Tories chose a radical leader and must back her
On Friday, the new Chancellor displayed an intellectual command which was remarkable, given how recently he had taken office. In assessing his budget, and given the need to acknowledge its significance, many commentators fell into error. They claimed that it was the most radical fiscal initiative since Margaret Thatcher. That is an understatement. For radical parallels, we would have to go back to Gladstone, the last Prime Minister who seriously considered abolishing income tax. But the reference to Lady Thatcher is relevant. The PM and the Chancellor believe that on the supply side, they are continuing with her mission.
In recent years, the UK’s growth rate and productivity rate – related of course – have both been unimpressive. The new team believe that they know why: deficiencies on the supply-side, because of too many obstructions.
These take different forms. Tertiary education does not do enough to promote practical skills and craftsmanship. We also have an immigration policy which seems unable to exclude the clients of Albanian gangsters, while failing to encourage those with skills that we need. Planning controls prevent the building of new houses in areas where people want to live and work. Until that is rectified, It is will not be enough to reduce stamp duty.
Then there are the large numbers of regulations that have accumulated over the years, not all of which can be blamed on the EU. So Friday’s statement, albeit dramatic, is only the first instalment of a work in progress. “Work.” Will it?
That question has two aspects, economic and political. The economists are divided. Indeed, one sometimes wonders whether economics is one of the less exact branches of astrology. But there is one question which seems to unite the critics and those who are willing the Government to succeed. There must be a danger that fiscal and monetary policy will pull in opposite directions. Those who benefit from tax cuts may be less enthusiastic when they find that they are paying six percent interest on their mortgages. After 2010, the Cameroons were able to assure Mervyn King (then the Governor of the Bank) that they were running a tight fiscal ship. The hope was that in response, he would feel less anxious about monetary policy.
The new Governor has few grounds for diminished anxiety. As Andrew Bailey has been criticised for not tightening earlier, he is hardly likely to relax now. The markets will be crucial. Will they conclude that Sterling is a one-way bet downwards; interest-rates, also a one-way bet, in the opposite direction? Will the dealing floors now be full of chaps who are applauding the Budget while shorting the Pound? This week will be interesting.
On a longer time-frame, it does seem probable that the supply-side reforms will work. But this may not be fully apparent in time for the Election, only about seven hundred days away. In order to make its case, the Government will have to win the political battle, which should not be impossible. Labour’s line of attack is already clear: that the Tories are only interested in the rich. There are two ways of refuting that: facts and philosophy.
When it comes to the facts, Miss Truss and Mr Kwarteng must learn a lesson from Labour: repetition. The top one percent of taxpayers contribute thirty-four percent of income tax and national insurance payments. So the better-off are paying plenty of tax. Meanwhile the Government is spending over £60,000 a year on a family of four. So there is a lot of public expenditure to go around. Those figures should figure in every ministerial speech, as should a few Thatcherite mantras, underlying this Government’s tax philosophy. No country ever taxed its way to prosperity. A society in which no-one is allowed to grow rich – except footballers and lottery-winners – is one in which everyone is condemned to be poor. The less well-off do not benefit from high taxes inspired by the politics of envy. What they need is a thriving free-enterprise economy, assisted by reasonable tax rates, which will create jobs and wealth, as well as generating the cash for better public services. Sir Stumbler and his colleagues will try to persuade the voters that the British economy is now a conflict between bankers and food bankers. If the Tories cannot rebut that nonsense, they will deserve to lose.
Ministers could start by quoting Peter Mandelson, who famously said that Labour was relaxed about people becoming filthy rich, as long as they paid their taxes. We might jib at “filthy”: pecunia non olet. But wise Tories can legitimately claim to be Mandelsonians, at least in that respect.
“Wise Tories”: that does not seem to apply to the entire Parliamentary party. A number of Tory MPs seem to have got used to bitching about their leaders. It is time for an outbreak of that uncommon quality, common sense.
The Tory Party has chosen the person under whom it will fight the next Election – and no-one could accuse her of failing to offer leadership. Her MPs must now re-learn the art of followership. In the 1980s, during one of the many troubled periods in the Liberal Party’s history, David Steel cautioned his colleagues against approaching every problem with an open mouth. It might seem alarming that some Tories now ought to take advice from a Liberal leader, but there it is.
To put it mildly, not everyone was persuaded by Liz Truss during the leadership election campaign. But her critics ought now to consider whether they might have been totally wrong about her: mis-underestimating her, as George Bush junior might have said. There are precedents. In Henry Kissinger’s latest book “Leadership”, which is full of wisdom, he wryly admits that in early 1975, he told the State Department that this Thatcher woman “would not last.” Assuming that her own Party does not sabotage her, it would be foolish to mis-underestimate this Truss woman’s durability.
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