No.256 - From Boris to Liz: Out of the Frying Pan into the Fire
Dear James,
Out of the frying pan into the fire? Out goes the court jester and in comes the ‘Faerie Queen’! You must be embarrassed, confused or perhaps downright politically suicidal? Having always managed to negotiate the countless Tory party manifestations of policy since 2015, this time you bet on Sunak and lost heavily. James, you now represent a party that seems to have gone stark, raving bonkers! Liz Truss has been allowed by a quirk in our constitution to introduce the most extreme economic policy change since the second world war with no reference at all to the voters. It is in effect a ‘coupless’ coup d’état made, courtesy of Johnson’s 2019 manifesto which was so far from the current policies that the two manifestoes could in effect be from two totally different parties. Out goes sound money, progressive taxation and one nation aspirations and in comes massive borrowing, aggressively regressive taxation and a nation divided more clearly than ever into the rich and the poor. This is not a policy swerve James. It is a violent manoeuvre that has thrown your party over a cliff. Unfortunately it is taking our nation with it. The country is in free fall. Let’s hope for a blessing in disguise - a great financial disaster may be the shock that the nation needs to start out anew.
Last Friday Kwasi Kwarteng, the new Chancellor, announced to a shocked House of Commons that he was launching £45bn worth of unfunded tax cuts including the scrapping of the 45% rate of tax for those earning above £155,000, ending the cap on bankers’ bonuses, cutting stamp duty for home buyers and neutralising the planned rise in corporation tax and all posited upon the doubtful theory known as the ‘trickle down’ effect i.e if you incentivise the rich, they will invest more and eventually you will get economic growth, more employment and higher wages. The trickle down effect has been the subject of many academic studies over the years and the vast majority conclude that there is no correlation between tax cuts and GDP growth, higher employment or higher wages. The ‘trickle down theory’ is, in effect a philosophical fig leaf for the primacy of an oligarchy, the one per cent of the wealthiest. It is based upon the unprecedented extra borrowing of £411bn over the next five years. Kwarteng is merely pushing the cost of his gamble upon future generations.
How should we see this James? Has your party just suffered a massive nervous breakdown or is this a case of terminal, late-onset dementia? It would be bad enough if its impact were restricted to your party alone. Disastrously, though, it will impact the whole nation. From one ‘boosterist’, recently and thankfully despatched, we now have another ‘super booster’ inflicted upon us. Elected by the tiniest minority of Tory Party libertarians, Truss and Kwarteng have set out on a reckless ideological experiment with the whole of the British economy. Conventional Treasury wisdom is dead. Tom Scholar, the Civil Servant in charge of our Finance Ministry has been sacked and our nation is cast out upon the seas of international markets. Yesterday the pound slumped by 3% against the dollar to its lowest rate since 1985 and the cost of government borrowing has skyrocketed to almost 4% on ten year gilts.
In the last twelve years of Tory rule, everything in the old Tory playbook has been tried and ditched and now we have to endure a final fling of extreme right ideology derived from institutions such as the notorious Institute of Economic Affairs. If there is one thing that characterises British culture, it is the need for fairness. The post war consensus on ‘progressive taxation’ and moves towards greater social justice have gone. When a top banker gets a £5,000 benefit from a tax cut and key workers in education, public health and child care get only £150, the average Brit gets angry. Real growth comes through investing in people and access to large markets. Britain threw away the latter in the disastrous Brexit vote and all it has now is a group of elitists who believe that they can wave a magic wand at a magic money tree and then just sit back and watch the golden apples fall. Truss and Kwarteng are taking us on a leap into the unknown. The Resolution Foundation predicts that three million more children will be taken into poverty in the next few years.
The nation has had enough James. We now have a government with no electoral mandate running riot with its hubristic ideology. Very soon, economic reality will demand that the electorate is brought back into our damaged democracy. Then, finally, your party will feel the wrath of the people! About time too!
BH - Your Concerned Constituent