The market didn’t respond to Theresa May’s speech

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The market didn’t respond to Theresa May’s speech

As others have noted, the top rate tax rabbit had been returned to the hat on Monday morning.

The markets did not respond to because there was nothing to respond to during the speech. The effective borrowing costs of government were down and sterling went up on the day.

It is hard to conclude that the speech, and others at the conference, have been edited to remove anything that could reignite market jitters.

Given the circumstances, that seems to be a sensible one. It is often forgotten that Theresa May's speech at the same venue in 2016 made sterling fall. There were significant announcements before and after the main show on the conference floor. The markets can't wait seven weeks for hard numbers - that's the reality that Number 11 has come round to after pressure from the Chair of the Treasury Select Committee. Plan B is slowly taking shape.

It shows that the government is prepared to do what it takes to regain market confidence. If there was any doubt as to the need for that, mortgage broker Paul Butlin - whose office is a 10 minute walk from the conference centre - could set it straight.

He told me that NatWest had just returned to the mortgage market, and repricing five-year fixes were 1.5 percentage points higher than a week ago. As I left, the interest rate on a landlord mortgage had doubled to over 7%, well above a commercial return.

Big name businesses are facing over 10% of their borrowing costs because of it. Many people can't raise finance at that rate and will have to turn to shareholders. What happened last week in the market turmoil is now fully filtering into the economy.

The experience of the top rate of tax U-turn shows that MPs will weigh in favor of the reforms that benefit the wealthy, even though Downing Street will say that new OBR forecasts need to be changed in this order.

After all, the popularity of a fiscal measure matters. The impact of such changes on the poor and the rich is a factor. The impact on growth will have to be weighed against the impact on macroeconomic stability.