Kwasi Kwarteng bets the house on growth - but financial markets aren't buying: Chris Burn

Imagine that when asked how you were going to make the sums add up, you said you would initially fund it with extra borrowing but the currently hypothetical additional growth of your house price at the end of the project was going to be thing to make it all worthwhile.

It is fair to say that most people would reasonably expect a bank manager to raise an eyebrow and politely show you the door.

That is, in very simplified form, what the financial markets have initially determined about Kwasi Kwarteng’s so-called ‘Mini Budget’.

Committing to a necessarily huge bailout for households and businesses on energy bills that will cost £60bn for its first six months of operation is one thing, doing so while also bringing in £45bn worth of tax cuts largely targeted at helping the wealthiest is another.

Government borrowing will increase by £72bn as a result of the announcements, according to the Treasury’s own projections – others such as the Institute for Fiscal Studies believe the final bill could end up being £120bn in three years’ time.

The pound has since fallen to record lows – a situation that will send the cost of goods soaring even higher, potentially worsening the cost-of-living crisis, while also making it more expensive for the Government to borrow money.

Mr Kwarteng is reported to be “sanguine” about the fall in value of the pound, with allies claiming it is the result of a combination of strong dollar and “City boys playing fast and loose with the economy”, and as such was “bound to happen”.

The remarks were briefed as part of the same Times report suggesting two years of real-terms pay cuts for public sector workers are now planned while a spending review freeze combined with continuing high inflation will put major pressure on the budgets of schools and hospitals.

While the public position is now that the Chancellor is relaxed about the fall in the pound, Chief Secretary to the Treasury Chris Philp rather gave the game away on Friday when he praised an initial and very fleeting rise in its value by tweeting, “Great to see sterling strengthening on the back of the new UK Growth Plan”. As has been pointed out repeatedly by hundreds on social media, that assessment is not one that has aged well.

It is worth winding the clock back just a month to Liz Truss’s leadership rival and the former Chancellor Rishi Sunak warning that her tax-cutting plans could have extremely serious economic consequences.

He said: “Increasing borrowing will put upward pressure on interest rates, which will mean increased payments on people’s mortgages.

It will also make high inflation and high prices last for longer, making everyone poorer.”

With the Bank of England now reportedly considering a further emergency interest rate hike just days after raising rates by another half percentage point to 2.25%, Mr Sunak’s warning is rapidly becoming a reality.

Supporters of Mr Kwarteng will argue his gamble of betting the house on future growth is a risk worth taking that will be borne out in the long-term. But for now, the markets disagree.