It’s a bold move for any government to pencil in a significant event for Halloween. Should it go wrong, the headlines write themselves – a nightmare. Indeed, Philip Hammond broke with tradition in 2018 and announced the Budget on a Monday to avoid “House of Horrors” front pages.

So Kwasi Kwarteng’s decision to bring forward the Government’s fiscal event to 31 October immediately raised alarm bells with nervous Tory MPs. After all, the first one – the not-so-mini-Budget – managed to cause a Tory meltdown with no superstitions attached. “The first thing he should do is not hold the event on Halloween,” says one fed-up former minister.

But unfortunately for Kwarteng, his problems go far beyond what day he chooses to lay out his fiscal plan. When it comes to the pressure the Chancellor is under to reassure the markets that he has a plan to balance the books, as one government adviser frankly puts it: “There are no good options.”

After riding into Downing Street with promises to shake up the Treasury orthodoxy and undo years of stagnation, Liz Truss and her Chancellor find themselves squeezed between the financial reality of their plans and the political response. The Institute for Fiscal Studies estimates that there is now a need for cuts in the region of £60bn to get public finances back under control. That is almost twice what George Osborne cut in 2010.

Truss’s hope had been that the markets would wear her plans to borrow to fund tax cuts as well as her energy support package. She had some reason to think that: borrowing has been low for over the past decade. Only a combination of global factors (the cost of borrowing rising across the board) and mistakes in the handling of the mini-Budget (from no official costings to new tax cuts that were not briefed to the media) mean that the markets took fright.

Since then economic turmoil has followed with mortgage offers withdrawn, rates rising and the cost of government borrowing soaring. Some of this would have happened anyway – but the fiscal event has meant voters largely associate this with the Government and its actions. According to YouGov, 52 per cent of voters think that the Government is most responsible for rising mortgage costs. Mortgage holders are a key Tory constituency – they won them by 10 points in 2019 – and since the mini-Budget, the Tories have dropped in the polls.

It is now very hard to put the genie back in the bottle. The mood on the back benches is mutinous. “Their incompetence means that every economic challenge will be blamed on us,” says a senior Tory. “We have claimed ownership of every turd we can find.”

Kwarteng and Truss have three unappetising options.

One, push on and say that growth will pay for it all despite the forecasts not matching their hopes. The markets are unlikely to take a sympathetic view. Borrowing costs are likely to continue rising.

Two, announce plans for mass spending cuts which could go down like a lead balloon with both Tory MPs and voters. During the 2019 general election, then Tory leader Boris Johnson told me in an interview that austerity during the Cameron era had been a mistake. It was this message of higher spending for public services that helped to take the party to victory. It’s hard to see how significant spending cuts would keep the coalition together. Even if the Government suggests it will balance the books come 2025-26, thereby avoiding short-term pain, it doesn’t seem politically feasible. Would the party really campaign on spending cuts?

Finally, another option could be to reverse or delay a number of the tax cuts announced in the mini-Budget. It would mean Truss and Kwarteng losing even more political capital and raise the question as to the point of this Government, given that tax cuts were the main pledge in the leadership campaign.

Yet they could soon be confronted with a stark political reality if they don’t get the situation under control. MPs in the Commons chamber on Tuesday warned Kwarteng not to announce or proceed with anything that MPs will not back. Already questions are being asked as to whether 1p off income tax is the right policy for now.

While the path forward is uncertain – and all come with problems – one thing is clear: Truss and Kwarteng’s plan to defeat the Treasury orthodoxy is flagging just a month in. They are having to adjust to the fact that even the boldest of governments can’t take on the markets without consequence. The appointment of James Bowler as Permanent Secretary to the Treasury over fellow civil servant Antonio Romeo is the latest example of the orthodoxy striking back. Unlike Romeo, Bowler has plenty of Treasury experience – though he is still on friendly terms with the new Prime Minister.

This winter was always going to be tough for the Government and country. But missteps from Truss and Kwarteng early on mean that it is more uphill than anyone in Downing Street imagined. Kwarteng faces an unenviable task. In order to calm the markets, he risks severe political pain. That’s a nightmare for any Chancellor – not least on Halloween.

Katy Balls is deputy political editor at The Spectator

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Truss and Kwarteng have three options – all of them unappetising

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11.10.2022

It’s a bold move for any government to pencil in a significant event for Halloween. Should it go wrong, the headlines write themselves – a nightmare. Indeed, Philip Hammond broke with tradition in 2018 and announced the Budget on a Monday to avoid “House of Horrors” front pages.

So Kwasi Kwarteng’s decision to bring forward the Government’s fiscal event to 31 October immediately raised alarm bells with nervous Tory MPs. After all, the first one – the not-so-mini-Budget – managed to cause a Tory meltdown with no superstitions attached. “The first thing he should do is not hold the event on Halloween,” says one fed-up former minister.

But unfortunately for Kwarteng, his problems go far beyond what day he chooses to lay out his fiscal plan. When it comes to the pressure the Chancellor is under to reassure the markets that he has a plan to balance the books, as one government adviser frankly puts it: “There are no good options.”

After riding into Downing Street with promises to shake up the Treasury orthodoxy and undo years of stagnation, Liz Truss and her Chancellor find themselves squeezed between the financial reality of their plans and the political response. The Institute for Fiscal Studies estimates that there is now a need for cuts in the region of........

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