After the mourning, Truss and Kwarteng could find themselves on a sticky wicket
Crunch time will come quickly for Liz Truss. After 10 days of national mourning to mark the death of Elizabeth II, Britain’s economic problems will return to centre stage this week. On Thursday the Bank of England announces its latest decision on interest rates. The following day Kwasi Kwarteng’s debut as chancellor will be the latest in a string of mini-budgets. Both will be significant occasions.
In one sense, Truss has benefited from attention being on the monarchy rather than on politics during her first two weeks in the job. She has been able to settle in at Downing Street and think about what to do with her new-found power. In cricketing parlance, the prime minister has had time to play herself in.
But, to extend the metaphor, Truss is soon to be faced by some nasty, short-pitched bowling. If things go wrong, her time at the crease will be brief.
Although inflation is at 9.9%, the economy is probably already in recession and the pound only one further serious downward lurch away from parity against the dollar, the government has things going for it. Ukraine’s military victories in the past week have had a marked impact on wholesale gas prices, which are down sharply this month. An end to the war, while far from a done deal, looks more feasible than it has at any time since Russia’s invasion in February.
What’s more, the labour market is holding up pretty well for an economy that has essentially moved sideways since the start of the year. The unemployment rate is the lowest it has been since early 1974.
If the government wants to be super-optimistic it can take comfort from the fact that previous periods of sterling weakness have not always been bad for the economy. The devaluation that followed Black Wednesday 30 years
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