One major event which has huge economic implications and creates widespread uncertainty is usually enough to test the government machine’s breaking strain. Today, we have four: a budget, a pandemic, a climate-change conference and global geopolitical insecurity. (Even though the final one rarely makes the headlines, it could be the most important – and dangerous – of them all.)
The others have one point in common: uncertainty. The politicians have to make crucial decisions while the experts are quarrelling. Let us start with the Budget. Chancellor Rishi Sunak has a simple task – to reconcile two apparently incompatible objectives: high growth and low inflation. The economy has to grow its way back to health and in order to assist this process, the government and the Bank have relaxed monetary policy to an extent that would have horrified old-fashioned Thatcherites. For a time, it seemed to be working. There was a rapid recovery. Unemployment stayed low and the threat of inflation appeared to be containable. Although a spike was expected, there was a lot of hope that it would prove temporary.