(Bloomberg) — Taxes and spending
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Mortgage costs would soar if the reform leader were to act Nigel Farage wins the July 4 elections or manages to get his plans adopted by the next government. He compared the impact to the market turmoil following Truss’ unfunded tax cuts in September 2022.
“The market would demand a crazy premium and mortgages would probably rise again,” Weale said in an interview. “This would be an event similar to the Liz Truss event.”
Farage’s plans include £90 billion in tax cuts and £50 billion in extra spending per year, paid for by cutting benefits, ending “waste” in the public sector and making massive cuts to the government’s quantitative easing program Bank of England.
The Institute for Fiscal Studies, a think tank, said the figures in the party manifesto were “incorrect.”
Weale’s warnings carry weight because he rightly predicted that Truss’ tax-cutting mini-budget would “end in tears” with a “run on the pound” and higher interest rates.
He made that call a day before the ‘Growth Plan’ was unveiled in September 2022. In the wake of the government’s announcement, sterling collapsed to a record low, borrowing costs rose and the BOE had to intervene to prevent a financial crisis. Truss resigned as Prime Minister a month later.
“Markets are missing a lot,” Weale said, but added that he believes the reform plans would still provoke a sharp reaction. “Tax cuts do not solve the supply-side problems of the economy. Sterling would fall in value and long-term interest rates would rise.”
Farage claims reforms could transform the Conservatives and become the real opposition in next month’s election. Polls show the country is only a few points behind the Tories in vote share, but Britain’s first-past-the-post system means it is unlikely to win many seats.
Farage previously led the UK Independence Party and the Brexit Party. Although he was a key figure in Britain’s withdrawal from the European Union, he has failed to achieve electoral success in terms of parliamentary seats.
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