The new prime minister’s neo-liberal ‘shock therapy’ is different only in timing and tempo from previous Tory medicine. This article was written before she sacked Kwasi Kwarteng, but the fundamentals haven’t changed: his successor, Jeremy Hunt, will follow much the same policies of austerity and de-regulation with tax cuts likely saved for a pre-election sweetener (and, of course, favouring the rich and voters the Tories need).
British Conservative Party conferences normally give their leaders unadulterated adulation, but these are far from normal times in the land of hope and glory. The delegates did their best to put on a show of loyalty in Birmingham when Prime Minister Liz Truss made her maiden speech, but it can’t have been easy with the party hitting record lows in the polls after the turmoil of the past two weeks. She was wise to leave the hall hurriedly before the applause subsided.
The theme of Truss’s speech – that she wouldn’t “consign the country to decline” and that change would mean “disruption”[i] – won’t have come as a surprise. Tory members paying attention would have known she was committed to shock therapy from her association with the Free Enterprise Group (FEG) of MPs, which she founded 12 years ago. She’s made no secret of her view that de-regulation, low business taxes and a small state are the only way to reverse Britain’s diminishing fortunes—painfully epitomised this year by a former colony, India, taking its place as the world’s fifth largest economy.
“The status quo is not an option,” Truss told the conference. “I will do whatever it takes to get our economy growing and get Britain moving.”
Truss’s problem is that her first dose of this therapy spooked the very markets she’s so eager to free. In a mini-budget two weeks ago, her Chancellor of the Exchequer, Kwasi Kwarteng, announced sweeping tax cuts – including reducing the top rate from 45 percent to 40 percent on income above £150,000—without specifying how the state would be shrunk to fund them.[ii] The windfall for high earners was politically toxic as people struggle with a cost-of-living crisis, and the increase in the fiscal deficit triggered a sharp fall in the pound and a liquidity crisis for pension funds which rely on government bonds – gilts – holding their value.
The Times accused Truss and Kwarteng of “staggering political incompetence”[iii], the Financial Times called it “reckless”[iv], and Michael Gove, a senior minister in every cabinet since 2010, said Truss was “betting too much on tax cuts when we are borrowing to pay for them.”[v]
Such was the furore that, with her party’s conference already underway, Truss told Kwarteng to announce a humiliating U-turn on the top rate of tax to head off a growing revolt among Tory MPs.
But she has not ruled out revisiting the issue and made her philosophy clear in telling the conference that “for too long, the political debate has been dominated by how we distribute a limited economic pie”.
In this respect, she’s returning to the mantra of earlier Tory administrations. From 2010, under David Cameron and his Chancellor, George Osborne, the Tories cut corporation tax from 28 percent to 19 percent and the top rate of income tax from 50p to 45p while also imposing austerity through welfare benefit cuts and a public sector pay freeze.
Two things forced a change of tack: firstly, the 2016 referendum vote to leave the EU, which triggered Cameron’s resignation; and, secondly, Jeremy Corbyn’s success in depriving his successor, Theresa May, of an outright majority in the 2017 General Election with a Labour manifesto promising to run the economy ‘for the many, not the few’. To deliver Brexit and see off the Corbyn threat, May and then Boris Johnson had to declare austerity over and commit to retaining EU employment and environmental protections after Brexit.
In the 2019 General Election, Johnson went even further with pledges to invest in the NHS and “level up” de-industrialised regions. This helped him win a landslide, capturing seats in Labour’s heartlands, but his approach began to be called into question by many of his MPs after a series of by-election defeats in the party’s traditional strongholds.
Truss is a product of a grassroots Tory groundswell in favour of uber-Thatcherism, a belief that Britain could be great again if only it freed the wealthy to make money and keep more of it for themselves. She told the conference she would “harness the power of free enterprise” and promised that “all EU red tape will be consigned to history” by the end of the year.
The far-right think-tank that has nurtured Truss’s career believes these so-called “supply-side” reforms will be decisive. In a Times article last Thursday, Mark Littlewood, the director-general of the Institute of Economic Affairs, said: “It is in this area of deregulation that the Truss economic strategy will succeed or fail…If you can find meaningful sectors of the economy that have been choked off by red tape and have the political will to liberalise, you essentially can get economic growth for free.”[vi]
The target list, already announced in a statement accompanying Kwarteng’s mini-budget, spans reducing the “burden” of environmental assessments for major infrastructure projects to deregulating childcare to make it cheaper and, in turn, expand the labour market.[vii]
A pet hate of the free marketeers is planning regulation that, they claim, hampers housebuilding. In the 1980s, Margaret Thatcher stopped local authorities from building public housing and forced them to sell-off much of their stock. Housing was to be left to the market, but private sector building didn’t expand to fill the gap. The free marketeers blame the planning system, but the truth is that the major housebuilders are hoarding more than a million plots of land, half of it already with planning permission.[viii] Even if they were to get their hands on prime green belt land, they would still restrict supply because it pushes up prices and profit margins.
Truss faces more battles with her own MPs: on planning, from those in rural seats whose constituents don’t like development on their doorstep; on the possibility of welfare benefits not being upgraded in line with inflation, from those in de-industrialised areas where claimant numbers are high.
But their resistance could prove the least of her worries. During her speech, she had an unexpected taste of the disruption her idea of change can bring when two Greenpeace activists held up a poster asking, “Who voted for this?.” They were soon bundled out of the hall by stewards, but their point will not be lost on the millions of people whose living standards are threatened by a Prime Minister who has no mandate from the electorate.
On the eve of the Tory conference, Royal Mail workers staged a one-day strike as part of a long-running pay battle and the campaign group Enough Is Enough held 50 rallies and demonstrations across the country.[ix] As Truss was speaking, train drivers had brought the rail network to a standstill. Recent weeks have also seen dockers, bus drivers, garbage collectors and housing maintenance workers take industrial action. Nurses and teachers are likely to be next.
The polls suggest the public backing for workers fighting to protect real pay is strong. As austerity escalates to pay for the tax cuts, the Tories will no doubt try to play off workers against claimants, but their common interest is highlighted by the fact that 40 percent of those on Universal Credit – the benefit likely to be targeted by Truss for a real terms cut—are actually working[x] but badly paid.
This article was first published by The Nation – the oldest progressive publication in the United States – on Thursday 6 October.
Steve is a journalist and author of Game Changer, a book on the 2017 General Election during which he was an adviser to Labour leader Jeremy Corbyn.
He has also written two novels, the latest of which – Collateral Damage – tells the story of a Palestinian woman’s battle for the truth about the death of her partner. To find out more: CLICK HERE
[i] Truss quotes are all from her speech – 5.10.22
[ii] Kwarteng’s mini-budget statement, 23.9.22
[iii] The Times, Leader: 1.10.22
[iv] FT, Leader: 29.9.22
[v] Quoted by Daily Mail among others on 3.10.22
[vi] The Times, 30.9.22
[vii] From the Growth Plan submitted to Parliament by Kwarteng on 23.9.22: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1105989/CCS207_CCS0822746402-001_SECURE_HMT_Autumn_Statement_2022_BOOK_Web_Accessible.pdf
[viii] This issue is covered in my piece for Big Issue, I checked the latest figures yesterday and land banking has gone up massively in the last three years. https://www.bigissue.com/news/housing/landbanking-construction-companies-still-hoarding-land/
[x] 40% of those on Universal Credit are in work, via Torsten Bell, Resolution Foundation. (6) Torsten Bell on Twitter: “Since this row—and arguments like this—are going to dominate the next month, a few facts:” / Twitter