The UK economy is effectively in a slow-motion tailspin. Britain’s new government has just two years to prove it can govern after three failed attempts in twelve years by the same party. Desperate times calls for desperate measures or in this case – huge gambles. These gambles are now seemingly the only option because those at the very top don’t really know what the antidote to Britain’s economic ills are or how to solve them.

With out-of-control energy prices causing the new PM to act – Truss had several options – she chose to save energy companies’ dividend payments. The EU chose to tax windfall profits. This action will inevitably lead to rising interest rates – that is unless the government intervenes in the independence of the bank of England – which it will do.

The cost-of-living crisis is a hot political potato and its one the government has no option but to hold. This is especially so because Brexit has caused the economy to contract. It will, according to the OBR cause a contraction of something like 4 per cent of GDP for at least a decade. Without inflation – that’s a loss of economic activity of about £85 billion a year or £850 billion to 2032.

So desperate is this government that they are preparing to hand out fracking licences. Only 27 per cent of the British population support fracking – lower in fact than support for coal as an energy source.

But how about this for a truly desperate measure? Kwasi Kwarteng, the new chancellor, now looks set to scrap Britain’s cap on bankers’ bonuses, introduced after the 2008 financial crash, in a highly controversial move in an attempt to “boost the City of London’s global competitiveness.” What this will do is attract the very same people and ask them to do exactly the same things as they did that caused the global meltdown. In Britain, the national debt doubled from 2010 to 2020 (pre-pandemic).

The Financial Times reports today – “Kwarteng argues the move would make London a more attractive destination for top global talent and would be a clear signal of his new “Big Bang 2.0” approach to post-Brexit City regulation, according to colleagues. Boris Johnson shied away from lifting the bonus cap, fearing a political backlash, but Kwarteng told City executives last week: “We need to be decisive and do things differently.”

Liz Truss has called the City “the jewel in the crown” of the British economy. Some senior Tories say Kwarteng is “unashamedly” looking for ways to boost growth. One banker said scrapping the cap would be a “clear Brexit dividend. Something you can present as a win”.

Goldman Sachs has been one of the most outspoken opponents of the bonus cap. Richard Gnodde, head of the bank’s international operations, has told the Financial Times eliminating the bonus cap would make “London a more attractive place for sure”. He said that under the current system, “if I move a senior person between New York and London I am driving up the fixed cost of our operations”. He added: “If that rule doesn’t exist, I don’t have to think about that.”

Labour leader Sir Keir Starmer described it as “pay rises for bankers, pay cuts for district nurses”. But that description does not go far enough. The reality is that with this policy reversal over the economy – the banks get to pay less in salaries whilst promoting the most aggressive and risky financial strategies and tactics to make money. And that didn’t end well.