ON Friday, the new Tory government will unveil a mini budget that is anything but mini. Chancellor Kwarteng will announce, in his impeccable Eton-educated cadences, a £150 billion scheme to limit household energy bills. He will also reverse planned rises (initiated by his predecessor but one, the unlamented Rishi Sunak) in corporation tax and National Insurance. Even with government revenues buoyant as a result of inflation, the new Chancellor’s plan to cut taxes and increase spending will shipwreck any idea of Tory fiscal conservatism.

Are we seeing the end of austerity and a new “dash for growth”? If history has anything to teach us, don’t hold your breath.

But wait a moment. I called Friday a “mini budget”. But the Chancellor is steadfastly refusing to use the word “budget” in reference to Friday’s statement. Just as Vladimir Putin refuses to call his invasion of Ukraine a war (it’s a “special operation”) so Mr Kwarteng won’t call his budget a budget. Instead, he refers to it as a “fiscal event”, which it certainly is. The reason for this silly obfuscation is because of the existence of the Office for Fiscal Responsibility (OBR), Britain’s statutory, independent fiscal watchdog set up by the Tories themselves in 2010.

The OBR was created by George Osborne – now making a fortune as a financial adviser – to ensure that the economic and fiscal forecasts used by government in framing its budgets should not be deliberately fiddled by the politicians to be over-optimistic or hide bad news. Cameron accused Gordon Brown of such duplicity during the latter’s time as chancellor (a criticism that had some justification). So the OBR was created as an independent fiscal referee.

However, Truss and Kwarteng now find themselves hoist on their own OBR petard. Everyone and his uncle knows that if you increase public spend and cut taxes (by an estimated £30bn per annum) at the same time, you will create a massive fiscal deficit. You can only fill that deficit through more state borrowing.

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That, in turn, will upend the standard Treasury rule to have the National Debt fall as a proportion of GDP. Truss and Kwarteng argue that their fiscal stimulus to the economy will kickstart economic growth – over the three months till July UK economic growth only flatlined. But Truss and Kwarteng don’t get to forecast the outcome of their policies – that’s the province of the independent OBR.

It is up to the OBR to forecast economic performance and evaluate the impact of any budget moves. Yet there is no way the new Truss administration can risk the OBR pouring cold water on its fiscal plans. As it is, the independent Bank of England (BoE) is already predicting a humongous recession for next year – the very opposite of growth. The Bank’s governor, Andrew Bailey, is dropping heavy hints that cutting taxes will also add to inflationary pressures; meaning the BoE will have to raise interest rates, starting this week.

Rather than have the OBR and BoE pour buckets of cold water on their budget plans, Truss and Kwarteng have resorted to subterfuge. If they don’t call Friday’s “fiscal event” a budget, then the OBR is not legally obliged to publish the relevant forecasts and evaluations. The Tories can announce higher growth and none of us will be any the wiser – not! At the very least, this is a cheap trick. After all, it was the Tories who set up the OBR in the first place. Now they find it a political inconvenience.

We are not done. Largely lost in the media blitz surrounding the Queen’s funeral, Chancellor Kwarteng has launched a putsch inside the Treasury by instantly sacking its veteran permanent secretary, Tom Scholar. A fixture at the Treasury since Gordon Brown, Scholar is the intellectual brains behind the austerity of the past 15 years. For that reason, I am not shedding tears at his forced departure.

But Scholar’s sacking also represents a move by the Truss-Kwarteng alliance to centralise government and neuter any independent thinking in the civil service. And that is dangerous, especially for Scotland.

Clearly, Truss and Kwarteng are set to override the normal constitutional checks and balances, especially those concerning economic policy. Conceivably, they could get away with this if Britain suddenly and magically enters a period of rapid economic growth, thanks to Friday’s “fiscal event”. But the financial markets appear deeply sceptical. This week past, the pound sterling tanked to its lowest level against the US dollar in 37 years. Investors and institutions are dumping pounds and buying dollars. That is hardly a vote of confidence in the new chancellor.

We have been here before. I am old enough (and cantankerous enough) to remember the infamous “dash for growth” of another Tory chancellor, the long-forgotten Anthony Barber (1920-2005). Barber was chancellor under Edward Heath, between 1970 and 1974. This was also a period of soaring inflation. Barber tried to break the mould of British economic orthodoxy by slashing taxes and liberalising credit – just like Kwarteng is doing. The result – initially – was the “Barber Boom”.

However, the combination of loose finances, global inflation and a soaring budget deficit caused the markets to panic in the early 1970s. The pound collapsed in international currency markets, just as it is doing now. That only made imports more expensive, adding to inflationary pressures. (For the record, the fall in the value of the pound this year has added circa 15% to import costs – meaning the BoE is bound to raise interest rates to penal levels.) The Barber Boom ended in economic chaos, the Three-Day Week and the Tories being ejected from office at the February 1974 General Election.

Could history repeat itself? I don’t doubt that Kwarteng can bung enough short-term stimulus into the economy to boost growth pro tem. But the inflation numbers will soar and the BoE will raise rates. This will divert more and more public spending into servicing the debt, squeezing wages in the public sector and triggering more strikes. This is hardly a scenario conducive to investor confidence. Eventually, under pressure from the city, the government will back down and try and balance the books. Or, more likely, an incoming Starmer government will do it for them.

Is growth a chimera? Not at all. But it will require something more than ending the limits to bankers’ bonuses or cutting corporation tax. The latter will only see company profits given back to shareholders rather than invested in high-tech. Instead, we need to shift from debt-fuelled consumer consumption to investment in production and training. We do that through state-led investment banks with given targets, not through the anarchy of the market. But I can hardly see an Eton-educated, ex-investment analyst at JPMorgan Chase like Kwarteng bucking the market.

However, we can expect Chancellor Kwarteng to try and surprise the markets with some big fiscal rabbit from his hat. My guess would be a cut to income tax. Even a small one would offset the impact of inflation on family budgets and set the tone for his stay at Number 11. Even then, this will only delay the inevitable economic course correction. Those who live by the market, die (politically) by the market.