The ‘leftwing economic establishment’ did not bring Liz Truss down. Reality did

Polly Toynbee

‘‘This soul-searching has not been easy,” she writes. But though she looked everywhere, Liz Truss never found it. Instead, she found blame to scatter on everyone but herself for the havoc left by her 49 days: even ChatGPT would have written her 4,000-word non-apologia with more humanity and humility. Truss’s attempt at resurrection would be easily dismissed, except that her hallucinations are rampant across her party: ideas not cauterised by searing confrontation with reality.
Though Truss was outlasted by a lettuce, let’s reprise how she did such damage in so short a time: her mini-budget was more of a mini H-bomb. Within hours the pound plummeted and borrowing costs soared. When her chancellor proclaimed more was to come, gilt markets plunged and the Bank of England rushed in with a monster £65bn bailout. That has left some highly exposed defined benefit pensions missing billions and people with mortgages paying the price.
The country still suffers her “moron premium”: it is less trusted to borrow and so obliged to pay more, says Prof David Blanchflower, a former member of the Bank of England’s monetary policy committee. “She has exposed the UK economy as knife-edge fragile,” he tells me. “And she made it worse with what she has written.” That’s because, unrepentant, she exposes the core beliefs of a party where many are all too eager to try her killer recipe again.
The failure of her real-life experiment has left many as convinced as ever of the theory. Plenty in her party agree that she was essentially right, she just didn’t roll the pitch. They cling to their theoretical Laffer curve, claiming tax cuts for the rich yield more tax to the exchequer, though as Blanchflower says, “Trump disproved it definitively. His $2tn tax cuts for the rich left $2tn of debts.” The head-on smash when ideology confronts the real world seems to have left Truss and her party concussed but undeterred. Hers was the latest of three lethal economic experiments. Austerity came first, George Osborne cutting back to a smaller government during a recession, when every economic precedent said it was a time to invest, so UK growth lagged behind. Then came Brexit, its high price to be paid for years to come. And now, this Trussonomics crash.
Free markets, that was the mantra of the contributors to Britannia Unchained, the 2012 Truss, Kwasi Kwarteng, Dominic Raab, Chris Skidmore and Priti Patel manifesto for Singapore-on-Thames Toryism. Yet those free markets brought her down, not her imaginary “leftwing economic establishment”. The hedge-funder Crispin Odey, a Brexiteer and Tory donor, who made another fortune betting on Truss trashing the pound and bonds, is the market personified: the brute force of money trumps ideology every time. Bleating that no one warned her of the risk to bond markets as she borrowed billions to give the well-off a tax cut, it was she who had had enough of experts; she who fired Tom Scholar, head of the Treasury; she who threatened the governor of the Bank of England, questioning the institution’s remit; and barred the Office for Budget Responsibility from alerting her to exactly this kind of blunder. She writes: “Even though the measure was economically sound, I underestimated the political backlash I would face, which focused almost entirely on the ‘optics’.” The optics? No, reality brought her down.
Most Tories seem none the wiser, as the jittery factions fight it out, ready to back that magic cuts formula again if May’s local elections are half as bad as they fear. Truss has few personal adherents, but she is the party’s standard-bearer for low taxes. The other resentful ex-PM echoes her themes, telling Nadine Dorries that cutting tax “needs to happen”, helping the “Bring back Boris, he did nothing wrong” grumbling groundswell. Suella Braverman, with her old-school rightist faction, is of that ilk; no contender is too improbable after Truss. But they have lost public trust on the economy, and whenever Truss speaks she will remind voters of who really chose her as prime minister, what she did and the small state ideal they still cleave to. And look at their so-called “sensibles”. Up pops BlackRock’s Rupert Harrison, an architect of Osborne’s austerity which knocked the UK economy back behind most of the EU. He tweets patronisingly that Truss got things in the wrong order: tax cuts should only come after “public sector reform and a sustainably smaller state”. The destination is the same, on the same Truss spectrum of delusion, along with their supporters in the press. The Sunday Telegraph leader says: “The statist Tory establishment has had its turn and the party is cratering in the polls; the free-marketeers must now speak up.” The Mail leader says: “The ideas she stands for may be due for serious re-examination.” Tory thinktanks, funded by God knows who, swirl with this “solution” to the party’s directionless drifting.
But their great omertà, what they never dare reveal, is what “small government” and “deregulation” mean and how on earth they could ever turn it into an even faintly palatable election platform. When ambulances no longer turn up to save Grandma and mothers give up work for lack of childcare, when pay for nurses and teachers is falling, while energy bills are due to shoot up again and no one can see any difference when the railways are on strike, “small state” looks a formidably hard sell. They never say what, exactly, they mean to cut, shrink or deregulate. This is their addictive elixir to revive flagging spirits when all else looks lost, though it’s a sure-fire loser. Incidentally, observers puzzled by the Truss phenomenon may like to check the Dunning-Kruger effect: “Unskilled and unaware of it: how difficulties in recognising one’s own incompetence lead to inflated self-assessments.”
The Guardian