The Chancellor has discovered something economists have spent centuries missing: the secret to growth is not interest rates, productivity, or tax policy. It is vibes. Specifically, good ones.
In a bold departure from centuries of fiscal tradition, the new leadership is attempting to maintain both confidence and what they are calling ‘economic animal spirits’—a term that sounds like it was borrowed from a self-help retreat rather than Keynes. The strategy, it seems, is to make people feel wealthy enough that they forget to ask why they are not actually wealthier.
This explains the implicit promise: boost morale, keep taxes low, and hope the resulting national mood swing generates enough economic activity to cover the gap. It is confidence-based economics. Build it and they will spend.
The problem is that feelings are not currency, no matter how many times the Chancellor says them in a warm voice. A nation cannot pay for schools, hospitals, or infrastructure with optimism. You cannot file optimism as a tax return. And when the bill comes due—when services need funding or public investment requires actual money—vibes do not convert to pounds sterling at any exchange rate.
What the Chancellor is really betting on is that if people feel good enough about the future, they will spend and invest as though it is already here. Sometimes that works. Often it does not. And when it does not, you are left with the same structural problems, now paired with a credibility problem.
The irony is sharp: a government that cannot raise taxes because it might hurt confidence is betting everything on confidence. One bad quarter of data, one recession, one headline, and those animal spirits scatter. Then you have neither the tax base nor the mood.
Economic policy should not require a karaoke night to work.