One minister from John Major era, who phoned me after the speech, said that even if the strategy works perfectly, it will take time. In the mid- 1990s he experienced an economic shock that affected mortgages, and was linked in part to government decisions. In his view, British voters do not give credit for cleaning up their own mess, because it has always been a forecast for future years from the Office for Budget Responsibility rather than fact, and it seems contrary to what he thinks of decades of low growth that was only a prediction. The taxation of the last quarter of a century has averaged 32.8% as a proportion of GDP, according to prime ministers Blair, Brown, Cameron, May and Johnson. That number was 32.4% of GDP under Mrs Thatcher's 11 years.
It is true that lower taxes can help boost growth, but all of this raises the question as to what has been weighing down the economy. It is striking that the government's comprehensive and transformational policy agenda is not going well without a thorough analysis of what the growth problem is, why it has occurred here and not in USA or Germany, and therefore how it should be addressed.
What other policies can increase forecast growth so quickly, which would help the current numbers add up, when the OBR does its sums? There is a need to increase the number of foreign workers to address the labour shortages around the country. Is it possible to reverse recent reductions to the OBR's long-term growth forecast if people who oppose changes to the immigration rules for political reasons are part of the anti-growth coalition Moves to lower new post-Brexit non-tariff trade barriers for British exporters. Since the beginning of the 20 years, Britain has set the gold standard for institutional independence when it comes to economic policy, built up by successive governments. That meant low borrowing costs, even through financial, and eurozone crises. In recent weeks, this administration has allowed the perception to grow that it is fiddling with these essential controls on the economy. That perception was fed by leadership campaign rhetoric and the mini-budget's massive tax cuts, presented without hard borrowing numbers.
Over the last few days, the sterling recovered its losses, but borrowing costs are still higher. There are also higher perceptions of how high the Bank of England will have to raise benchmark interest rates. After a decade and a half of ultra-low interest rates, rates were always going to get back to normal higher levels. It didn't have to happen in a matter of days. Rates for mortgages and company lending have been moving up due to the PM's choice of theme tune.
The extra interest rate shock will hit the economy and how much it will cost the government, according to the OBR. It is true that the UK's growth will also be affected by rising economic challenges in other parts of the world, including the eurozone and the USA.
If the PM's speech was light on policy, that might reflect the need to not do anything at this point, which could further spook markets. It seems that the lesson of the last week might have sunk in: that macroeconomic stability, rooted in institutional credibility, is actually a prerequisite for growth, growth, growth, growth.