The Tories are debating their options under Liz Truss like a party of chefs fretting over different ways to unscramble eggs. The public may not like what is on the Downing Street menu, but it’s too late. The brittle shell of the prime minister’s authority is already in pieces.
Voters haven’t properly tasted Kwasi Kwarteng’s budget plans yet, but they can smell trouble from the way mortgage interest rates are rising. Also, the bond market is retching. Traders and fund managers who decide the cost of servicing UK government debt don’t like the chancellor’s fiscal recipe.
The government’s posture has lurched between swaggering overconfidence in parliament and grovelling for patience from the market. Kwarteng has brought forward the date when he intends to explain in parliament how he will balance the books. A Treasury veteran, James Bowler, has been installed as permanent secretary in the chancellor’s department – a genuflexion to economic orthodoxy that Truss had previously anathematised.
The Bank of England peered anxiously into the pot and stirred in a special sauce of emergency bond-market intervention. Now the governor, Andrew Bailey, says the sauce needs to be stirred back out again. The purpose of the government’s tax measures is to stimulate growth, but the central bank is raising interest rates to contain inflation and shore up the pound, which could have the opposite effect. UK economic policy is now a wild culinary experiment with too many cooks in a dysfunctional kitchen.
Financial credibility, like all measures of trust, cannot simply be reclaimed once lost. The first mouthful of Trussonomics triggered an allergic reaction and the basic ingredients have not changed.
The plan is still to cut taxes and borrow heavily. But to make that combination more palatable to lenders, the prime minister is salting the mix with spending cuts. She won’t yet say where the axe will fall.
The Institute for Fiscal Studies calculates that £60bn will need to come out of Whitehall budgets by 2026 to fund higher borrowing costs. Savings of that kind can’t be made without dismantling pillars of public service provision. Nothing would be unscathed; not schools, not hospitals.
The consequent national immiseration would be an act of economic self-harm even if it were politically feasible or morally justifiable, and it is neither.
Conservative MPs who never balked at George Osborne’s austerity recognise that the public mood has shifted since then. The Tories’ dismal poll ratings at the moment reflect mostly dismay at the general levels of incompetence on display. They could sink even lower if Truss’s response to a cost of living crisis looks like spiteful slashing at the social safety net.
To expect things to get better under their current leader, Tories have to believe two things. First, that the disastrous start is a blip; that Truss can govern well once she has warmed up. Second, that the underlying strategy – a dash for growth that generates enough revenue to compensate people for pain felt en route – is sound.
Even optimists who share the prime minister’s ideological convictions think her economic bet is a long shot, made longer still by inept politics. Already, Truss has had to retreat on one of her headline tax cuts. She is under pressure to rule out a real-terms cut in benefits, and that is just the first wave of parliamentary resistance to her legislative agenda. Tory MPs will also organise against planning reform, scrapping environmental protections, fracking and anything else that their constituents will hate.
It is irrelevant whether Truss’s original prescriptions for growth were the right ones to begin with (and sceptical markets had already declared them dud). A leader who governs in perpetual negotiation with rebel MPs, while hoping for merciful treatment by famously unsentimental hedge funds, has no plan except day-to-day survival.
That defensive stance was reflected in the prime minister’s speech to last week’s Tory conference. As much emphasis was placed on the “anti-growth coalition” – a vast conspiracy of everyone in politics, media and civil society who disagrees with the Tory leader – as on growth itself, and what tangible benefits voters may feel from it.
Truss was getting her excuses in early. Her revolution is barely a month old and already she has skipped to the part where arrival at the Promised Land is postponed and someone must be blamed.
The cast of naysayers and saboteurs was recruited from the familiar roster of Brexit scapegoats. It was the “remoaners” rebadged as enemies of supply-side economic reform, except now the ranks of the fifth column have swollen to include Tories such as Michael Gove and Rishi Sunak, who voted leave. The vanguard of true believers has shrunk to a Trussite sect. Membership barely exceeds the number of seats at the cabinet table. It may not be much higher than one.
Unlike Brexit, Truss’s project has no claim to an electoral mandate. When Eurosceptics denounced parliamentary and judicial obstruction as treason they could cite the “will of the people” as their higher authority. That was disreputable nationalism but it was still a potent rhetorical cudgel for beating liberal pro-Europeans.
The same device would only work against the “anti-growth coalition” if millions of people had been swayed by a charismatic Truss campaign, and made an active electoral choice to invest their hopes for a brighter future in her. They haven’t. They won’t. She is trying to govern with the divisive methods of populism, minus the popularity.
That is stupid politics made dangerous by maverick economics. The utopian promises of Brexit were a fraud that could be sustained for years with bluster, diversion and misinformation. That deception didn’t do Britain’s international reputation any good, but the damage was contained as long as the rest of economic policy was sane. Under Boris Johnson there was plenty of chaos, but much of it consisted of parochial power games in the Westminster arena, where winners and losers are chosen at election time.
Financial markets don’t play by those rules. They move faster and call bluffs sooner. Basing trade policy around denial of European reality was a slow degradation of investor confidence in the UK. Truss and Kwarteng blew the lot with their fiscal fantasies. Now there is no plan for growth. There is no plan for anything. There is just a mess and a Conservative party in a panic, wondering how it might be unmade.
Rafael Behr is a Guardian columnist
Guardian Newsroom: Will Trussonomics wreck the economy?
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