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  • Christian Armbruester


The problem with budgets is that they have to balance, which left the Chancellor sitting between the proverbial rock and a hard place. On the one side we have inflation, which means the welfare state needs more money. We also have a huge bill for all things Covid with estimates topping £400 billion for all that fiscal and monetary stimulus.

On the other side we cannot borrow any more, as interest rates are a lot higher than they used to be. Betting on growth was an unmitigated disaster, so the only way this was ever going to go was higher taxes. The only question is, who is going to pay for it?

Here is where it gets complicated. The UK, like most advanced economies, relies on the consumer to drive the economy. We spend money at the shops, they make profits, pay their employees, who then use their hard-earned cash to acquire other goods, and so on, and everyone is happy.

The so-called money multiplier has historically brought about £4 of economic output for every £1 we spend. Now take away the £50 billion of tax increases from discretionary spending, and the whole thing goes into reverse. Mr. Hunt did say the outlook was bleak. That may very well be the understatement of the century.


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