The emergency Budget may just save the government

There are two audiences and two objectives. Audience one is the British public, audience two is the global money markets, writes Hamish McRae

Spend, spend, spend means borrow, borrow, borrow (PA)

Will Trussonomics work? It is very simple. If the emergency Budget on Friday helps the economy deliver a reasonable success story in two years’ time it may just save this government. It will be a case of “the economy, stupid”, to quote James Carville’s famous message to voters in Bill Clinton’s successful run for president in 1992. And if not, the game will be over. So what should we be looking for?

There are two audiences and two objectives. Audience one is the British public, audience two is the global money markets. Objective one is to get the UK economy through this winter without a recession, or at least a serious one. Objective two is to jack up the UK’s long-term growth rate.

It is for the political analysts to judge how the voters will react once the dust settles, and anyway they have a couple of years to make up their minds. So let’s focus on the second audience, the markets. It is really important to get them onside because if you are going to borrow an extra £100bn from them, they need to have confidence in what you do. Otherwise, the pound goes down even further, and that pushes up inflation. And gilt yields climb even more than they otherwise would, and that pushes up the government’s borrowing costs, mortgages, and the cost of funding for businesses.