AAs local and regional elections loom across the UK, it is clear that the ghost of Trusonomics is still alive. The Greens, Reform UK, Your Party, Restore Britain, the Conservatives and even the Liberal Democrats can’t help but make promises of wasteful spending, often paid for by making some cuts or borrowing more, that they argue will have no negative economic consequences.
Or if they do, the costs will be borne by people and businesses they don’t care about.
Only Keir Starmer and his cabinet colleagues appear to be immune from the UK government’s insane demands that the way the economy operates be somehow reconfigured without any spillovers, unintended consequences or additional costs that offset the perceived benefits derived from the original policy.
Liz Truss promised huge tax cuts of £45 billion paid for with extra borrowing and welfare “efficiencies”. Directed mostly at the wealthy, the economic argument was based on unleashing the entrepreneurial spirit that would lead Britain out of a long period of low productivity and only incremental gains in average incomes.
Ahead of the May local elections, a number of other magical policies are being offered. The Conservatives want to spend big after making deep cuts to welfare benefits. One of the headlines at the last Tory conference was a pledge to reduce the welfare bill by £23 billion. Shadow Chancellor Mel Stride said, “The culture of ‘something for nothing’ must end now.”
Green Party leader Zac Polanski has toned down some of the more radical elements of his party’s economic plans, though the agenda remains unclear. If we examine what his colleagues proposed in the last election we can see Dirt is spreading on every page of Free Lunch.
He proposed increasing taxes by more than £170 billion per year by the end of the next Parliament – including a £90 billion per year tax on carbon emissions – to provide a similar size boost to day-to-day public spending. On the spending side of the ledger, he plans to increase the current £160 billion capital expenditure budget by £90 billion a year.
Reform UK has embraced Trusonomics like no other party. Its main general election pledge was to raise the threshold at which people start paying income tax from £12,570 to £20,000, costing the Exchequer more than £40 billion a year.
One sentiment behind many of these proposals is that Britain could reverse more than 100 years of decline with a magic wand and, what’s more, travel alone on this journey without worrying about the impact on financial markets or trading partners, and even while the old global order is disintegrating.
Donald Trump may be an extreme example of the desire among American citizens to maintain their standard of living inside a protective economic and military shield, yet there are plenty of people like the current White House occupant in the US and other countries.
In France, Marine Le Pen’s National Rally competes with Jean-Luc Mélenchon’s France Unbowed (LFI) for the attention of those who believe economies and societies could be turned on their heads in a matter of weeks or months. They both promoted dramatic policies claiming the French economic supertanker would be reshaped like a boat, targeting the rich, big businesses or immigrants for huge savings and extra revenue.
Thankfully, French voters rejected gesture politics in last month’s local elections, preferring more centrist candidates. Not across the board, but in some key cities such as Paris and Marseille, this meant that centre-left candidates who had distanced themselves from both Mélenchon and Le Pen were victorious.
It appears that the reality of this decade – characterized by two major wars that cost trillions of dollars to produce, a quantum technological shift and a rapidly changing climate – is that there are no easy answers.
Labour’s way to get rich was considered to be additional economic growth, while staying within strict spending limits.
Rachel Reeves made a big bet that spending early in Parliament would boost the economy later on and at least buy time for the next general election, if not the more imminent midterm verdict.
However, the damage done by the previous government is still underestimated, leaving Labor with a £22bn loss in public finances even larger than the £22bn loss publicized by Reeves in his first months in office.
If only ministers could make some decisions, Labor could still do a lot with the money it has already set aside for investment. Procrastination is the disease that infects Whitehall at the moment and Starmer must take much of the blame for it.
Once the government can show that it has achieved things with public money, it can justify taking more from the better off, knowing that it will not be wasted – at the moment the only one that shows how well ministers spend on new infrastructure is HS2.
Yet the broader theme should be that in an uncertain world, sensible, rational government is better than bizarre initiatives that produce too many angry losers.
The truce was a disaster and not just because he believed that major industrialized economies like the UK (unlike Ireland or Switzerland) could cut taxes as a path to sustainable growth. The idea was to have an escape hatch, or an ejector seat if you prefer, available which, like Artemis, would take economy to a higher level.
