24 September 2022
Liz Truss, the Conservative leader, repeatedly said that she was open to making unpopular decisions in national interest. And with Friday’s‘mini-budget’, the new Prime Minister is more than living up to the first part of that promise.
According to every poll, tax cuts that benefit the better off and reinstated banker bonuses are not the priorities of ordinary Britons—and according to pound Sterling, Truss’ economic planis no more popular in market circles. Friday’s plunge below $1.10 marked a 37-year high.
In truth, there was nothing ‘mini’ about the so-called ‘mini-budget’. Kwasi Kwarteng may only be seventeen days into the job, but the new chancellor has already unveiled a £45 billion tax cut package. You have to go back to 1972 and Anthony Barber’s infamous ‘dash for growth’ budget to find a fiscal event of comparable tax-cutting magnitude. As Ted Heath’s Chancellor, Barber’s tax-cutting saw government borrowing rise from £1 billion in 1970-71 to £4.5 billion in 1972-73.
Certainly, the economic conditions of 1972 are not entirely analogous to today’s; in many senses, the current situation is worse. In 1972, Barber was able to lower interest rates to make borrowing cheaper, but Kwarteng has no such right—indeed, the independent Bank of England raised rates to 2.25% this week. Similarly, the ‘dash for growth’ budget was the first since the UKopted to join the European Economic Community. Today, the UK’s ‘European venture’, as Barber called it, has been and gone.
But even if Britain’s economic conditions have changed in the 50 years since Barber, the ideology informing the Conservative party’s decisions has not. At the Commons dispatch box on Friday, the chancellor declared repeatedly: ‘there are too many barriers to enterprise’. Barber came to a similar conclusion in 1972: ‘tax too often stultifies enterprise’.
Like its seventies precursor, Kwarteng’s fiscal event was a clear statement of ideological intent. No longer will any concession be made to fears about public finances—there will no more apologetic, compromise Conservatism.
The political backdrop to the ‘mini-budget’ will have featured heavily in the thoughts of Truss and her Treasury team. Labour and Keir Starmer still enjoy a healthy poll lead unshaken by Truss’ take-over of the Tory party. In this position, Truss may well have retreated into the buccaneering comforts of Johnsonianism—but, in hindsight, the Boris appeal had started to wane with the British public. And in any case, our new premier hardly has her predecessor’s charisma.
Truss understands that the Conservative party desperately needs a new platform. Contrary to her opponents’ contended instincts, therefore, Trussonomics is not an electoral death wish but a deliberate, if risky, electoral strategy.
The term ‘one-nation Tory’ has done a significant amount of heavy lifting for Conservative prime ministers of the years. Cameron, May, and Johnson all embraced the label with open hearts. But with her new economic plan, Truss is finally doing away with any last vestiges of Disraeli’s contribution to Tory thought in government circles. The new government’s budget that blazenly introduces tax cuts for the wealthy marks her out as a fundamentally different style of Conservative to her ‘one nation’ predecessors. The ‘populism’ of Johnson has been replaced by a willingness to cater to entrepreneurs first and foremost—hoping the effects will trickle down to everyone else.
At the very least, Friday’s mini-budget shows a confident PM willing to step out with the bounds of Johnson’s legacy and electoral appeal. At most, the Johnsonite slogans have been entirely replaced with a call to entrepreneurial action: Kwarteng has beckoned a ‘new era focused on growth’.
Kwarteng also supports a specific kind of growth. By abolishing the top rate of income tax, the chancellor has shown he is willing to make Britain a less equal place in return for economic advance—which, as of today , is far from guaranteed.
Kwarteng and Truss are staking their party’s political future on a relentlessly right-wing programme of tax cuts. The political strategy behind such Trussonomoics is thus: as Labour triangulate, the Conservatives will charge ahead with a clear economic plan—no compromises, no apologies. It provides the party with a clear identity that can be used to create a simple political slogan. Who knows, where there was ‘Make America Great Again’, might we now see ‘Make Britain Rich Again?’
Truss may be betting that a clear message and a strong ideological case will win over Labour’s obfuscation, regardless of the economic and moral arguments.
Nonetheless, for Truss’ political calculation to succeed there will need to be some improvement in the economic situation, This is far from guanteed. Just ask Anthony Barber, whose unsuccessful ‘dash for growth’ budget in 1972 virtually handed the keys of Downing Street to Harold Wilson after an extended period of inflation and industrial action. But there may still be method to Truss’ madness. This is against a Labour Party under Starmer that yearns to be popular above all else.
