"Trussenomics” will mean Sterling through the floor and interest rates through the roof - Alex Salmond
“The Truss plan to cut corporate and personal tax into the teeth of an inflationary crisis is a recipe for sterling going through the floor and interest rates going through the roof.”
This was said by former Scottish First Minister, Alex Salmond commenting on the new Prime Minister’s economic programme as outlined at today’s Prime Minister Questions.
The ALBA Party leader continued;
“The overwhelming and immediate task is to break the inflationary cycle and get retail inflation under control. The only tax cut that makes sense towards that objective is to cut VAT and directly impact on the Retail Price Index. That combined with an energy price freeze could bring inflation sharply down and to a reasonable level.
But unless there is a clear commitment to 5 per cent inflation by year end, there is no way that wages will be held to anything like that level and the inflationary cycle will intensify. Why on earth should working people settle for 5 per cent, if inflation is heading for 15 per cent?
Controlling inflation carries the benefit of saving vast sums on the coupons on Treasury index link gilts - around £5 billion for every point off the RPI. Not controlling it is the road to perdition.
The Truss plan to cut corporate tax when many companies are cash rich with windfall gains is patently absurd, while any benefit from personal national insurance cuts will be trumped many times over by high interest rates for mortgage payers.
In fact monetary policy is totally irrelevant to controlling a crisis which is totally the result of cost push inflation from scarce resources, and allowing interest rates to take the strain risks ruination for home owners and small business.
An energy price freeze is necessary and will assist in reducing inflation but the public should not be asked to pay for all of it through borrowing. Energy providers who are over-dependent on gas generation should not expect the public to bale out their poor decision making while it is the energy producers themselves who are the beneficiary of obscene windfall profits. They are the ones who should be taxed.
Thus far Trussenomics looks more like economic mumbo jumbo and time is now very short. Instead of defenestrating her political opponents in the Tory Party, and rewarding her pals, she should be clearing out Ofgem and the Bank of England. Neither institution commands any confidence and both share great responsibility for the current scale of the economic crisis.
A commitment to 5 per cent inflation by year end is essential to break inflationary expectations.
It is reality hour for Truss and her Tory C-Team.”