The Bad Alternative to Trussonomics

This and reversals on dividend tax cuts and alcohol duty reductions come on top of the previous U-turn on the top personal income-tax rate, which is staying at 45% rather than falling to 40%, and plans to proceed with an increase in the corporate tax rate to 25% from 19% next April. What remains of Trussonomics is a 2.5-percentage-point cut in the payroll tax, and a break on the stamp duty, a transaction tax on home sales.

The critics claimed investors were clamoring for evidence of fiscal rectitude, so Mr. Hunt is also cutting the energy-price subsidies Mr. Kwarteng promised. The subsidies now will expire in April rather than running for two years. Mr. Kwarteng said last month the subsidies would cost £60 billion in the first six month alone, but for some reason the fiscal scolds in the media seem surprised this popular policy is also getting the chop.

Mr. Hunt’s announcement worked in the narrow sense of inducing a positive market reaction. Yields on government bonds fell and the pound gained about 1.5% against the dollar, to just above $1.14.

This is the kind of “stability” Ms. Truss’s critics said they crave. It’s also an illusion. Interest rates inevitably must rise in coming months as the Bank of England under Governor Andrew Bailey pursues its tardy and ineffective fight against inflation at 40-year highs. Mortgage borrowers can still expect their adjustable-rate payments to rise steeply. Improperly hedged pension funds will again face the pressure from rising rates that triggered panic gilt selling after the Sept. 23 tax-cut announcement.

Now, however, as households feel the bite of inflation and rising mortgage rates and pension funds and other investors flee gilts for higher returns, they’ll discover the British economy’s prospects for economic growth have been dented by the collapse of Ms. Truss’s plan. Britain now is a high tax, high inflation, low productivity, low growth economy again.

Ms. Truss’s political sin was to rush out a supply-side economic plan in a country, and a Conservative Party, that didn’t understand it—and then fail to persuade or keep her nerve. She soon may pay with her job.

But her Tory opponents fail to correctly diagnose Britain’s economic ills or to offer a solution other than immiserating the British middle class via taxation and inflation. The Tories will be uncommonly lucky if they don’t pay for this at the polls in the next election.