bank of England’s interest rate), the pound tanked and gilts spiked. Pension funds suddenly and unexpectedly faced margin calls, and the Bank of England was forced to intervene to protect them.
The market response and widespread panic led to a catastrophic loss of confidence in the Government, especially since Prime Minister Liz Truss took nearly a week to show herself again to the public. Kwarteng was eventually sacked, and Liz Truss herself resigned only days later.
Now, one year on, we at Redfield & Wilton Strategies have asked British voters for their views on the mini budget and its fallout.
Overall, 32% of British voters think the key mistake of the mini budget was that its new policies were too much too quickly, while another 22% think they were poorly communicated. 30%, by comparison, believe that the new policies were in the wrong direction entirely.
When prompted with Kwasi Kwarteng’s recently stated view that it was the implementation of the mini budget, not the policies themselves, that were wrong, a plurality of 36% of voters are inclined to agree. 25% disagree.
In fact, if some of the policy measures in the mini budget were announced again today, most British voters would respond favourably.
Outright majorities would support cutting the basic rate of income tax from 20% to 19% (60%) and permanently eliminating stamp duties on properties up to a value of £250,000 (58%), while pluralities would support cutting the top rate of income tax from 45% to 40% (41%) and scrapping the recent increase in corporation tax from 19% to 25% (38%).
As we wrote last year:
“The public’s negative reaction to last week’s mini budget appears largely driven by 1) the financial market’s negative reaction, in particular the run on the British pound as investors became concerned about the UK Government’s ability to pay its debts, and 2) the significant amount of media coverage drawn towards the two unpopular measures which are primarily beneficial to the wealthy.”
Our latest findings suggest that this hypothesis still stands true today. It was not the (largely popular) policies introduced in the mini budget that did it for Kwarteng and Truss. Rather, it was the failure to properly prepare the markets and confidently communicate to the public.