In politics, character is electoral destiny: which is to say, the voters have to know what they’re getting. Ever since she announced her bid to succeed Boris Johnson, Liz Truss has presented herself as the heir to Margaret Thatcher; a politician who scorned backsliding, deplored the “drift and delay” of past governments, and would “stay the course”, irrespective of the pressures piled upon her.
It is unfortunate, then, that the first five weeks of her premiership have been most notable for screeching U-turns. First, she and her Chancellor, Kwasi Kwarteng, yielded to immense pressure from their own side not to abolish the 45p tax rate after all. Yesterday, in a bid to reassure the markets, Kwarteng announced that his medium-term fiscal statement would be brought forward from November 23 to October 31.
In an especially egregious example of dither and political amateurism, the Chancellor offered the job of Treasury permanent secretary to Antonia Romeo, but was overruled by Truss, who has instead installed the old Treasury hand James Bowler.
Meanwhile, the Government is wobbling publicly over its plan to increase benefits in line with earnings (about 5.5 per cent last month) rather than inflation (closer to 10 per cent). At the Conservative conference last week, Penny Mordaunt, the Leader of the House of Commons, breached Cabinet collective responsibility by backing an increase to keep pace with inflation.
Chloe Smith, the Work and Pensions Secretary, has reportedly said the same in private — and former Cabinet ministers ranging from Sajid Javid to Nadine Dorries have taken to the airwaves in support of an uprate in line with inflation.
It was significant, too, that Victoria Prentis, the Work and Pensions minister, said so pointedly on Sky News yesterday: “It’s really important that we make sure that we target the Government resources at the most vulnerable.” Though the Government has a notional working majority in the Commons of 69, many Tory MPs will not stand for what they see (correctly) as the politically toxic option.
Yet what is too easily forgotten is that U-turns tend to be financially, as well as politically, costly. Truss and Kwarteng have already shredded their economic credibility; to win back market confidence they must now pursue precisely the fiscal conservatism — balancing the books — that they had hoped to dilute. And hardly anybody seriously believes that their supply-side reforms will deliver growth with sufficient speed to raise the tax revenues they need.
In short, Truss and Kwarteng now find themselves with a massive bill to pay: and the full consequences of that bill are only now becoming apparent. According to the Institute for Fiscal Studies, Kwarteng needs to find £62 billion in savings to meet even his relaxed fiscal rules. Assume, for now, that NHS spending is ring-fenced; it is unlikely, too, that Truss, as the Ukraine crisis intensifies, would feel able to renege on her promise to spend three per cent of GDP on defence. That means cuts of 15 per cent to most other departments. Local government spending, already pared to the bone, would be slashed further; investment in infrastructure would have to be cut; social care would be in deep jeopardy; spending on climate policy would be vulnerable — but then, so too would almost everything else.
One of the more bombastic claims of the Johnson era was that austerity was over. Not so; not so at all. What lies ahead in 2023 and beyond is not just a return to the fiscal conservatism of the Cameron-Osborne years but deep cuts at a time when the cost of living is high, mortgages are increasing, food insecurity is on the rise, and hundreds of thousands of people are on the brink of profound poverty. The context is very different to the period 2010-2016, and it is much more painful.
This portends not only serious trouble for the governing party. It represents the forbidding outline of a dangerous social emergency for which this country is plainly unprepared. Our public services are already in a parlous state. Battered by Covid and soaring household bills, we are scarcely ready for another round of swingeing cuts. But that is precisely what looms on the horizon.
There are no easy options available to Truss and Kwarteng. But a good start would be to rip up last month’s mini-Budget entirely and issue a three-word press release: Sorry — our bad.
