It's been a year since Liz Truss, former Prime Minister of the United Kingdom, announced her "mini" budget which aimed to get the country's economy booming again. However, the day after the budget was announced, the UK's financial markets became unstable and newspapers claimed that the budget was the reason for it. And within days, Liz Truss was quickly booted out of office, to be replaced by Rishi Sunak, before her policies were given a chance to work.
While it's true that interest rates were expected to be at even higher levels than they were when Liz Truss was in charge, it's important to understand that interest rates needed to rise anyway, as they are doing around the world to stave off inflation. The Bank of England was too slow to react and they only had one job: to control inflation, and they failed. But soon, Kwasi Kwarteng's policies ensured that these crippling interest rates were coupled with a stunted economy, while Liz Truss's budget was all about getting Britain growing again, and her low tax agenda was about promoting aspiration and investment.
The mainstream media are not even talking about this. Quite frankly, I don't think they understand it. The crisis of these liability-driven investments or LDI's happened coincidentally just one day before the mini-budget, and most people, not having a clue what LDI's were, misattributed the market turmoil to Truss's budget. The amount of money UK pension funds invested in these risky assets is 1.6 trillion pounds, which is enormous and the same as our entire national debt. What's more, the Bank of England had its own entire pension fund worth 5 billion pounds invested in LDI's last summer. It's quite astonishing that our Central Bank, which you'd expect to act prudently, could put all its own eggs in this one basket. These are the people managing our nation's finances and it's quite depressing.
Liz Truss did not have support from many in her own party, who clearly failed to understand the economics. Immediately after the budget, Michael Gove claimed that cutting taxes were not conservative, even though he has previously described the Conservatives as the party of low tax. Mel Stride, chair of the treasury select committee, complained that Liz Truss's plans could not be relied upon without forecasts, despite the fact that almost every forecast the office for Budget responsibility has made and the IMF has had to be changed within months of them making it. Forecasts are only as good as the models used to make them and everyone knows the OBR's model is utterly flawed.
Senior Tory Rob Helfon, for example, claimed that Liz Truss was acting like a libertarian jihadist. If Liz wanted to set fire to the economic strategy that has delivered no growth for the UK for the last 12 years of Tory rule, count me in. It is utter madness that we don't focus on growing our economy. It's only by growing our economy that we yield tax revenues to pay for public services. By stifling business growth with high taxes and recession, there is no hope for the future.
Conservatives, if you're not going to bring back Liz Truss, please bring back her policies urgently. It was a true Tory budget and if we'd followed that path, we would already be on the road to recovery.
It's important to note that the UK's pension industry had invested more than any other country in the world in extremely risky investments that would collapse in value as interest rates rose. The crisis of these liability-driven investments happened coincidentally just one day before the mini-budget, and most people, not having a clue what LDI's were, misattributed the market turmoil to Truss's budget.
LDI's, or liability-driven investments, are primarily used to gain enough assets to cover all current and future liabilities. This type of investing is common when dealing with defined-benefit pension plans because the liabilities involved quite frequently climb into billions of dollars with the largest of the pension plans.
The amount of money UK pension funds invested in these risky assets is 1.6 trillion pounds, which is enormous and the same as our entire national debt. What's more, the Bank of England had its own entire pension fund worth 5 billion pounds invested in LDI's last summer. It's quite astonishing that our Central Bank, which you'd expect to act prudently, could put all its own eggs in this one basket. These are the people managing our nation's finances and it's quite depressing.
It's important to acknowledge that Liz Truss was not without her detractors. Many in her own party did not support her economic policies. Some even claimed that she was acting like a libertarian jihadist. However, it's important to understand that Liz Truss's budget was designed to get the country's economy booming again, and her low tax agenda was about promoting aspiration and investment.
The mainstream media failed to understand the complexities of the LDI crisis, and Liz Truss and Kwasi Kwarteng were wrongfully blamed for the economic crash that followed the mini-budget. Instead, we should be looking at the bigger picture. Interest rates needed to rise anyway, and the Bank of England was too slow to react. Liz Truss's policies were designed to get the country's economy growing again, and her low tax agenda was about promoting aspiration and investment.
In conclusion, it's time for Conservatives to take a long, hard look at Liz Truss's economic policies. It's clear that her budget was a true Tory budget, and if we had followed that path, we would already be on the road to recovery. The crisis of the LDI's was not the fault of Liz Truss or Kwasi Kwarteng, but rather the fault of the UK's pension industry, which had invested heavily in risky assets. It's time for us to put aside our differences and focus on what's best for the country.
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