Truss’ demise ends revival of Thatcher’s libertarian economics
- Free marketers say Britain’s low tax dream is dead
- They worship the markets, but the markets didn’t like their policies
- The cancellation of the tax cut plan leaves the government in crisis
LONDON, Oct 20 (Reuters) – Daniel Pryor, who is lobbying governments to shrink the state and cut taxes, believes the brief and disastrous fate of Liz Truss as the prime minister killed his dream of an economy low-tax, deregulated Britain for at least a generation.
Pryor, who works at the Adam Smith Institute in London, laughs bitterly at the irony that Truss, who on Thursday said she would quit, was forced to abandon her libertarian economic policies by the same free markets as her cherish.
The Adam Smith Institute and other think tanks that provided much of Truss’s inspiration had welcomed the plans she and Kwasi Kwarteng, her former finance minister and political soulmate, presented on 23 september.
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Weeks later, they say mistakes have been made with the strategy – not only poor communication but also the scale of the proposed tax cuts – and fear that the policies they have championed for years are now buried for some time.
Truss had the “right policies at the wrong time,” Pryor said, referring to an economic backdrop marked by rapidly rising inflation and weak growth, which are making markets more sensitive to deficits and the scale of government borrowing.
“I now expect the language of free markets and libertarianism to be relegated to the scrap heap for a while. I’m sober and realistic about it,” he said.
“I can briefly laugh at the irony of what happened, but it’s also incredibly frustrating because I remember the UK’s growth prospects for the next decade are pitifully weak.”
Truss said Thursday she would step down after the economic chaos she unleashed forced a humiliating reversal of nearly her entire free-market agenda.
In a brief statement of resignation, Truss said she was elected to bring “low taxes, high growth,” but admitted she couldn’t fulfill that mandate.
A poll this week showed his Conservative Party – which has dominated British politics since World War Two – would not even be the Official Opposition if a general election were held now.
Truss had spent her summer leadership campaign complaining about Britain’s sluggish economic growth, productivity and low wages since the 2008 global financial crisis. fifth largest economy in the world to the benefit of India.
His solution was to challenge economic “orthodoxy” and demand faster and more drastic action to shake the economy out of its slumber.
Truss and Kwarteng’s speech – deep tax cuts with the promise of deregulation to seize what they called the benefits of Brexit – echoed the policies of 1980s British and American leaders Margaret Thatcher and Ronald Reagan.
Their thinking can be traced to their links with Britain’s free market think tanks, which have advocated similar policies and also urged business and government to seize the opportunities offered by leaving the European Union.
A year after his election to parliament in 2010, Truss founded a group of libertarian conservative lawmakers called the Free Enterprise Group. Kwarteng served as chairman of the right-wing, free-market Bow Group in 2005-6.
Truss’ Downing Street team included former staff from the Institute of Economic Affairs, another free market think tank which said its role was to ‘think the unthinkable’ and Adam Smith Institute.
The Institute of Economic Affairs said of the economic plan: ‘It’s not a trickle down budget – it’s a stimulus budget.
Think tanks have since said the government mishandled the policy announcement, including ignoring the Office for Budget Responsibility, raising fears that the tax cuts could blow up public finances.
The independent oversight body normally issues a verdict alongside budget statements on public finance management.
Andy Mayer, chief operating officer of the Institute of Economic Affairs, said the government had tried to push through too many policies too quickly without explaining the strategy.
Mayer also said he erred in pledging to abolish the 45% income tax rate on top earners, which was unpopular and ended up being a distraction.
“I think they got caught up in the moment of the historic victory over the establishment candidate,” he said, “and decided they could bet on unpopular measures from the start.”
Mayer said Truss and Kwarteng should have focused on supply-side reforms, such as changing the rules that govern the construction of residential and commercial space.
John Longworth, a pro-Brexit businessman who was part of Thatcher’s ‘deregulation task force’ and is now chairman of the Independent Business Network, said Truss could have succeeded in her plans had she split the policies into “little pieces” and presented them. overtime.
But after the Sept. 23 “mini-budget” shook investor confidence, Longworth thinks it will be another decade before those policies can be tried again. He also fears Brexit is in jeopardy.
“I don’t think she killed the philosophy, I think what she did was kill any opportunity to deploy it for a very long time,” he said.
“It is still possible to reap the benefits of Brexit, even in this situation. But of course what will happen and what happens is that the joiners use the situation as an excuse to blame Brexit, while this actually has nothing to do with Brexit at all.”
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Editing by Catherine Evans
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