At a macro-level, it reinforces prudence and affordability. But at a micro-level, it can be an obstacle to speed, efficiency and innovation.
The risks of an adverse market reaction were obvious in advance of Kwarteng’s statement, and a wise Chancellor would have taken heed of it. Unfortunately, the Permanent Secretary had been dismissed and he ploughed on apparently oblivious to the risks.
This Chancellor’s statement was Trussonomics at its purest. If it pays off, it will be the biggest vindication of economic liberalism since Thatcher at her pomp. But that is a big if.
In one of the most remarkable statements from a Chancellor in living memory, Kwarteng pledged to reduce the top rate of income tax – amongst many other measures.
“‘Rift’ claims as Treasury Chief retires,” the Independent reported in 1998, after Brown eased out Terry Burns.
At the very least, we need an Office for Economic Growth, as proposed by both Kemi Badenoch in her leadership bid and the former Treasury minister, Lord Agnew.
Both candidates agree: there is a “Treasury orthodoxy” that damages economic growth. Coming from an ex-Chancellor and a former Chief Secretary, that is a powerful charge.
He will have believed he had no need to define himself more clearly when his poll ratings were high. So now other people are doing it for him.
My guess is that she is too smart to allow the worst case scenario to happen. To do that, however, she is going to have to move swiftly from focusing on winning the confidence of Conservative MPs and party members to winning the confidence of the markets.
It would help reach that holy grail for all politicians: to find the key to long run economic growth. To grow the pie so that all in society can benefit.
In future, the economy may run into inflation bottlenecks earlier in economic recoveries than before, thus constraining growth.
There is a lot of rhetoric about boosting vocational training, but we need to do more to deliver it in practice.
As one Cabinet Minister put it to me recently, the Treasury has never been interested in growth, just in collecting taxes.
The Government should be more worried about the balance of payments deficit than about the government deficit. We cannot rely on the goodwill of foreigners. We need to start to close the gap and reduce our demands on foreign currency markets.