Government’s plan for growth sends markets reeling

While it should initially soothe some of the recession we are already likely to be in, the huge borrowing has sent markets reeling.

It's been one of the worst days for UK government bonds in decades, with some of the biggest one-day hikes in the cost of borrowing since the 1990s.

The markets had to tell the government that it needed to borrow an extra 72 billion dollars this year, but did not publish the numbers behind that. Interest rates charged for British debt hit 4%, having been 3.1% earlier this week, and 1.8% at the beginning of the leadership contest with Rishi Sunak.

The Treasury's forecasts show how much tax revenue would be raised if the reforms were able to spur growth in the economy.

The table, while an aspiration that every chancellor and every politician seeks, has not convinced the markets. It is an assumption of extra tax revenue that has replaced actual tax.

The growth of the economy is going to increase over the long term, and so is the tax revenue. The details of that plan are not included in today's announcement. A tax cut that could underpin such a plan is mainly what we got today, along with some interesting economic reforms for financial services and enterprise zones.

Many of the most important economic policies that could help boost growth were left unmentioned. The last time the Office for Budget Responsibility adjusted the UK's long-term growth prospects, it was to cut them in July because of Britain's shrinking workforce. Maybe workers visas, skills, infrastructure, trade barriers for exporters to Europe will be addressed at some point in time. All contain growth-enhancing policy areas that will test the limits of the PM's acceptance of doing unpopular things.

The prime minister criticised bean counters in her leadership campaign. Today's plan shows only one side of the ledger. For a chancellor making a debut, it is usual to focus on fiscal credibility. The government has thrown the kitchen sink at it, but there are a lot of risks in this plan. It should help growth upfront. The economy may be left behind in a couple of years due to the fact that global markets send interest rates to the government rocketing, but there is a chance that there is a permanent hangover of high interest rates and high debts. There are risks in the housing market as mortgage rates and commercial borrowing increase.

There are many gaps left to fill in this plan for growth. It is important that growth be a reality and the government needs an aspiration to make it a reality. The echoes of the last budget of this size in 1972, which led to an infamous boom and bust under chancellor Anthony Barber, will not be comfortable.