Kwarteng's 'mini-budget' marks arguably the biggest shift in economic policy since Thatcher

Kwasi Kwarteng will unveil his budget on Friday. Credit: PA

There is literally nothing mini about Friday's so called mini budget, or fiscal event.

It represents arguably the biggest shift in economic policy by a government since Margaret Thatcher’s more than 40 years ago - unless you count the way that Tony Blair’s New Labour made peace with market economics.

Kwasi Kwarteng the chancellor will say it’s all about growth. And there will be lots of investment in infrastructure, which is fairly mainstream, and passionate pledges to slash red tape and regulations - which will only be novel if it actually happens.

But it is the scale of the expected tax cuts at a time when the government is already running a deficit and when inflation is wreaking havoc on living standards that is striking.

These are tax cuts that will be paid for initially out of borrowing.

We've got the National Insurance cut, we've got corporation taxes not going up as planned, we’re likely to get a significant stamp duty reduction, and it is possible that a promised 1p per pound reduction in the basic rate of income tax could be accelerated.

This will add up to well over £30 billion a year, maybe even £40 billion pounds, in giveaways - and that will lead to £40 billion of more borrowing each and every year.

Unless Truss is right that the economy will grow faster as a direct consequence and the yield from all continuing taxes will increase.

To put it another way, unless somehow this package of tax cuts and other reforms achieves Liz Truss’s target of increasing the UK’s underlying growth rate to 2.5% a year, from its current steady-state rate of around 1.5%, Truss’s government will be unable to balance the books, and the national debt will rise inexorably as a share of national income.

She would be guilty of the alleged fiscal crime that Gordon Brown’s Labour was accused of - Brown would say dishonestly though compellingly - by her Tory predecessor David Cameron in 2010.

Except Truss would be far worse than Brown, because she would be stoking already high inflation and risking a further collapse in the value of the pound - which in turn would fuel inflation further.

In that sense Truss would not be the heir to Thatcher she claims to be. She would be the anti-Thatcher - since Thatcher put up taxes and interest rates to increase the value of the pound and slay inflation.

Thatcher might indeed accuse Truss of recklessness.

But Truss might not care, so convinced is she that the UK’s economic torpor requires shock treatment.

The question is whether the economy will be shocked back to stable health or to an unhealthy and unsustainable inflationary boom.