ConHome headline above from my ToryDiary of August 24.
Comrades, I am no Nostradamus. I could have not predicted a year ago that Liz Truss would have become Prime Minister, and that she would be resigning as our party leader after only 45 days. Back then, I was fresh out of university, with no idea that within a few months I’d be Assistant Editor of ConservativeHome. Since then, I have been one of the many unlucky spectators to the self-immolation of two separate PMs, watching largely powerless as we tanked so far and so quickly in the polls. I feel like something of a Jonah.
Nonetheless, there is still something I can be smug about. Only two months ago, I said that readers of this site should ignore Truss’s campaign promises to lower taxes and get Britain growing through supply-side reforms. In an environment of soaring inflation and energy prices, and with Tory MPs habitually opposed to falling house prices, my crystal ball only foresaw more intervention, more borrowing, higher taxes, and spending cuts.
I know smugness is unbecoming. I have been told that enough by parents, teachers, and various girlfriends. Even so, I wouldn’t be human if I didn’t feel a little chipper at being vindicated so quickly and so obviously. Of course, doing so has involved Truss usurping George Canning as a pub quiz question answer, our party taking a terminal knock to its reputation for competence, and Larry the Cat dodging an ever-growing number of removal lorries. Every cloud, and all that.
If I might be allowed a little self-indulgence, I would like to ask why I – a 22-year old graduate with no formal economics training and a silly haircut – was better able to predict the consequences of the Prime Minister’s economic policies than herself or her former Chancellor. The latter, after all, does have a PHD from Cambridge in economic history. My superior predicting ability cannot only come from the fact I went to a better university in Oxfordshire.
As that makes me sound like an Oxbridge tosspot, I apologise. Nonetheless, my time at university did help me see Trussonomics’ implosion coming. In my last year, I took a course on ‘Britain in the Seventies’. Between reading Tony Benn’s diaries and listening to the Sex Pistols, I developed an unhealthy interest in the catastrophic economic mistakes of successive governments that paved the way for Mrs Thatcher. The Barber Boom was my bag.
It has become a cliché to compare our current woes with the Seventies. Energy crises, strikes, double-digit inflation, and Kate Bush – us lazy hacks easily reach for the banalities. But we are right to draw a few parallels between now and the decade that taste forgot. If inflation goes up, interest rates go up. If interest rates go up, government borrowing becomes more expensive. More money must be found from somewhere to pay debt interest. Taxes go up, spending falls – or the country goes bankrupt.
Following that logic, it is no surprise that I was able to put two and two together. That I have been vindicated so quickly is a natural consequence of both the monetary incontinence of my old friend Andrew Bailey, and the political naivety of Truss and Kwarteng in dumping on a febrile market environment the biggest package of tax cuts in fifty years, with no explanation of how they would be paid for except for a few platitudes about growth. Only the willingly deluded could not have seen this coming.
Cue fulminating about ‘Treasury orthodoxy’. A few readers will shuffle off to the warm, comforting embrace of Allister Heath. Others – EnochWasRight59, say, or NetZeroIsLiterallyCommunism – will post some angry comments below saying that I’m a jumped-up little shit who doesn’t know what I’m talking about. Or words to that effect – Vuukle is usually quite good at filtering out the worst stuff. But I did tell you Trussonomics was a dud, and a lot of you still voted for her. This is your mess, not mine.
Then again, it would be churlish not to acknowledge that I had some help in calculating how Truss’s plans would implode. Unlike those party members who have long since written him off as a snake and tax cheat, I have bothered to spend the last few months listening to Rishi Sunak. In every fiscal statement, public speech, and hustings appearance he made clear why he had taken the decisions he had – raising taxes, extending investment allowances, prioritising targeted support – and why Trussonomics wouldn’t work. Guess who I voted for?
Those Tories who claim to be Thatcherites – the frilled sharks of the political world – often have little interest in actually studying her time in office. Instead, their beliefs usually map onto some bastardised form of Reaganomics. Tax cuts first, and don’t worry about borrowing – the Laffer curve can take the strain. Like Power Rangers, milk teeth, and sucking my thumb, believing that was something I quickly grew out of. Some would prefer to stay in Neverland.
I read up on what Thatcher, Howe, and Lawson actually did. Why they raised taxes in the middle of a recession to get interest rates down and reduce borrowing. Why income tax was only cut once inflation was tamed, and why the NHS, the welfare state, and other blockages to growth were not tackled. Why, fundamentally, it is really hard to do anything in government, especially during a crisis – and why, as such, having a clear strategy and patience are so necessary.
Unfortunately, despite having written a book on her early premiership, it appears Kwarteng failed to learn those lessons as well as his predecessor (but one) – a man born after Thatcher had come to power, but who still had a picture of Nigel Lawson in his office. Kwarteng decided to do everything at once at the worst possible time, and watched his plans blow up accordingly. By contrast, Sunak laid out how the strategy must be to get inflation down first, up growth through research and development, reduce borrowing, and then cut taxes.
That agenda, in some form of another, is the one we have again now. The strange death of Trussonomics has meant that it has to be implemented in a faster and harsher way, against a backdrop of higher borrowing costs and a volatile pound. Truss and Kwarteng could have waited. They could have made their energy announcement, and those tax changes they promised on the campaign trail, and then hung back. They could have slowly and surely won some support for real supply-side reforms. Who knows? They might have proved me wrong.
Instead, we now look set to be cutting research and development spending, cancelling income tax cuts for the worst off, and jamming up energy bills by more than expected next April. The free-market cause has been put back another few decades – perhaps forever, if our failure to make it easier to build more means nobody from my generation ever votes Tory. Some have suggested it is a falling away of illusions as swift and painful as Suez. But at least Suez succeeded as a military operation. Trussonomics failed entirely.
I did warn you. Truss’s humiliation was foreseeable, but not inevitable – the product of an unwillingness to face reality on the parts of both Truss, and the party members who promoted her to her level of incompetence. Going forward, if our party is to have any chance of surviving as a viable political force, we must never make these same mistakes. I told you Trussonomics wouldn’t work. You didn’t listen. And if you don’t listen now, you might get our party in even more of a mess than you already have.