Economic firestorm sparked by Truss’s mini-budget is remarkable

“The sudden collapse of the UK government’s remaining economic credibility is an event that will define British politics for years to come, with unavoidable effects on Ireland” – so writes our columnist Newton Emerson, and you have to suspect he’s right. The pace of what has happened in Britain, and tunnel vision caused by our own budget, means the importance of this story has been slow to land.

But the Bank of England being forced to step in yesterday to purchase its own government’s debt (our lead today), days after Liz Truss’s mini-budget started an economic firestorm that has set sterling, mortgages and now the pensions industry ablaze, is remarkable.

Following on from an extraordinary intervention by the IMF (ratings agencies like Moody’s started getting in on the act too, resurrecting another ghost from our own none-too-distant past), the BoE’s actions probably averted an immediate economic disaster. The economic effects will still hit Ireland – tourism and exports will take a hit, along with UK-facing Irish firms, which will be magnified if and when the fallout migrates more from the markets to the real economy.

The political effects are even more dislocating: Dublin has been waiting for a reliable counterparty to emerge in London for six years, but the damaged and broken British system keeps offering up less and less credible candidates. Hopes were never high for Truss, but with her economic and political credibility suddenly and near-totally in tatters, what chance that she can grapple with the protocol, usher the DUP back to Stormont, or restore trust to East-West relations?

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Senior officials and politicians in Dublin are slack-jawed looking across the Irish sea: their feelings are somewhere between sympathy (it’s not too long since the markets dissolved an Irish government), confusion, bewilderment and concern. Between punditry (will Truss and chancellor Kwasi Kwarteng reverse ferret or double down? Will they break cover before the Tory party conference? Will either of them stay in post? Will they attempt a round of austerity to calm markets, and how will voters react? Will this hasten Keir Starmer’s ascent to No. 10?), policymakers in Ireland are trying to grapple with what this latest hairpin turn in British politics means for Ireland. None of it looks good.

With Tory MPs branding the moves “inept madness”, head over to the Guardian if only to enjoy the quotes being proffered to Westminster hacks (“extinction level-stuff”; “this government is dead on arrival”.

Political support for blocks levy crumbles

Just when our Government was tempted to sound the all-clear after the budget, they’ve been hit with a barrage of criticism from their own backbenchers over the introduction of a concrete product levy to go some way to offsetting the potential €3 billion cost of the mica and pyrite scandals. With signs of a slowdown in the house building market already, government TDs are wailing that another headwind is the last thing the sector needs. Is this a major issue or merely a hiccup?

One Minister of State, speaking privately yesterday, said the step was a mistake and should be reversed – but was unwilling to go on record with their complaints, indicating it is not open season just yet anyway.

A lot depends on the Finance Bill, which will tell more about the structure of the levy, and whether the coalition’s backbenchers are willing to be won over. The backbenchers are cranky without this being a full scale revolt – so you’d think a U-turn is not inevitable. If the Government can win the argument over how much this would add to house prices (the Department of Finance says 0.4 per cent), it is likely to hold the line.

Best reads

Prof Desmond O’Neill has a forceful piece on nursing home care

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Miriam Lord’s take on the day after the budget – après the spending deluge - is here

Playbook

Dáil business starts with oral questions for Catherine Martin at 10.30am, before Leaders’ Questions at midday. The budget debate continues in the afternoon, before Topical Issues at 6.15pm and the Dáil adjourning for the week at 7pm. It’s a busy day in committee land, with Paul Reid at PAC at 9.30am, the Tánaiste at the committee on gender equality at the same time.