ALEX BRUMMER: Strikes threaten tax cuts 

The ghosts of the autumn 2022 meltdown in currency and bond markets are stalking Washington. 

One might think that after the battering her Government took at the International Monetary Fund (IMF) in October, former Prime Minister Liz Truss would want to give the US capital a miss.

Yet there was Truss yesterday delivering the Margaret Thatcher Freedom Lecture at the Heritage Foundation think-tank.

She returned to her favourite theme of lower taxes, suggesting that woke policies mean ‘more tax, more subsidies, more regulation’.

The Liz Truss-Kwasi Kwarteng agenda was crushed by the financial markets.

Tax talk: Former Prime Minister Liz Truss delivers the Margaret Thatcher Freedom Lecture at the Heritage Foundation think-tank in Washington

The fallout, in the shape of the eruption in the UK’s defined salary pension funds, is seen by the IMF as one of the first fissures in the post-great financial crisis stability.

In this new age of inflation, the IMF doesn’t much like radical thinking. Its Fiscal Monitor argues that restrained public finances are an important tool in cutting price levels. Controlling public sector pay and indexation of benefits are critical.

Moral objections to the 96-hour strike causing 350,000 NHS operations are strong enough. The economic and fiscal arguments are equally powerful.

It is sometimes argued that pay settlements in the public sector have no direct impact on inflation.

A claim for a 35 per cent increase, as the battle against consumer prices is being waged, plainly is political, and vengeful. 

If paid, it would send a terrible message to other public sector workers and increase unfunded public sector pension liabilities.

It would also add to borrowing and raise the cost of servicing the national debt.

That could be as dangerous for gilts markets and the cost of mortgages as Truss’s well-meant, but unaudited, tax cuts.

Chancellor Jeremy Hunt used some of the headroom in the public finances, a result of falling energy prices, to get the country back to work through childcare and pensions incentives for stay-at-home Britain in his March budget.

IMF data suggests he faces an uphill battle in bringing national debt levels down in the next several years. Forecasts show UK net debt climbing from 95.1 per cent of output this year to 101.2 per cent by 2028.

The March Office for Budget Responsibility projections show the debt-to-GDP ratio moving in the opposite direction.

If the IMF is right the Treasury will have trouble meeting fiscal rules and Chancellor Jeremy Hunt’s trick of pulling a tax cut rabbit out of his hat before the general election will be spoiled.

The current bloated borrowing and debt levels are the troubling inheritance from Covid-19 and Russia’s war on Ukraine.

Crunch time

As Jeremy Hunt began his meetings in Washington he must have looked enviously across at the US Treasury.

Not only have the Americans embarked on an enormous fiscal stimulus but inflation is also tumbling.

British consumer prices rose in February to 10.4 per cent, although there must be hope that March will be more favourable as energy costs start to fall out of the index. 

As for the US, the annual rate of consumer price rises fell to 5 per cent in March, down from 6per cent in February, and is now at its lowest level in two years, having peaked at 9.4 per cent.

Core inflation, which takes energy and food prices out of the equation, is much more stubborn. Clothing manufacturers and retailers are not sharing the benefit of lower fuel costs with consumers just yet.

The drop in the headline rate of inflation has ignited debate about whether it is time for the US central bank, the Federal Reserve, to pause rate rises and hold the rate in the 4.75 per cent to 5 per cent range set in March. The divisions among rate-setters have been accentuated by banking turbulence.

The Chicago and Philadelphia regional Fed presidents are urging prudence at time of stress. Not before time, the message that it is bonkers to increase rates into a credit crunch is being heard.

Soft shoe shuffle

Do you happen to have a signed pair of Air Jordan sneakers? If so, you are in luck

A pair of the emblematic Air Jordan XIII sneakers worn by the basketball genius Michael Jordan in the 1998 NBA finals has sold at Sotheby’s for £1.8million.

Eat your heart out, Kanye West, the disgraced rapper who held the previous sneaker price record.

This post first appeared on Dailymail.co.uk