She promised to reduce corporate tax. She wanted to get into hydraulic fracturing. She insisted on establishing real investment zones, with real tax cuts and relaxed town planning rules, unlike the fake “free ports” that were sold to us before.
Liz Truss may well be forgotten in the long book of British political history, but she can be proud of it: her campaign and her short tenure have dramatically changed the way we talk about the economy in this country, for the better. Whoever succeeds him, if he wants Tory support, will now have to focus on how the UK gets out of the disastrous loop of low growth, high taxes and cheap money in which it has been trapped.
For nearly three decades, the British political establishment simply assumed that growth was a given. The Thatcherite legacy, it was believed, would keep the engine running forever, while poll-addicted politicians would redistribute the benefits of growth to the less efficient sectors of the economy.
Tony Blair and Gordon Brown borrowed huge sums, even in good times, to splurge on the NHS and tax credits. They designed a welfare system so devilishly complex that almost everyone was collecting benefits. And to reduce accountability, they have concocted increasingly elaborate plans to remove spending from the public balance sheet.
David Cameron and George Osborne have doubled down on this redistributive policy – sharing bigger and bigger slices of a shrinking pie – while cutting the kind of public investment that could actually generate growth. Their policies further encouraged work-related benefits and guaranteed an even more bloated and unproductive healthcare system.
Perhaps worst of all, Theresa May ignored the question like it didn’t matter. She never really cared about the economy: the hubris that started with Blair had reached its climax.
Meanwhile, in the background, like the dry rot eating away at the foundations of a house, the UK’s economic outlook has deteriorated. A million people left the labor market during Covid. The cost of imported energy has caused the trade deficit to explode. Businesses and pension plans have proven so fragile that they could not resist a return to interest rates that would have been considered perfectly normal for most of the past 300 years.
Inevitably, this whole facade would lead to a major collapse. True, Truss’ unfortunate mini-budget may have been the spark, but the stake had been building for decades.
Now, when the excitement of the Tory leadership race wears off, the next person to govern Britain’s economy will have to answer the same tricky question: how to increase productivity, create new industries, reduce the trade deficit and end addiction to cheap money. ? This is the only way to avoid a disastrous long-term recession and raise electoral hopes in the near future.
If this is Rishi Sunak, there can be no going back to the ‘dishy Rishi’, politician-eater to help, happy-on-leave we’ve seen during Covid. It’s going to have to be a much more grown-up “let me tell you about the hard choices we have to make” version than anything we’ve seen so far.
If it’s Penny Mordaunt or even Boris Johnson, they’ll have to find a formula for growth that has so far eluded them. “Leveling Up” was never a real economic project.
And if it is Sir Keir Starmer, which could well be very soon, he will have to find the language of reform and renewal and not just promise higher public spending for an economy that produces less less, as it has done for the past three years. Its current proposals are plagued by budgetary shortcomings. How will he pay for big increases in NHS spending, for example, without increasing the deficit? Such cakeiness is not sustainable in a recession.
In literature, in music, and sometimes even in politics, there are movements which, while no one likes them at the time, turn out to have deep significance. They change everything that comes after them. Liz Truss may have gone down in flames, but Trussonomics, an insightful mix of revived Reaganism, classical liberalism and techno-boosterism, will dominate the debate for decades to come – and it could one day be considered a remarkable achievement. .
