Liz Truss’s Telegraph essay has provoked some extraordinary howls of outrage. With scarcely a word of contrition, she attempted to justify her time as prime minister, focusing on the disastrous mini-Budget that saw the pound fall to a record low and government borrowing costs surge. And yet, she said, she would do it all over again. Cue online consternation.
But that front page isn’t aimed at you, dear New Statesman reader. It’s laser-targeted at the frontal lobes of the Conservative Party, or at least the 57 per cent of members who voted for Truss to become leader. The paranoid style and the attack on the “left-wing economic establishment” are closely aligned with Tory activists’ world-view. Derision from the leftie woke establishment on Twitter merely reinforces Truss’s point.
Do not underestimate Liz Truss. She set out to be prime minister a long time ago and leveraged her limited talents to get there. Keen observers of Tory economic thinking – we all have our hobbies – will have spotted her, as far back as autumn 2021, delivering anti-Treasury arguments at cabinet and carefully leaking them to the press. For all her insistence that she couldn’t possibly have imagined becoming prime minister, she, like every other MP except Jeremy Corbyn, clearly had. And unlike nearly every other MP, including Jeremy Corbyn, she actually became prime minister, albeit briefly and unhappily.
Too much anger about Truss’s time at No 10 has focused on the “unhappy” rather than the “brief”. There are reasonably hard limits as to what even a determined wrecker of civilisation can achieve in 49 days, particularly in an economy as large and complex as the UK’s.
To do truly lasting damage you need more time – perhaps a decade, which is roughly how long we were subjected to the fiscal insanity of austerity. The social consequences of this are too obvious to ignore: the queues at the food banks, the rough sleepers, the crumbling schools, the collapsing National Health Service. Average life expectancy, for the first time since 1900, has stalled.
But the economic impacts have been more subtle, and too little discussed. By draining demand out of the economy, spending cuts depressed growth. By slashing government investment, they undermined future productivity. The combination of both together is the primary cause of the UK’s economic malaise – more so than Brexit, and far more so than Truss.
The cumulative effects of continual failure are immense. If the UK economy had grown at the same pace as before austerity, it would be £900bn, or almost a third, larger by 2027. Austerity was the biggest, most sustained economic policy error any British government has ever committed. It was stupidity piled on stupidity, a self-inflicted, self-imposed disaster.
But it wasn’t ideologues such as Truss or Kwasi Kwarteng that condemned the UK to this fate. It was dead-eyed Sensibles like George Osborne who calmly shredded our prosperity, and affable former bureaucrats who justified those decisions. As a BBC review found last week, we suffer from a corps of political journalists who lack an understanding of “basic economics”, relying instead on a limited selection of assumed authorities who, in turn, never deviate far from the Treasury view. The result was what the Confederation of British Industry head Tony Danker has called a “doom loop”: as austerity failed, its failures justified more austerity to deal with the failures. Jeremy Hunt’s response to Truss’s implosion was to insist on a new round of spending cuts, was another crank of the handle.
Did Truss cause harm while she was in office? Yes, of course. The combination of radicalism and ineptitude in the mini-Budget led to a spike in government borrowing costs, triggering unexploded bombs in our pension funds, and rising mortgage rates. But the removal of Kwarteng as chancellor and then the prime minister herself rapidly (if not quite entirely) unwound that financial damage, leaving us much as we would have been without Truss – that is to say, in dire economic straits. Digging ourselves out of the hole austerity put us in will require more government borrowing, but for productive investment rather than unproductive tax cuts. The partisans of austerity and “sound money” oppose both equally as if there was no difference between, say, gifting the rich another skiing holiday and building a new school.
Truss is a sideshow. The more we focus on her, the less attention we are paying to the primary causes of our unmistakable economic decline – which means, above all, the austerity programme of the 2010s. Britain’s economic woes have not been caused by its messiahs, but by its managers. The problem isn’t the Institute of Economic Affairs. It’s the Institute for Fiscal Studies.
[See also: Martin Wolf: “Austerity and Brexit made everything worse”]