The Gods of the Copybook Headings, in Rudyard Kipling’s poem, are guardians of folk wisdom – or something like it, as unchanging in character as the truths they tell.
These include: stick to the devil you know; if you don’t work, you die and all is not gold that glitters. A longer list would include a favourite of that Kipling enthusiast, Margaret Thatcher: live within your means.
Sometimes her governments cut taxes, as in the 1979 Budget. And sometimes they put them up, as in the Budget of 1981. But in both, she cut the rate of growth in public spending, and kept a lid later on how rapidly it rose. In 1979, it was 39 per cent of GDP; by 1990 her governments had reduced it to 31 per cent.
One of the purposes of restraining spending growth was to keep borrowing down. It fell from a peak of 1.9 per cent of GDP in 1982 to a surplus of 0.5 per cent of the same in 1990 (though with bumps along the way).
In 2010, David Cameron followed her example, albeit from a higher base and on a smaller scale. The comparable spending and GDP figures are 43.7 per cent in 2011 per cent, the year after he took office, and 40.2 per cent in 2016, the year he left it.
Borrowing again began on a higher base under Cameron, but its fall was bigger than the parallel drop under Thatcher: from 7.1 per cent in 2010 and 2.5 per cent in 2016. At any rate, she articulated an economic orthodoxy that he followed – in his time, lampooned as”austerity”.
It’s worth pausing to take in the scale of how radically our new Prime Minister may be willing to break with the Thatcher-Cameron continuum, and a Conservative consensus that has held for the best part of half a century.
This frantic political week in the wake of Queen Elizabeth’s funeral is set to include an energy statement on business support and Friday’s “fiscal event”, beside the Bank of England’s Monetary Policy Committee meeting on Thursday.
Elizabeth Truss promised a public spending review during her leadership election launch speech, and perhaps Kwasi Kwarteng will give a flavour on Friday of when it will come, as he gears up to find tens of billions of pounds for the energy support package. But the focus of Trussonomics has been elsewhere to date.
For whereas the settled Tory orthodoxy has been to cut taxes and cut spending, the Prime Minister has focused on cutting taxes and, by implication, raising borrowing if headroom runs out.
So it is that some Conservative MPs who voted in 2010 to put spending control and a lower deficit at the heart of economic policy – if not an actual surplus…
…Are now clamouring for a higher deficit, while keeping mum on spending control. Among those tearing down the Thatcherite temple most enthusiastically are some who worked hardest to build it up. And since the EU is no longer available to blame for our current plight, there is a new villain on which blame can be projected: the Treasury.
A plausible reading of the future is that, with sterling low against the Euro as well as the dollar, and UK gilt yields moving up to their highest in a decade, the markets will draw the same conclusions as Kipling’s Gods: that the UK won’t live within its means.
And that a sterling crisis will follow, with even higher interest rates to fend off the inflationary consequences, recession…and spending cuts for which most voters and many MPs are unprepared (especially if they sit for Red Wall seats).
Now the counterpoint to the Gods of the Copybook Headings in the poem are the Gods of the Market – by which Kipling meant not those of the free economy, but of current fashion, whatever it may be.
The trend of the moment in Toryland is to maintain that to start from deficit reduction is to start in the wrong place. Instead, we should go all Ronald Reagan, as it were – and start with getting higher growth to bring the deficit down, not with bringing the deficit down to get the higher growth.
It could be that such an approach delivers a soft landing rather than a hard one. That on Thursday, the Bank raises interest rates sufficiently high to soothe the markets.
And that on Friday and afterwards, a Trussonomical mix of tax cuts, aversion to new windfall hikes, lifting of the 48 hour working week restriction, uncapping of bankers’ bonuses, fracking, and new investment zones calms them further.
Especially if the new Chancellor is able to say enough about future spending control to appease them. Consequently, there is no sterling crisis, no emergency rate rises, and only the mildest of downturns, if one at all. So, when the next election comes, Truss is able to win a fifth Conservative term and a workable majority having delivered higher growth.
Speculation about the electoral consequences of Trussonomics is inevitable, but it may be more productive to probe the economic ones, and ask how likely she is to get the growth she wants.
A point strongly in the new Prime Minister’s favour is that she is forcing the subject to the front of political discussion. ConservativeHome has long been talking about it. So recently has Keir Starmer, following where she is leading.
Truss will want to carry on where this bit of the conversation leaves off. You may disagree with some of her potential policies as outlined above. In some cases, the reason may be substance; in others, timing; in others still, both. But there are always lots of reasons to do nothing, and it’s always easiest to do nothing at all.
So were you to carp about all of what we know of Truss’ plans, I’d conclude either that you were committedly anti-Tory, or else simply want her to fail. However, what will matter at least as much as what’s in her programme is what isn’t.
Yes, lower taxes and less regulation are necessary for more growth. But they aren’t sufficient. A better educated workforce must be in the mix. Ditto more local control. Ditto better infrastructure, spread more evenly.
Truss has placed less stress on these to date. And there’s a tension between simply going for growth, which might well benefit the bits of the country that are better off already, and the requirements of levelling up. To give one example almost at random: a Growth First policy would dust down the Oxford-Cambridge arc.
Above all, a growth-at-all-costs policy would seek to tear up the planning laws. The new Prime Minister was once in the vanguard of change. Now she has dropped back to the rearguard.
Finally, pledging higher growth is high wire, if only because delivering it isn’t like making a tax cut. A Government determined to reduce National Insurance or Corporation Tax, say, has the power to do so if it commands a Commons majority.
Ensuring more rapid growth, by contrast, is beyond government’s reach. It can strive to create the conditions. Nonetheless, its efforts can be swept off course by a pandemic, say. Or by war. After our recent experience with both, we should need no reminder of either – or of Donald Rumsfeld’s “unknown unknowns”.
Kipling makes his “proper prostrations” to the Gods of the Market Place. Many Tories, disillusioned with the economic consensus, are doing likewise. And to give them their due, conservative thinking changes over time and with circumstance.
But the Gods of the Copybook Headings seem closer to its essence – at least to me; at least in Britain. Here’s hoping that they don’t have to “limp up to explain it once more”.