This is about broadening the tax base, spreading the pain far and wide. £55bn of tax increases and spending cuts will materialise in 2024 and after the next election in late 2025.

Public spending will also decline in real terms since outlays are expected to increase by only 1% in nominal terms.

Much of the fiscal tightening exercise is backloaded, with the freeze in thresholds happening from April next year and continuing into the following year, by which time the government hopes that the economy will be recovering enough to improve the conservative party’s chances for the next parliamentary elections to be held before January 2025.

If the package helps to lower inflation by lowering demand and stabilizing government debt, it will at the margin reduce the amount of interest rate hikes that the Bank of England (BoE) will likely need to deliver in the final few months of 2022 and the start of 2023.

Markets have barely reacted to the news, suggesting that there were very few surprises and the effort to rebuild credibility continues, allowing investors to focus on long-term fundamentals of the UK economy and the prospect of a credible path towards debt sustainability.

The fiscal stimulus announced by the Chancellor will lead to a deterioration for domestic UK equities, due to lower domestic demand and cost saving incentives taken by UK households.

As the UK battles through a recession the sterling should remain range bound, which should be supportive for the UK large cap equity market, given that most of UK firms generate a large part of their revenue (over 70%) overseas. However, not all UK equity markets will benefit as mid and small cap market generate most of their revenue domestically.