Ross Clark

Given the swift defenestration of his predecessor after her mini-Budget panicked the markets, it is not surprising that Rishi Sunak has delayed the Treasury’s autumn statement until 17 November. No set of fiscal plans will satisfy everyone, but markets and public opinion do seem to be especially sensitive to changes in fiscal policy at present. And there’s this: left-leaning thinktank the Resolution Foundation this morning said delaying the statement for just two weeks will reduce the apparent black hole in the public finances as the cost of government borrowing comes down. The two-week delay could create the illusion of an extra £15 billion in the government’s coffers (or rather £15 billion less borrowing), mitigating the need for spending cuts and tax rises.

Inflation, asserted Rishi Sunak in his first PMQs, makes us all poorer. That is not entirely true – people relying entirely on the state pension, for example, will be fully compensated for this year’s high inflation, and no doubt some of Sunak’s former colleagues in the hedge fund industry have found a way to profit, too. But generally, he is right. Working people have on the whole suffered a large drop in their real wages. In the year to April, median weekly pay rose by 5 per cent from £610 to £640. In many years that would be a substantial rise, but when adjusted for inflation it comes out as a fall of 2.6 per cent.

Is low unemployment causing us more problems than we realise? The suggestion might seem absurd, offensive even. It’s reminiscent of the days of Mrs Thatcher’s supposedly ‘cruel’ monetarism, when we had three million unemployed. Some on the fringes liked to argue that unemployment was good for the economy because it made people work harder, being fearful for their jobs. Mass redundancies would not, of course, help the economy now or at any other time. If a million people were to lose their jobs, as happened in the early 1980s, that would be a million households suffering a collapse in the spending power. As well as a human tragedy, it would be an economic one, too. Many graduates are not doing graduate-level jobs But then who mentioned anyone losing their jobs?

So, no Black Friday. The pound is steady, the FTSE100 up 1.5 per cent, the FTSE250 up more than 3 per cent. Just as fears grew that the end of the Bank of England’s gilt-buying programme could send pension funds to the brink and precipitate a fresh market crisis, the opposite happens: markets embark on a rebound. It won’t necessarily last, of course. The long, miserable decline of stock markets and gilt markets this year has been punctuated, as ever, by periods of optimism, only for a fresh slide to begin. But for the moment it seems as if the big story that is driving markets is the expectation that Kwasi Kwarteng’s mini-Budget will see more U-turns – possibly as early as today – or even be dumped altogether.

All financial crises have their peak days, the moment of drama when everything comes to a head. Think of Black Monday – 19 October 1987 – when the bottom fell out of global stock markets, or Black Wednesday – 16 September 1992 – when the pound crashed out of the Exchange Rate Mechanism. With the Bank of England saying that it will cease emergency purchases of gilts tomorrow (although it is reported to have told pension fund managers a different thing in private) could we be facing a Black Friday? Some things to look out for tomorrow morning…. Gilts crash (ie yields rise sharply)?  This afternoon, things have been going in the other direction.

Kwasi Kwarteng’s mini-Budget was botched and the government has lost control of public spending. But this morning Jacob Rees-Mogg was not wrong to deflect at least some of the blame for current market turmoil on the Bank of England. The bank has been hopelessly behind the curve on inflation – in May last year it was still confidently predicting that the Consumer Prices Index would rise no higher than 2 per cent this year. Shortly before Kwarteng’s budget it showed that it was still lagging behind by raising interest rates by 0.5 per cent rather than the 0.75 per cent which markets had been expecting.

The ‘rabbit out of the hat’ in Kwasi Kwarteng’s mini budget this Friday is likely to be a cut in stamp duty on property purchases. If so, it will be a popular and wise decision. Not only might it help generate extra activity in a housing market which looks like flagging as interest rates bite – or maybe mitigate a decline in activity – it should help to promote labour mobility by making it easier for job-seekers to move around the country to look for work or further their careers. Moreover, depending on at what level it is set, a stamp duty cut might well generate extra revenue, too.  Never was there a better demonstration of the Laffer Curve in action than with stamp duty in the UK property market.