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Trussonomics was the best way to save the British economy, supporters of the former Prime Minister have claimed, as new GDP figures have confirmed Britain is in a worse than expected recession. Liz Truss was forced out by Tory MPs after just 44 days after her Chancellor Kwasi Kwarteng’s mini-budget caused a crash in the pound and bond markets, but today’s GDP figures suggest that cancelling their growth plan may have caused long term harm for Britain.
Writing for Express.co.uk, economist Professor Patrick Minford has claimed Rishi Sunak and his Chancellor Jeremy Hunt have “run out of excuses”.
It came as gross domestic product (GDP) – the value of all goods and services produced in the country during that time – is now thought to have fallen by 0.3 percent during the third quarter.
The OBR predicts France and India are now set to pass the UK in economic size with British GDP set to contract by 1.4 percent next year.
Professor Minford, who was Margaret Thatcher’s favourite economist, blamed Mr Hunt’s decision to cancel his predecessors tax cuts and increase corporation tax to 25 percent among a series of crippling tax rises.
He said: “The [current Government’s] Autumn Statement is the main driver of this outlook. It not only abandoned Liz Truss’s programme of keeping tax rates down and planning to lower them further, while supporting the economy against recession.”
He went on: “It has put up corporation tax to 25 percent where it is a major deterrent to innovation and investment; it compounded this by raising taxes on the capital gains that come from business success and also put up income tax rates generally by failing to index tax thresholds to inflation.
“This damaging combination has helped plunge us into recession and damaged longer term growth. The irony is that this also worsens the public finances, as revenues will be lower.
“It is hardly surprising that one of the side effects of all this is that our GDP is falling down the world rankings.”
He also blamed Ms Truss for throwing in the towel on her economic plans including sacking Mr Kwarteng.
Prof Minford said: “The pity of it all is that Liz Truss gave up on her agenda so soon. She should have persevered and kept Kwasi Kwarteng in place as Chancellor, producing a clear long-term budgetary projection, and pushing on with her plans to make Britain a great place to invest and innovate.
“The panic over rising mortgage rates could have been contained by the Bank of England, had she forced it to cooperate.
“We can now see that interest rates should not go much higher with inflation in retreat. Had she pushed the Bank into making that clear earlier by buying government bonds in the market when their rates got too high, we would be in a better place today.”
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Jacob Rees-Mogg, who was Ms Truss’s Business Secretary before resigning when Mr Sunak became Prime Minister, also suggested that the policies of the previous Government would have been better.
He said: “The UK economy clearly needs growth and that will come from deregulation and lower taxes combined with reduced public expenditure.”
Mr Rees-Mogg has, however, urged his colleagues to “stay loyal” to Mr Sunak.
Veteran Brexiteer MP Sir John Redwood, who headed Baroness Thatcher’s policy unit in the 1980s, said: “Yes of course we need a growth strategy.
“I forecast a recession on their policies when their forecasts were too optimistic.
“Time to amend Bank and Treasury policy which is driving the economy down. I warned this would also increase the deficit and borrowing, as November’s official figures proved.OBR was far too optimistic on borrowing in its March forecast as I warned.”
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Commenting on the GDP figures, one said: “This really is a big issue.”
There are also fears that the economic policy is “undermining the benefits of Brexit.”
One senior Brexiteer MP said: “Colleagues are exhausted at the moment but if this continues there could be problems for the Prime Minister in the new year.”
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