“The Queen’s last act of service to the nation was selflessly buying the economy a fortnight,” said a tweet when the four wheels finally broke away from Britain’s economy.
The Queen’s death and funeral took up the first 12 days of Liz Truss’ term in office, so the job of destroying the new Prime Minister could only get off to a good start last Friday. Then, however, Truss and his trusty sidekick Kwasi Kwarteng, the new Chancellor of the Exchequer (Finance Minister), got to work with incredible speed.
Kwarteng’s “mini-budget” was a suicide note that all but guarantees defeat for the Conservative Party in the next election, two years from now. It is increasingly doubtful that Truss’ government can even survive that long.
She is the fourth Tory Prime Minister in the past six years, and with each turn of the wheel the party she currently leads has grown more mutinous. Moreover, he did not choose her as leader.
That choice was not made by his fellow Conservative MPs, but by the party’s 160,000 dues-paying members, who tend to be elderly, white, non-urban and highly ideological.
What drew them to her was her fanatical devotion to the cause of lower taxes and a smaller state, as evidenced in a book she and Kwarteng co-authored 10 years ago titled “Britannia Unchained”.
So, as soon as the Queen’s funeral was safely over, she and Kwarteng gave them what they craved: a budget that is the political equivalent of asset stripping. It contains unfunded tax cuts, mostly benefiting the wealthy, of about $50 billion a year.
Where will the money come from to make up for lost tax revenue, plus an extra £65billion to help voters cover horribly high energy costs this winter due to Russia’s invasion of Ukraine?
Why, they’ll just borrow it all. . At least that’s what Liz Trust believes, convinced that she is following in the footsteps of her heroine, former Prime Minister Margaret Thatcher. She is not.
Blessed Margaret cut taxes, but she also cut government spending. The Truss-Kwarteng partnership spends like a drunken sailor on shore leave. It’s not ‘Britannia Unchained’; it’s “Britannia Unhinged”.
The sad news for Truss and Kwarteng is that the “free market” they so revere isn’t stupid. The value of the pound sterling is already collapsing. Former US Treasury Secretary Larry Summers said: “I guess the pound will end up below parity with the dollar and the euro.”
Meanwhile, investors examine Truss and Kwarteng’s business model, do the math, and flee. According to Paul Donovan, chief economist at UBS Global Wealth Management, they now see the Conservative Party as a “doomsday cult”.
And as interest rates soar to fight runaway inflation, millions of Britons are finding they can’t afford to pay their mortgages. The poor cannot even afford to feed their children. Strikes and protests are on the rise.
It is probably around this time – in the middle of winter, say – that the next rebellion occurs within the parliamentary Conservative party. However, changing horses would make little difference unless the policy changed. It wouldn’t.
The International Monetary Fund (IMF) has already issued its first warning to the UK to put its house in order. Larry Summers accuses the UK government of “behaving like an emerging market turning into a submerged market”, but Truss is not changing.
It’s a bit like the slow-motion car crash that brought down the Sri Lankan government and economy, which took over six months from start to finish. Liz Truss’ government won’t last a year, and the Conservative Party could then split, leading to a snap election (due by 2024 anyway).
Labor already has a 17-point lead in the polls, and its lead could even widen. It will be a wild ride, but the next British government will be led by the Labor Party, which will quickly overthrow everything Truss aspires to.