UK needs to be put on an economic war footing for the coming recession
The waiting is almost over. Conservative party members have made their choice. This week a new prime minister will be installed in Downing Street at the most testing time imaginable. Even February 1974, when Harold Wilson came to power and ended Britain’s three-day week, doesn’t really match up to the omni-crisis with which Boris Johnson’s successor has to grapple. Arguably, it is the grimmest inheritance since Winston Churchill’s in May 1940.
All the smart money is on Liz Truss winning the race, although in retrospect it may come to be seen as a Pyrrhic victory because the new prime minister will arrive in office with the economy about to hit the wall, energy bills soaring, the pound crashing and the global financial markets selling off.
In more normal times, NHS waiting lists and the prospect of hospitals being overwhelmed by a winter flu outbreak or a new strain of Covid-19 would be the incoming government’s top priority. In the coming few weeks, though, there should be one priority and one priority only – and that is to avoid economic meltdown.
Throughout the seemingly endless Tory leadership campaign, Truss has been radiating positivity, but the time for boosterism is over. October’s jump in fuel bills is less than a month away, and will make households considerably worse off. Last week, the Resolution Foundation thinktank said the impact of higher energy costs would wipe 5% off household spending power this year and a further 6% next – together the sharpest decline in living standards in at least a century.
The prospect of mass immiseration is leading to a sell-off in the pound. While it is true that currencies generally have been falling against the US dollar, sterling’s decline has been more pronounced than most. The
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