The global echoes of a British near-collapse

British economic policy under Liz Truss seems certain to end the Conservative Party’s dominance, and reversing Brexit seems to be the only solution

• By Anatole Kaletsky
• • 
    
   
  • 
    
   
  • 
    

As the world’s policymakers gather in Washington for the IMF’s annual meetings, there is a historical curiosity to consider. Roughly every 15 years since the 1930s, Britain has experienced an autumn financial crisis and policy regime change that has foreshadowed global upheavals a few years later.

Britain abandoned the gold standard in September 1931; the US followed in 1933. The sterling devaluation of September 1949 ended post-World War II hopes of a genuinely multilateral currency system and confirmed the dollar’s hegemony. The second post-war sterling devaluation, in November 1967, triggered a chain reaction that culminated in then-US president Richard Nixon dismantling the Bretton Woods currency system in 1971. Britain’s IMF bailout in September 1976 discredited Keynesian economics and led to the election of Margaret Thatcher as prime minister, inspiring the monetarist revolution of then-US Federal Reserve chairman Paul Volcker and then-US president Ronald Reagan. The breakup of the European exchange-rate mechanism on “Black Wednesday” in September 1992 forced France, Italy, Spain and Greece to accept Germany’s economic dominance of Europe. The run against Britain’s most aggressive mortgage lender, Northern Rock, in September 2007, became a template for the global financial crisis a year later.

Britain has just suffered its latest financial convulsion. The near-collapses of the pound, the country’s government bond market and its pension system are likely to echo around the world in several unexpected ways.

Last month, I argued that Britain’s Conservative Party had outdone itself by finding in Liz Truss a prime minister even worse than Boris Johnson, Theresa May or David Cameron.

However, I also asked a paradoxical question about the politically disastrous experiment with “Trussonomics.” Was it possible that Truss’ bet on 1970s-style Keynesian stimulus and price controls might succeed, at least in the short term? Could some modified version of Britain’s unorthodox mixture of fiscal stimulus, price caps and energy subsidies become a model for other countries desperately trying to revive collapsing economies while keeping inflation at least temporarily under control?

Today it seems preposterous to suggest that Britain could become a model for economic revolution, as it did under Thatcher. Yet, looking beyond Truss’ political blunders, there are four features of her new economic policy that other countries could consider if they ever stop laughing at Britain:

First, the top priority for economic policy in a time of war and international energy upheavals might be to avert deep recessions, rather than worrying about inflation targets and debt dynamics.

Second, under such conditions, inflation might be better managed with price controls and fiscal subsidies than with tight money.

Third, a policy mix of bold fiscal expansion and moderate monetary tightening might succeed in avoiding an economic slump for a year or two and prepare the ground for an orderly tightening of monetary policy in the longer term.

Fourth, when inflation and debt levels increase unexpectedly, fiscal sustainability can become easier, not harder, to achieve.

All four of these statements are heretical, according to current economic orthodoxy. Yet all can be backed by plausible economic arguments and historical examples, albeit with plenty of counterarguments and counterexamples.

Consider “fiscal sustainability.” Suppose a government with 1 percent growth and 2 percent inflation aims for a debt-to-GDP ratio of 60 percent. Simple arithmetic shows that the government must keep its deficit below 1.8 percent of GDP to meet this definition of “fiscal sustainability.” Now suppose that growth is 1 percent, but inflation accelerates to 4 percent and the debt-to-GDP ratio rises to 90 percent. In that case, the government can borrow up to 4.5 percent of GDP and still keep the debt ratio unchanged.

However, if there were plausible arguments for Britain’s new policies, why did they plunge financial markets into turmoil? The reason might lie in astonishing political and institutional blunders that almost guarantee the end of a long Conservative hegemony in British politics.

By combining a useful Keynesian stimulus with an economically irrelevant and politically toxic abolition of Britain’s top tax rate, Truss gave the impression that the new government’s true objective was to redistribute income from poor people to rich people. By insisting, without evidence, that her tax cuts would boost Britain’s long-term growth trend, rather than simply promising to avert a disastrous slump caused by the Ukraine war, she exposed herself to economic derision and set herself up for political failure when her supply-side miracle fails to happen.

Truss also needlessly alienated Britain’s entire government establishment. She fired Britain’s most powerful civil servant, the permanent secretary of the Treasury, for no good reason. She refused to allow an objective analysis of her plans by the Office of Budget Responsibility, which would normally be a legal requirement for any budget. She also ridiculed the Bank of England’s monetary management. After these unprovoked attacks on Britain’s longstanding tradition of nonpartisan public service, Treasury and Bank of England officials might not have been too distressed by the market turmoil last month.

Because of all these blunders, pollsters are now near-unanimous that the Conservatives are likely to lose the next election.

Throughout British history, the party in power has always lost it after financial crises, even those that were followed by decent economic recoveries. This pattern is likely to be repeated in the coming two years.

Suppose, as I think is likely, Britain avoids the economic collapse that many observers now consider inevitable and, using energy subsidies and price controls, squeezes inflation back to tolerable levels — not to the 2 percent official target, but to 4 or 5 percent. By next summer, other countries stuck in recession might start looking with interest at Britain’s heterodox economic experiment, but inside Britain, Truss will get no credit for averting a short-term economic catastrophe, because she never presented that as her main objective. Instead, she will face ridicule for breaking her impossible promise to achieve sustained supply-side growth.

Meanwhile, the opposition parties would be preparing for government, and would need to propose alternative policies for achieving the long-term growth that the Tories failed to deliver.

With fiscal leeway exhausted by Truss’ tax cuts and inflation still a serious problem, there is no serious prospect of alternative policies based on more public spending, but any non-Conservative government that emerges from the next election could offer one completely credible policy that would instantly improve Britain’s growth prospects with no budgetary costs: Restore cooperation with its overwhelmingly dominant trading partner, the EU.

This would not mean reversing Brexit. It would mean negotiating a new customs union, aligning British regulations with the EU single market and gradually moving toward a closer relationship with the bloc, similar to Swiss and Norwegian arrangements. A month ago, this would have been a fantasy, but stranger things are now happening in Britain almost every day.

Anatole Kaletsky is chief economist and co-chairman of Gavekal Dragonomics. Copyright: Project Syndicate

EXCLUSIVE
The Dark Heart of Trussonomics

The Mainstreaming of Libertarian Theories of Social Darwinism and Apartheid

LONG READ

Nafeez Ahmed
10 October 2022

Charles Murray. Photo: Zuma/Alamy

The legacy of the Nazi ideology of eugenics – popularised by Charles Murray’s controversial book The Bell Curve – goes some way to explaining Trussonomics, writes Nafeez Ahmed

Following the reaction to Liz Truss and Kwasi Kwarteng’s economic policies, ‘Trussonomics’ has been criticised as a case study in neoliberalism. Their financial shock therapy, the assumption goes, is aimed at making the rich richer, because they believe that this wealth will ‘trickle-down’ to the rest of society, driving economic growth.

But this misses a key ideological driving force: the reshaping of neoliberalism into an extreme nationalist economics rooted in a form of social Darwinism. Under this ideology, it is impossible to reduce inequality because characteristics such as race, gender and class that cause disparities are fixed.

In this sense, Trussonomics represents the continuation of an experiment that began with Trump and Brexit, both of which were seen as radical departures from the neoliberal consensus of the ‘golden age’ of globalisation.

Instead of tackling poverty and inequality, this social Darwinistic strain advocates that social divisions are destined to become wider because of fixed biological and cultural group properties. This, in turn, underpins an economic agenda of elevating and perpetuating the ‘fittest’ groups – while finding ways to manage, control and diminish the ‘underclass’.

This ideology has an astonishing reach – from the American Enterprise Institute, which has strong in-roads into the Republican Party; to UK pressure groups including the ‘Tufton Street’ think tanks that have helped shape Conservative Party policies.
The Pseudoscience of an ‘Underclass’

At the root of this thinking is a set of unstated assumptions that have become widely accepted across the conservative landscape – assumptions that have their origins in biological theories of human nature that have become increasingly mainstream across the right, even as they have been overwhelmingly discredited by the scientific community.

The ideology can be traced back to the extraordinary influence of American sociologist Charles Murray.

Murray is one of the world’s pioneers of scientific racism and biological theories of IQ and social stratification, and his related economic theories of the ‘underclass’ have influenced policy thinking on both sides of the Atlantic and the political spectrum.

According to the Southern Poverty Law Centre – the leading civil rights law firm that tracks extremist groups in America – Murray is a white nationalist extremist who uses “racist pseudoscience and misleading statistics to argue that social inequality is caused by the genetic inferiority of the black and Latino communities, women and the poor”.

His 1994 book, The Bell Curve: Intelligence and Class Structure in American Life, co-authored with Richard Herrnstein, has been described by Scientific American magazine as “the flagship modern work reporting on racial differences in IQ score”.

The book claims that black people, women, the poor and Latinos are cognitively inferior largely due to hereditary genetic factors – and that rises in their birth and immigration rates therefore explains the rise in inequality between racial and social groups. This has led, Murray claims, to the emergence of a “cognitive elite” that consists mainly of concentrated, self-selecting, networks of white men who are well-endowed with cognitive abilities.

The Bell Curve’s core theories around genetics, race, gender and IQ come from research funded by a Nazi eugenics foundation based in the US.

The book was widely critiqued by geneticists, biologists and other experts for being “scientifically flawed” at the time of its publication and has been criticised ever since.

While few of the conservative figures and institutions cited in this article can be seen as intentionally supporting Nazism, their fascination with Charles Murray’s ideas – and their transmission of fringe pseudoscientific theories originally incubated by Nazi ideology into the mainstream – raise concerning questions.

American Conservatism’s White Nationalist Star

Charles Murray is F. A. Hayek Chair Emeritus in Cultural Studies at the American Enterprise Institute – a powerful neoconservative think tank in Washington D.C. with close ties to the Republican Party. He first joined the AEI in 1990 and has been in his current role since 2018.

In 2009, Murray received the AEI’s prestigious Irving Kristol Award. The AEI’s “highest honour”, it is given annually to an individual who has made “exceptional practical and intellectual contributions to improve government policy, social welfare, or political understanding”. Boris Johnson was honoured at a similar event by the AEI in 2018.

Photographs seen by Byline Times show that a wide range of conservatives were in attendance at the AEI’s annual dinner honouring Murray – throwing light on the extent to which he is considered a respectable and legitimate voice on the right.

Former special assistant and speechwriter to President George W. Bush, David Frum, posed alongside Fox News host Tucker Carlson and anti-Islam activist Ayaan Hirsi Ali.

Newt Gingrich, former Republican Speaker of the House of Representatives credited with paving the way for the rise of Trump with his ruthless partisan rhetoric, also attended.

Another figure at the event, who would go on to become very close to Trump, was economist Kevin Hassett, who previously served as economic advisor to the presidential campaigns of John McCain, George W. Bush, and Mitt Romney.

Billionaire Roger Hertog, a Republican Party donor credited with being the main conservative funder who financially enabled the neoconservative movement, also turned up. Hertog is linked to several other think tanks such as the Washington Institute for Near East Policy and the Manhattan Institute.

He was joined at the event by the late Antonin Scalia, a pro-Republican Supreme Court Justice since 1986.

Another prominent billionaire and conservative funder in attendance was Robert Agostinelli. The founder and managing director of global private equity firm the Rhone Group, Agostinelli funds a range of right-wing projects. He also has key political connections in Britain.

In 2018, he gave $10,000 to the Legatum Institute, an influential UK think tank with close ties to the Conservative Party. A year later, the Rhone Group paid £10,000 to Conservative Party MP Jacob Rees-Mogg for a speaking engagement. Rees-Mogg is now the UK’s Business, Energy and Industrial Strategy Secretary in Liz Truss’ Government.

But that is not the Truss Government’s only connection to the nexus surrounding Charles Murray. His influence in Britain goes far deeper than is ever acknowledged.

American Dark Money, the Mercers and the Conservative Party A Network of Influence 

Nafeez Ahmed

Charles Murray and the UK Right

Charles Murray’s entry into British politics began via The Sunday Times and Rupert Murdoch’s News International, which sponsored his writing and flew him to the UK several times. This was when Murray was still largely unknown in Britain, but he was sought after by then Prime Minister Margaret Thatcher’s Government.

By 1987, Murray had met representatives from her Policy Unit, the Department of Health and Social Security, and the Treasury Office. In 1989, Murray met Thatcher herself.

A year later, the Institute of Economic Affairs (IEA) – founded in 1955, originally based in Westminster’s Tufton Street, a driving force of Thatcherism, and widely credited as a driving force for Trussonomics today – published Murray’s essay ‘The Emerging British Underclass’. It published a follow-up by Murray, ‘Underclass: The Crisis Deepens’, in 1994 – the same year he released The Bell Curve.

In these essays, Murray expanded on his thesis that the welfare state perpetuates the growth of an underclass by creating self-reinforcing cycles of poverty – not just in America, but also in Britain.

“When I use the term ‘underclass’ I am indeed focusing on a certain type of person defined not by his condition e.g.: long-term unemployed, but by his deplorable behaviour in response to that condition e.g.: unwilling to take jobs that are available to him,” Murray wrote.

He did not mention the role of his biological theories of IQ in determining the assumptions underlying this thesis, but had few qualms about claiming that this growing underclass is “predominantly black” – making the case that this could not be explained by “black history”.

The Sunday Times printed these essays and commissioned Murray to come to Britain and investigate its alleged ‘underclass’.

In 1994, he attended a high-profile lunch hosted by the IEA to discuss his ideas. Then in 1996, the IEA published a series of essays to debate Murray’s underclass theory through its health and welfare unit, headed up by David Green. Green’s unit later seceded from the IEA, becoming Civitas – another Tufton Street organisation that former Downing Street advisor Tim Montgomerie and former Vote Leave CEO Matthew Elliott have described as a core part of the infrastructure of Britain’s conservative movement.

Civitas continued to draw on Murray’s thinking through the ensuing decade. In 2005, it published Simple Justice by Charles Murray, once again in association with The Sunday Times, calling for retributive justice to deal with crime along with a series of commentaries.

In 2008, Murray was interviewed for a Civitas report entitled ‘Second Thoughts on the Family’. In 2013, Civitas advisor, sociologist Peter Saunders, referred directly to Murray’s theory of “cognitive stratification” to justify his claims that intelligence varies between classes, and also claimed that children’s cognitive abilities are genetically inherited. Saunders then authored a Civitas report in 2019, ‘Social Mobility Truths’ – which not only referred specifically to Murray’s The Bell Curve, but even directly cited one of the dubious sources relied on by that book: the late psychologist Hans Eysenck.

Eysenck was one of the earliest proponents of the race, genes and intelligence hypothesis and received funding from the Nazi Pioneer Fund for his claims. Dozens of his papers have recently been retracted due to serious flaws in his research. As neuroscientist Andrew Colman points out in the Personality and Individual Differences journal, “a deeper understanding of population genetics has shown that race differences in IQ could be determined entirely by environmental factors even if its heritability were as high as Eysenck believed it to be” and new techniques in molecular genetics suggest “that the black–white IQ gap is not determined significantly by genetic factors”.

Neither Civitas nor the Conservative Party responded to Byline Times’ requests for comment.

Over at the IEA, by 2009, Mark Littlewood was its director-general. Two years later, Liz Truss founded the Free Enterprise Group of Conservative MPs – the de facto parliamentary wing of the IEA. In 2012, Kwasi Kwarteng co-authored an IEA paper with Jonathan Dupont on fiscal discipline. The following year, as Education and Childcare Minister, Truss cited Civitas for promoting a new curriculum for schools – a connection also inspired by the Murray school of thought.

Over the next few years, the IEA’s fascination with Charles Murray would continue.

Reports and books repeatedly cited him. In 2012, the IEA’s head of political economy, Kristian Niemietz, published a book with the IEA, Redefining the Poverty Debate, citing Murray’s work on the underclass.

In 2015, IEA’s then head of public policy, Ryan Bourne, interviewed Murray about his recently released book, By The People: Rebuilding Liberty Without Permission. Building on his previous work, Murray dismissed the role of democracy in solving the problems of governmental regulatory overreach, instead advocating for “systematic civil disobedience” to “roll-back the regulatory state”.

In 2019, the IEA’s head of education, Stephen Davies, published a critique of universal basic income citing Murray.

Eugenics & the Intellectuals Stephen Unwin


Littlewood has previously told Byline Times that, while he is no expert, he does not believe in the idea of racial differences in IQ or a biological basis for race, and that he believes racism should be called out. But it is difficult to see how that stance squares with the IEA repeatedly choosing to platform Charles Murray – while refusing to challenge the racist theories and biological pseudoscience underlying his work.

A spokesperson for the IEA did not disassociate from Charles Murray’s views and said that its publications and citations of him were not endorsements. “The IEA disagrees with racists, white nationalism, and eugenics,” they said.

But asked whether they agreed that Murray is a racist and white nationalist whose ideas are rooted in eugenics, they added: “The IEA’s mission is improving understanding of the institutions of a free society and role of free markets in solving economic and social problems. We do not then recognise your attempt to link it to things we have not published or supported, let alone third party interpretations of what they mean.”

The IEA’s engagement with Murray’s work has been careful to avoid acknowledging its well-known racist roots and dependence on questionable theories of cognitively-based social stratification – instead choosing to amplify the social consequences of Murray’s claims around a self-perpetuating underclass that must be managed and controlled by effectively ‘starving’ it of state support.
The Conservatives and Tufton Street

Liz Truss’ ties to the IEA demonstrate how the think tank is now influencing UK Government policy at the highest levels.

The IEA co-hosted numerous events with Truss’ Free Enterprise group and Truss herself has spoken at the IEA more than any other politician over the past 12 years, according to Littlewood. He has been her friend since their student days.

Truss’ senior special advisor in Downing Street, Ruth Porter, is the IEA’s former communications director. During her leadership campaign, Truss cited IEA trustee Patrick Minford in defence of her tax cuts agenda.

A total of eight members of the current Cabinet belonged to the IEA Free Enterprise Group – now known as the Free Market Forum – including Kwasi Kwarteng, Brandon Lewis, Jacob Rees-Mogg, Therese Coffey, Nadhim Zahawi, Simon Clarke, Kemi Badenoch and Alistair Jack.

A Downing Street spokesperson did not clarify to Byline Times whether the Prime Minister and her Cabinet agreed or disagreed with Charles Murray’s views.

Truss’ reference to a new school curriculum by Civitas while she was Education and Childcare Minister came from then Education Secretary Michael Gove’s vision of education as ‘cultural literacy’ – the learning of hard facts rooted in the history of a country. This, in turn, comes from the work of English professor E. D. Hirsch, who has been vociferously promoted by Charles Murray.

In 2013, a 237-page private thesis by Dominic Cummings, Gove’s then special advisor, was leaked. The document, which cited Murray, revealed that Cummings believed a child’s educational performance has more to do with their genetic make-up rather than educational standards. The paper also cited scientists who have been affiliated with eugenics, including Stephen Hsu and Robert Plomin. As author of Human Genetic Engineering Pete Shanks observed, Cummings’ analysis promoted “the blatantly eugenic association of genes with intelligence, intelligence with worth, and worth with the right to rule”.

Such claims about the relationship between genes, race and cognitive ability have been repeatedly disproved. But the influence of these ideas in British conservatism appears to have persisted.

Following Boris Johnson’s victory in 2019, Cummings appointed eugenicist Andrew Sabisky to his Downing Street advisory team. It quickly emerged that Sabisky believes black people to be genetically predisposed to have lower IQs. Before taking up his role, he had publicly lamented “the white death”, which “sits on a throne of ethnic diversity” driven by globalisation and mass immigration. Downing Street refused to comment on whether Johnson disagreed with Sabisky’s views – a spokesperson said only that his views had been well-publicised already.

Indeed, as Mayor of London, Johnson had claimed that economic inequality was due to some members of “the species” having lower IQs, with economic success equating to higher cognitive ability. While the remarks were condemned by Liberal Democrat and Labour politicians, the Conservative Party remained silent.
‘Social Apartheid’

The economic agenda spearheaded by Trussonomics cannot be simplistically equated with neoliberalism. Rather, it is a nationalist evolution of neoliberalism seeking to socially engineer market conditions that favour the so-called cognitive elite, while controlling an underclass considered parasitical to society.

Charles Murray has played a critical role in bringing social Darwinistic thinking into centres of neoliberal thought.

In 2005, The Sunday Times commissioned him to write an article explaining what he called “social apartheid”. In it, Murray argued that, given Britain’s welfare policies, the only way to deal with the rising underclass was through its “social segregation” and “increased geographic segregation”, including mass incarceration. In the US, of course, black people are incarcerated at a rate five times higher than white people.

Marshalling as much as he could to prove that genes play a large role in determining cognitive ability, he later conceded in The Bell Curve that there is yet no clear evidence on whether genetics or environmental influences predominate in determining IQ.

Eugenics was Behind Some of the PolicyDisasters of the 20th Century Samir Jeraj


Murray nevertheless concluded that the emergence of a self-perpetuating underclass of cognitively inferior people is inevitable due to “dysgenic pressures” – and that this is worsened by welfare policies incentivising the underclass to continue self-reproducing on the udder of the state.

Instead of the traditional trickle-down economics associated with neoliberalism – through which growth for the few is supposed to lift all boats – Murray’s ideology not only naturalises entrenched inequalities, but argues that there is no point in attempting to lift all boats at all.

He suggests that social policy should be designed not to improve the lives of the less fortunate, but to decrease their numbers. Murray therefore recommends the elimination of all welfare policies, hard limits on immigration, and strategies to lower birth rates among these groups through policy disincentives – while implementing ‘social apartheid’ to manage these inferior populations and contain their dangerous impacts on wider society.
An Extreme Trajectory

Charles Murray’s work has channelled the principles of Nazi eugenics into mainstream conservatism, while carefully excising its Nazi origins from visibility.

The Southern Poverty Law Centre points out that the 13 scholars on which The Bell Curve relies to substantiate its claims received funding from the Pioneer Fund – founded in 1937 by Nazi sympathisers to promote “racial betterment” via eugenics and the “repatriation” of black Americans to Africa.

Throughout the 1930s, the Pioneer Fund’s first president, Harry Laughlin, published articles in Eugenical News promoting Nazism and approving of its antisemitic laws. In The Bell Curve, Murray praises Laughlin as “a biologist who was especially concerned about keeping up the American level of intelligence by suitable immigration policies”.

The Pioneer Fund maintained intimate contacts with Nazi scientists. One organisation it finances is the Ulster Institute for Social Research, the journal of which – Mankind Quarterly – was founded by Otmar von Verschuer, who taught and mentored Nazi SS officer Josef Mengele, renowned for his medical experiments at Auschwitz.

In his AEI award speech in 2009, Murray encapsulated some of the core ideas that have come to dominate conservative movements in the US and UK.

He articulated the key ingredients of what is now the ‘Great Replacement’ theory – the baseless far-right belief that white populations in Europe are being replaced by foreign immigrants, largely from Muslim and African countries. “The European model can’t continue to work much longer,” Murray warned. “Europe’s catastrophically low birth rates and soaring immigration from cultures with alien values will see to that.”

Murray’s concern was that “every element of the Europe Syndrome is infiltrating American life as well” and he pointed to “America’s social democrats, heavily represented in university faculties and the most fashionable neighbourhoods of our great cities” as its main carriers. The good news, he declared, was that science was about to prove the European model wrong to the entire world because “within a decade, no one will try to defend the equality premise”.

“All sorts of groups will be known to differ in qualities that affect what professions they choose, how much money they make, and how they live their lives in all sorts of ways,” he said. “Gender differences will be first, because the growth in knowledge about the ways that men and women are different is growing by far the most rapidly… But groups of people will turn out to be different from each other, on average, and those differences will also produce group differences in outcomes in life, on average, that everyone knows are not the product of discrimination and inadequate government regulation.”

But the vehicle for this vision being executed, Murray said, would be the most powerful people in America, “the small minority of the population that has disproportionate influence over the culture, economy, and governance of the country” – the kind of people “in this room tonight”. He called for a “political great awakening” among these elites to consider “what they are willing to do to preserve” an exceptionalism defined by the right-wing libertarian philosophy of limited government, privatisation and deregulation blurred with social Darwinistic values of survival of the fittest.

These ideas – articulated more than a decade ago – have played a fundamental role in the transformation of Anglo-American political ideology.

Though largely unacknowledged, Charles Murray’s school of thought now permeates the background thinking of numerous politicians, conservative media pundits, thinkers and financiers. Although the specifics may not have been taken up, Murray’s work has set the mood music against which right-wing political and economic ideology is increasingly choreographed. Many who dance to its tune do not know the origins of the music and the beliefs of its composers.

Yet this goes some way to explaining the increasingly extreme trajectory of mainstream conservatism today: its intensifying race-baiting; its infiltration by Great Replacement theorists; and an obsession with an agenda containing social Darwinist strands of thought. It also helps to explain why Trussonomics has converged with the American brand of right-wing libertarianism in a doctrine that revels in inequality, and sees the poor and vulnerable as little more than ‘useless eaters’ who must bear the blame for their own circumstances.

The quiet predominance of this ideology, however, bodes ill for the future of the West. Although the Third Reich was defeated in 1945, right-wing influencers and politicians have cherry-picked from the findings of modern biology to justify retaining its ideological remnants while denying their Nazi origins.

In a time of escalating crisis, the continued radicalisation of the right poses the biggest internal threat to the values defining Western civilisation since the Second World War.

The markets have taken back control: so much for Truss’s Brexit delusion of sovereignty


This is the biggest humiliation of Britain since Suez, a reminder that no government can ignore reality

‘Liz Truss is finished, a hollow husk of a prime minister.’ 

Photograph: Sean Smith/The Guardian

Opinion
Jonathan Freedland

The Guardian
Fri 14 Oct 2022 

Hard to believe now, when we’re in the middle of the maelstrom, but one day this too will be the past. And when it is, when we’re out of the hourly psychodrama – no longer staring at the screen, watching Kwasi Kwarteng’s plane do an actual U-turn in the sky en route to his being fired on touchdown, for the crime of doing what his boss wanted him to do – it may not look all that complicated.

Historians will look back and see a point of origin to the current madness, one that explains how a new prime minister could see her administration fall apart in a matter of weeks, even if we struggle to name that cause out loud right now. When the textbooks of the future come to the chapter we are living through, in the autumn of 2022, they will start with the summer of 2016: Brexit and the specific delusion that drove it.

They will point to the obvious impact of Britain’s decision to leave the European Union, and the role that played in upending a country once renowned for its stability. They might begin with the basics. Exit, they will write, shrank the UK economy thanks to a 5.2% fall in GDP, a 13.7% fall in investment and a similar drop in the trade in goods. That self-inflicted contraction helps explain why Britain felt international shocks – surging inflation, for example – harder than most. If your economy is smaller, you either have to tax people more to pay for the services they expect, or you cut those services, or you borrow. There are no other ways out.

Unless you resort to magical thinking. Which brings us to the second causal connection between the craziness of now and the turning point of 2016. Brexit broke the link between governance and reason, between policy and evidence. Until Brexit, politicians only rarely got away with defying the empirical facts or elementary logic. But in 2016 they pretended that a country could weaken its trading ties to its nearest neighbours and get richer, which is like saying you can step in a bath of ice and get warmer. Once the taboo on magical thinking was broken, once fantasy became a Conservative habit, Trussonomics became inevitable – smilingly insisting that you could cut taxes for the richest, make “absolutely” no cuts to public services and control borrowing, all at the same time.

But there is a less obvious way in which Brexit made the current great unravelling a political death foretold. It turns on the idea that powered the urge to leave the EU more than any other: call it the sovereignty delusion.

The leavers’ slogan, “Take back control”, urged Britons to shake off the constraints of Brussels and become a proud, sovereign nation once more – a nation that, alone, would decide its fate. After Brexit, they promised, Britain would be the sole master of its destiny, unburdened by the need to consult or even accommodate anyone else.

The three weeks since Kwarteng delivered his mini-budget have seen the shattering of that delusion. For Truss and her now ex-chancellor were given the rudest of reminders that in our interdependent world there is no such thing as pure, untrammelled sovereignty. No government can do what the hell it likes, heedless of others. In this case, the restraint on sovereignty was not the EU: it was the money markets. But their verdict was as binding as any Brussels edict; in fact it was more so. They ordered the removal of a chancellor after just 38 days in office and the cancellation of the government’s economic strategy. It is the financial markets that have taken back control.

None of these events should be a surprise. There were plenty who warned this would happen, not least Truss’s summer opponent, Rishi Sunak. But Truss and Kwarteng went ahead anyway, issuing their proclamations as if they were the sole actors on the stage, oblivious to the fact that you can’t just announce £43bn of unfunded tax cuts without those whom you expect to lend you the money expressing a view – in this case by triggering an instant spike in the cost of borrowing. You cannot simply bypass the official spending scrutineer, the Office for Budget Responsibility, without the markets concluding that you’ve become unpredictable and, therefore unreliable, a bad risk.

As remainers were mocked for pointing out six long years ago, there is no such thing as unfettered sovereignty in the 21st century: every country has to accommodate its neighbours, the global economy, reality. But the leavers, and their zealous convert Truss, refused to hear it. When Sunak tried to spell out these rudimentary facts, Conservative party members thought he was being a spoilsport. The Treasury permanent secretary, Tom Scholar, was seen as the embodiment of such boring, reality-based thinking, and so Truss fired him.

This week Sanjay Raja, chief UK economist of Deutsche Bank, told a Commons committee that Britain was facing a unique form of trade shock: “We haven’t seen this kind of trade deficit since 1955, since national account records began.” It was odd, because I too had been thinking about the mid-1950s, specifically the Suez crisis of 1956. The failure of that military adventure is now seen as the moment when a bucket of cold reality was thrown into Britain’s face, a humiliation that stripped the country of its imperial delusions, forcing it to accept that it was no longer a global superpower that could act alone. For a while, Britain learned that lesson: just five years after Suez, the country was knocking on Europe’s door, asking to join the club.

But some, especially in the Conservative party, never shook off the old delusion. By 2016, it was back, the Tories high on Brexit talk of a global Britain once again sailing the world’s oceans, free of the constraining hand of the EU, ready to return to its rightful grandeur. The Tories have been breathing those fumes for six years, and the Truss-Kwarteng mini-budget was the result: the Suez of economic policy, a disastrous act of imagined imperial sovereignty.

As several economists have noted, Truss was acting as if Britain were the US, issuer of the world’s reserve currency, with markets falling over themselves to lend it money. Like Anthony Eden before her, she could not accept that Britain’s place is not what it was: it can never be sovereign like a king in a fairytale, able to bend the world to his will. That kind of sovereignty was always a fantasy, one that both fed Brexit and was fed by it.

Now she has had to make a concession to reality, laying down the political life of her friend and abandoning what had been a signature policy. She is not in charge of events; she is not even in charge of her own government. Jeremy Hunt was an appointment forced on her. Her demeanour in her afternoon press conference on Friday – shell-shocked, brittle – suggested she has not absorbed the full meaning of what has just happened.

She is finished, a hollow husk of a prime minister. But this is bigger than that. The Brexit bubble has burst. The country has seen that the Tory hallucination of an island able to command the tides was no more than a fever dream, and a dangerous one at that. We can pronounce Trussonomics dead. Bring on the day we can say the same of the delusion that spawned it.

Jonathan Freedland is a Guardian columnist

Analysis: Battered UK markets need more than policy U-Turn before confidence returns

By Yoruk Bahceli
and Nell Mackenzie

Pedestrians leave and enter the London Stock Exchange in London, Britain

 August 15, 2017.    REUTERS/Neil Hall

LONDON, Oct 14 (Reuters) - British Prime Minister Liz Truss and new finance minister Jeremy Hunt will have to do a lot more than Friday's U-turn on corporation tax to restore Britain's credibility with financial markets after three bruising weeks.

Truss and Hunt, a former foreign minister, will be looking to Oct. 31 - the date of the government's medium-term budget plan announcement - as a moment to win back the trust of investors.

The pound and British government bond prices rose on Thursday and Friday in anticipation of the policy shift, but they retreated after Truss gave a short news conference on Friday, which underwhelmed analysts.

"Undertaking a U-turn that is forced doesn't really give the impression that Liz Truss is driving forward with a credible policy plan but rather reacting to developments as they unfold, which itself doesn't engender much confidence," said Richard McGuire, head of rates strategy at Rabobank in London.

As Truss spoke on Friday gains made in anticipation of the corporation tax U-turn faded.

Ten-year gilt yields were 40 bps above session lows hit earlier on Friday, also pushed up by moves in bond yields globally. This puts them some 80 bps above their levels before the government's mini-budget on Sept. 23 that triggered the recent turmoil.

The pound fell more than 1% against the dollar and remains 0.6% below its pre-Sept. 23 levels. 

Investors and analysts said the reinstating of a previously scheduled corporate tax hike did little to resolve the challenges the "mini-budget" had originally introduced.

Paul Dales, chief UK economist at Capital Economics, called Friday's move a "mini-U-turn," noting there were still 25 billion pounds ($28.07 billion) of unfunded tax cuts remaining, down from 45 billion pounds in the original plan.

Without further changes the Office for Budget Responsibility - Britain's fiscal watchdog - will say a 43 billion-pound hole in the public finances will need to be filled to put the debt-to-GDP ratio on a falling path in three years, he estimated.

Focus also turned to growing political instability with the fourth finance minister in as many months appointed in a country grappling with a cost-of-living crisis, and some questioned how long Truss herself could stay in office.

"Markets are potentially seeking out a hard reset back to square one. Like we've seen in Greece and Italy, the market can force a change of leadership if necessary," said Janus Henderson portfolio manager Bethany Payne.

Then Foreign Secretary Liz Truss at the European Commission earlier this year. 

Photo: Alexandros Michailidis/Alamy

UNDERWHELMED

Britain's mini-budget three weeks ago triggered some of the biggest ever jumps in British bond yields, exposed vulnerabilities in the pensions sector -- undermining the country's financial stability.

Sterling, already hurt by a strong dollar, fell to record lows, creating another headache for the Bank of England which is has accelerated the pace of its interest rate increases in a bid to tackle an inflation rate running at nearly 10%.

The BoE was also forced to carry out a round of emergency bond-buying which ended on Friday, leaving many investors anxious about what might happen next week.

"These sudden changes of policy both from the government and the central bank raise uncertainty for market participants potentially stalling or deterring investment, which has been weakening since Brexit," said Ken Egan, director of European sovereign credit at Kroll Bond Rating Agency.

"How it impacts liquidity on the gilt market going forward is something we are monitoring closely."

Nomura said sterling's decline was unlikely to slow until economic growth rebounds. It forecasts a fall in sterling to $0.975 by year-end. The pound was trading at around $1.1191 and is already down 17% against the dollar this year.

NatWest Markets also suggested Friday's announcement would do little to tame gilt yields. A roughly 20 billion-pound reduction in funding needs over the next two years -- Friday's measures are expected to raise 18 billion pounds -- would be worth only 30 bps off the 10-year gilt yield, which has already been more than priced in, its economists said.

Rabobank's McGuire said pressure on UK assets could lead the BoE to re-intervene in the bond market or delay its quantitative tightening, bond-selling plans.

Investors may need more reassurance, especially given the scale of Britain's six-month, 60 billion-pound energy support package, fund managers said.

"Thus far, the investment community has been underwhelmed by the move on corporation tax and is looking for a more substantive 'U-Turn' in order to restore fiscal credibility," said Mark Dowding, chief investment officer at BlueBay Asset Management.

"A windfall tax to reduce the cost of the energy price cap will be required along with further steps," he added.

In his editorial from the October 2022 print edition of Byline Times,  Peter Jukes argues that Liz Truss is ushering in the final phase of the Brexit project

It wasn’t supposed to happen like this. When David Cameron took over as leader of the Conservatives in 2005, he wanted to transform its electoral reputation as the ‘nasty party’. With the help of ecologically friendly policies, more ethnic diversity in his MPs and a vow to preserve the National Health Service, he hoped to turn the sluggish rump of Thatcherism into a bright butterfly to bedazzle and attract a wider electorate, and become the ‘true heirs to Blair’. 

The credit crunch, austerity and Coalition with the Lib Dems took some of the shine off Cameron’s colours. But electoral success brought more problems. Devouring Nick Clegg’s party in the 2015 General Election, Cameron lost the deflective protection of his left flank, and it was his attempt to destroy the right flank – to remove the threat from UKIP once and for all – that really ended in disaster. His gamble of the EU Referendum in 2016 and his sudden resignation as leader destroyed the possibilities of a more centrist Conservative Party. 

Brexit turned Cameron’s butterfly into the chrysalis of something much darker and backward-looking. 

The last six years of Brexit-related chaos – four prime ministers and six chancellors – have underlined that the ‘project fear’ he and George Osborne muttered about during the referendum was, if anything, an understatement of the economic and political damage to come. 

Boris Johnson and Michael Gove might not have realised the ugly forces they were incubating. Their white faces on the morning of the Vote Leave victory suggested they were stunned by the catastrophe of their own success. Like the would-be Broadway conmen in Mel Brooks’ The Producers, their scam to fleece investors only worked if their terrible play Springtime for Hitler was a flop and nobody looked closely at the books. With a hit on their hands, they would all end up in prison. 

Theresa May tried to contain the extreme forces rising within her party over the next three years with a moderate-to-hard Brexit agreement: no Single Market or freedom of movement, but alignment with EU standards to reduce trade barriers and with a workaround to avoid a hard land border between the Republic of Ireland and Northern Ireland in breach of the Good Friday Agreement.

But May’s Parliament was beset by rebellions and plots. The tricky economic uncoupling from Europe both inflamed and was inflamed by various cultural conflicts around identity, immigration, national history and Empire. By now, Brexit was fracturing into a myriad of demands, with more and more extreme versions of what ‘Leave’ actually meant gaining currency and – like Gresham’s Law – driving the good faith plans out with calls for the catastrophic cliff edge of a ‘no deal’ exit. 

Like so many religious or political utopias, the ‘sunlit uplands’ of leaving the EU became an impossible promise: any failure to achieve it or heresy from it a source of terror and turmoil. With Nigel Farage still outriding on the right, and the powerful parliamentary European Research Group conspiring against her, May was toppled and replaced with the most prominent face of the Vote Leave campaign – Boris Johnson — who finally became ‘world king’ and entered Number 10 in July 2019. 

Johnson’s first few months were tumultuous and typically rule-breaking. First, he tried to unlawfully prorogue Parliament, then expelled moderate rebels, and finally went to the country in a rare winter election with the promise to ‘Get Brexit Done’. It worked, for a while. Compared to the apparent paralysis of Parliament and the Labour Opposition Leader Jeremy Corbyn, Johnson won the Conservatives their biggest parliamentary majority since 1987. But almost immediately, the pandemic changed the political landscape. 

Johnson’s Brexit was – essentially – a cultural Brexit. His effective appeal was a mishmash of nationalist rhetoric and what (former Conservative Attorney General and expelled rebel) Dominic Grieve calls economic “boosterism”. With his half-remembered Latin tags and Shakespeare quotations, Johnson embodied a new kind of ‘One Nation’ Conservative: English nationalism with an Etonian accent, which turns its own bigotries into a joke. 

Much mockery was made of foreigners and dastardly Europeans, but the proffer was – at least to the white working-class in northern cities and towns – that he would act in the best interests of his narrowly-conceived nation. Johnson’s ‘levelling-up’ programme and his towns and cities plan may have been poorly executed, badly funded, and used in a ‘pork barrel’ way to prop up Conservative seats. But even while procuring donations from oligarchs, providing a VIP lane for commercial COVID contracts, and redecorating his Downing Street apartments in lavish style – at least he made a gesture towards public solidarity. 

Johnson’s downfall came because he broke even this meagre promise of a bouncy nationalist Brexit. In the early days, he made people laugh; voters thought he would be a fun person to party with. But then the public discovered that Johnson broke the lockdown rules he had imposed on us – and he lied about. He went to private parties we weren’t invited to while the Queen mourned Prince Philip and the rest of us paid silent, socially-distanced, respect to hundreds of thousands of lost relatives. In our darkest hours, he wasn’t laughing with us, but at us. 

Johnson’s replacement Liz Truss has none of this personal and symbolic baggage to weigh her down. She doesn’t have the problem of the public souring with her charisma, because she has no charisma at all. She doesn’t lie about levelling-up or inequality, because she honestly doesn’t care. Her ‘culture wars’ are limited to posing as a tribute act for Margaret Thatcher.

There’s nothing like a new leader, free from the encumbrance of expectations, to achieve a fresh start for a failing party. Judging by the opinion polls, Truss is nothing like a new leader to achieve a fresh start. Why?

From Cameron’s gilded butterfly, through May and Johnson’s chrysalis, the Conservative Party has gone through a whole Brexit reverse metamorphosis. It is now reduced to Truss’ primitive worm of an idea: an economic proposition to ‘go for growth’ while ignoring the most obvious constraint to growth – Brexit.

We can all see that the Truss and Kwarteng mini budget is an extreme version of American libertarian capitalism that was discredited 40 years ago (and before that during the 1930s). That it has been drawn from a nexus of ‘think tanks’ with many links to US dark money donations and corporate interests in fossil fuels, tobacco and private healthcare is perhaps the only rational explanation for why these discredited theories still survive at all. 

Cutting taxes for the rich and reducing government expenditure on infrastructure and benefits at this economic moment is the surest way to ensure a looming economic recession turns into a deeper crisis. Already, Truss and Kwarteng’s market fundamentalist advisors (many drawn from the Tufton Street lobbying network) have proved they do not understand market fundamentals.

The pound has crashed to its lowest level since the 1980s. On top of the rise in import and energy prices, the lack of confidence in UK Government debt has caused a credit rating downgrade and a hike in interest rates for mortgage payers. This nasty trifecta would normally be countered by cheaper exports if Brexit hadn’t frozen our borders by leaving the EU as drastically as it did. Compared to other OECD countries, which have seen exports rise by 10-20% since the Coronavirus lockdowns, ours have flatlined. At 8.3%, Britain now runs one of the highest trade deficits in developed or emerging markets, and the worst since records began in 1955.

In the words of former US Treasury Secretary Larry Summers, Britain – at the bottom of the G7 league for growth – is “like an emerging market turning itself into a submerging market”. 

So, in the end, Brexit really does mean Brexit: Britain’s exit and isolation from the leading economic nations of the world. It may have been disguised by the pandemic and Russia’s invasion of Ukraine, but there is now no longer any way we can avoid it. Leaving the EU under the conditions we did has been a massive act of self-harm or, as American economist and former member of the Bank of England’s Monetary Policy Committee, Adam Posen put it, “the first time in history a nation has declared a trade war on itself”. 

The music has stopped and – rather than Cameron, May or Johnson – it’s Liz Truss who faces the consequences of a decade of Conservative divide-and-rule. Her demise, and that of her party, won’t solve the underlying problem of the dire state of our trading relationship with our nearest neighbours. But it will hasten the final burial of a bankrupt idea whose rotten stink can longer be ignored.  

This article was published as an editorial in the October 2022 print edition of Byline Times. 

Government Losing Control Over Public Spending  Report Warns

David Hencke
14 October 2022

Boris Johnson and Liz Truss visit GKN Aerospace.

 Photo: Andrew Parsons/10 Downing Street

The method used to track state expenditure is now ‘increasingly unreliable and incomplete’, reports 

The Government is losing control over managing and recording public expenditure in Whitehall, local government and the devolved nations, a new report reveals today.

The Commons’ Public Accounts Committee found that Boris Johnson’s plan to cut 91,000 Civil Service jobs was not based on any Whitehall plan and that the Treasury has done no work on this staff-cutting agenda – leaving the job to individual departments, which have yet to produce a single plan.

The entire Whole of Government Accounts (WGA) – which pulls together the £900 billion spent every year on public services and covers 10,000 public organisations – is a tool used by the Treasury to keep a grip on public spending. It is now described by MPs as “increasingly unreliable and incomplete”.

Their findings come as Chancellor Kwasi Kwarteng and Prime Minister Liz Truss are facing an economic crisis over their unfunded mini budget – a lack of confidence in their handling of the economy having spooked the markets.

The WGA for 2019-20, published five months late partly due to COVID, now shows that the Treasury does not have the full picture of audited public expenditure across the country.

“We still desperately need to see the big picture as the Government balances one massive intervention after another – from the pandemic response to the interrelated energy, climate, and cost-of-living crises we face now and into the future,” Labour’s Meg Hillier, chair of the Public Accounts Committee, said.

“The public also deserves a clear and transparent record of the full costs and liabilities that generations of current and future taxpayers have been committed to.”

Mini-Budget Opacity Resembled‘Failing State With BarelyFunctioning Tax System’Andrew Baker and Richard Murphy

The report reveals that collection of data by the Treasury was delayed by yet another Whitehall computer failure – relying on a new computer system called OSCAR II but never testing it before it went live.

“The Treasury failed to anticipate a number of significant problems that arose during implementation,” the report states. “Setbacks – which included issues with data submission by component bodies, incomplete and inaccurate report outputs, and various performance issues – took the Treasury significantly longer than would be expected to understand and resolve.”

The situation was compounded through difficulties in getting auditors to check local council accounts. As a result, 45% of local government audits were not completed on time. The WGA report was ultimately published with 23 councils having no audited accounts available at all.

The report also highlights the fact that the Treasury is not tracking the huge cost of the pandemic – relying instead on the National Audit Office. MPs are critical of this.

“Providing a more comprehensive assessment of the impact of the pandemic on the level of fraud and error against the Government should be a focus going forwards, for example by including estimates of NHS procurement fraud,” the report says.

It concludes with a stark warning about the lack of information compared to the accounts expected from businesses: “The asset and liability split reported in the WGA shows total assets of £2,138.5 billion and total liabilities of £4,972.7 billion. In a commercial organisation this would indicate that it was insolvent. Although this is not the case, there is currently no narrative to explain this.”

Liz Truss’s tax reversal, firing of budget chief the latest setbacks for fledgling British PM

PAUL WALDIE

EUROPE CORRESPONDENT
LONDON

PUBLISHED YESTERDAY

Britain's Prime Minister Liz Truss looks down during a press conference in the Downing Street Briefing Room in central London on Oct. 14, 2022, following the sacking of the finance minister in response to a budget that sparked markets chaos

.DANIEL LEAL/AFP/GETTY IMAGES

British Prime Minister Liz Truss has sacked her finance minister and dropped a key part of her government’s tax-cutting plan in an effort to salvage her teetering leadership.

Ms. Truss announced Friday that she had replaced Kwasi Kwarteng as Chancellor of the Exchequer and would not fulfill a pledge to scrap an increase in the corporate tax rate; instead, the rate will climb from 19 per cent to 25 per cent next April, as previously announced.

Jeremy Hunt, a former senior cabinet minister, has taken over as chancellor.

The moves are humiliating setbacks for Ms. Truss and may not be enough to save her from being forced to resign. In just five weeks as Prime Minister, she has reversed course twice on major policy announcements and dropped the central part of her economic growth plan.

Her government’s mini-budget, which included deep tax cuts funded by increased borrowing, has also caused havoc in financial markets and a spike in mortgage rates, driving public support for the Conservatives to 30-year lows.

On Friday Ms. Truss said she remained focused on her “mission,” but acknowledged that there had been some instability.

“It is clear that parts of our mini-budget went further and faster than markets were expecting,” she said during a short news conference. “So the way we are delivering our mission right now has to change. We need to act now to reassure the markets of our fiscal discipline.”

She insisted that she remained committed to a “low-tax, high-wage, high-growth economy.”

“I am determined to deliver on what I set out when I campaigned to be the party leader. We need to have a high-growth economy but we have to recognize that we are facing very difficult issues as a country,” she said.

But she could not explain why she should remain Prime Minister given that she has now abandoned her core campaign pledge and dismissed Mr. Kwarteng, who was simply carrying out her agenda. She would only reiterate that she remained “absolutely determined” to implement what she promised during the leadership race.

Throughout the summer, as she campaigned to replace Boris Johnson as party leader and prime minister, Ms. Truss railed against higher taxes and took aim at her rival, former Chancellor Rishi Sunak, for making the decision to increase the corporate tax rate. She said it would stifle investment and stall economic growth and repeatedly promised to cancel the increase. She also vowed to cut the top tax rate for individuals from 45 per cent to 40 per cent, arguing that it would stimulate investment.

After she won the leadership contest on Sept. 5, she appointed Mr. Kwarteng because he shared her free enterprise philosophy. He tabled a mini-budget on Sept. 23 that included £45-billion worth of tax cuts but no plan outlining how the measures would be financed beyond increased borrowing.

That uncertainty roiled financial markets and sent government bond prices falling, which in turn drove up mortgage rates for millions of homebuyers. The turbulence got so bad that the Bank of England had to intervene to help pension funds facing hefty margin calls to cover falling bond prices.

Last week Ms. Truss bowed to public pressure and dropped the plan to reduce the top tax rate. That decision came only after she’d been accused of helping wealthy Britons while the rest of the country struggled with rising inflation. But it wasn’t enough to quell the growing discontentment with her leadership.

Conservative MPs have openly questioned her future, and there have been reports this week that some MPs have been looking for ways to oust her. Her performance Friday did little to solidify her position.

“Hard to understand why the Prime Minister has sacked her Chancellor – a good man – for promoting the policies upon which she was elected,” Tory MP Roger Gale said in a tweet.

Her remarks also failed to calm financial markets. Bond prices fell after she spoke, and the pound was down about 2 per cent on the day to US$1.11.

The mini-budget remains a source of uncertainty. Mr. Kwarteng had been expected to outline how the government would pay for the measures on Oct. 31. That will now be left to Mr. Hunt.

Economists say increasing corporate taxes and maintaining the top tax rate will raise about £20-billion per year. But the announcements were “unlikely to be enough” to plug the fiscal gap, said Paul Johnson, the director of the Institute for Fiscal Studies. “More than £20-billion of tax cuts are still in place.”

“As U-turns go it’s a doozy,” added Danni Hewson, an analyst at London brokerage AJ Bell. “The freeze in corporation tax wasn’t something most households were talking about around the dinner table, but it was the jewel in the crown of the new Prime Minister’s plans to supercharge U.K. economic growth.”

Opposition parties were quick to call for Ms. Truss to either step down or call an election. “Liz Truss’s reckless approach has crashed the economy, causing mortgages to skyrocket, and has undermined Britain’s standing on the world stage,” Labour Leader Keir Starmer said Friday. “We need a change in government.”

Liz Truss’ Economic ‘Shock Doctrine’
Is Pushing the UK to the Brink

Adam Bienkov
11 October 2022

RARE FOTO OF TRUSS SMILING, LAUGHING WITH THE GIRLS

Prime Minister Liz Truss with members of the England women's football team.

 Photo: Stefan Rousseau/PA/Alamy

As the Bank of England takes alarming steps to stabilise the economy, the Prime Minister is preparing for a devastating new era of austerity, reports Adam Bienkov

The Bank of England made another huge intervention in the UK economy this morning to prevent what it described as a “material risk to UK financial stability”.

The intervention in Government bond markets – the second it has made in as many weeks – followed a collapse in market confidence after Liz Truss and Kwasi Kwarteng’s disastrous mini budget.

In an alarming statement, the bank said that “dysfunction” in the market meant that it had been forced to intervene to prevent a “self-reinforcing ‘fire sale’ dynamics” from taking hold.

Following its announcement, the International Monetary Fund (IMF) issued its own statement, warning that Truss’ economic plans – which it had already urged the Prime Minister to “re-evaluate” – would only “complicate the fight” against rising prices.

Statements like these would normally be expected to trigger alarm in Downing Street or, at the very least, an immediate commitment from the Chancellor to take action. No such commitment has come.

The Chancellor told the House of Commons on Tuesday afternoon that he remained committed to his existing plans. Meanwhile, a spokesman for Truss told reporters that the Bank of England’s latest intervention had not even been discussed at this morning’s Cabinet.

Asked by Byline Times whether Truss was confident in the bank’s ability to stabilise the economy, her spokesman said that the “fundamentals” of the UK economy remained strong.

It is becoming increasingly difficult to justify this confidence.

The Chancellor’s announcement of significant unfunded tax cuts spooked the financial markets for the simple reason that they are no longer convinced that the UK Government is able to pay for them. In the weeks following Kwarteng’s announcement, international ratings agencies have downgraded the UK economy from “stable” to “negative”, while the surge in the cost of Government borrowing has led to a subsequent surge in mortgage and rental costs.

This combination of higher borrowing costs, and unfunded tax cuts, has caused a huge hole in the Government’s spending plans, which the Chancellor has committed to filling when he makes another “fiscal statement” at the end of this month.

Of course, the most obvious way to fill that hole would be for the Chancellor to scrap his planned tax cuts. However, with those cuts forming the centrepiece of Truss’ entire economic strategy, this remains unlikely. The Prime Minister’s spokesman told Byline Times that she is still committed to dramatically cutting the tax burden in the UK.

But, without a reversal of those cuts, and without a massive and inexplicable surge in economic growth, only one option appears to remain.

As the Institute for Fiscal Studies outlined today, without any reversal of the tax cuts imposed by the Chancellor, we are likely to see truly devastating public sector cuts over the coming few years. According to its analysis, the Chancellor’s tax cuts require annual cuts to government spending of around £62 billion in the coming years. To put that into context, that is around half the Department for Education’s entire budget.

Even if we assume that the cuts are spread more widely, we are still looking at truly colossal cuts. If Truss’ Government, like David Cameron’s before it, protects health and defence spending at current levels, then that implies cuts of around a third to the budgets of all other remaining departments. This would be an even bigger reduction in spending than under the austerity budgets of George Osborne and would follow a decade of continued low growth and cuts to public services.

It would, in short, be utterly devastating. Certain basic and essential public services would simply cease to function while the welfare state would be cut right to the bone.

But the important point to remember here is that, disastrous as this would be, it would not be an accident. As the Levelling-Up Secretary admitted last month, it is in fact a deliberate strategy by the Government to slash the size of the state in order to fund tax cuts.

As Simon Clarke told The Times, Truss’ Government believes that the UK is living in a “fools’ paradise” in which the UK’s “extremely large” public sector now needs to be brought “in full alignment with a lower tax economy”.

Truss has yet to admit to what this actually means in practice. Her spokesman this morning told Byline Times that she remains committed to maintaining Boris Johnson’s commitment not to bring in a new wave of “austerity”.

Yet a reckoning is surely coming. Either Truss will have to reverse her planned tax cuts, and potentially impose further tax rises, or she will feel compelled to implement the most painful set of public service cuts this country has seen for decades. If she fails to do either, the instability we are currently seeing in the UK economy risks tipping over into a major financial crisis.

As we head towards that reckoning, Truss’ Government will no doubt attempt to convince voters that it is all an inevitable result of ‘global’ factors, such as the war in Ukraine. But, while such factors are undoubtedly affecting most Western economies, the particular crisis affecting UK financial markets right now is – as the Bank of England itself has a made clear – overwhelmingly the responsibility of Truss and her Chancellor.

As Sam Bright has set out on these pages, the economic and social disaster we are currently seeing unfold is a direct result of the extreme libertarian economics which Truss, Kwarteng and the right-wing think tanks which supported their rise to power have been pushing for more than a decade.

At fringe meetings at this year’s Conservative Party Conference, hosted by the Institute of Economic Affairs and TaxPayers’ Alliance, it was notable that representatives from these groups emphasised the need for slashing the size of the state, even above tax cuts. For these groups, which boast of having previously hosted Truss more than any other UK politician, austerity is the number one political aim.

The economic ‘shock doctrine‘ of tax cuts and subsequent cuts to public services, is not an accident, but a deliberate and long-term political aim. In this view of the world, the likely new wave of austerity will not so much be a means to an end, but an end in itself.

It is not yet too late for Truss to avoid this disaster. A moderate programme of tax rises and support for the most vulnerable people in society could help prevent most of the social harms and economic turmoil which the Government’s current plans are leading us towards. And while the Prime Minister is unlikely to change course out of her own free will, it remains possible that Conservative MPs, fearful for their own futures, could force her to reconsider.

But with the UK economy in an increasingly alarming place, it remains to be seen whether that change, if it comes, will come soon enough.

UK

Is a Big Money Coalition Influencing Liz Truss’ Climate Change Policies?
Max Colbert
13 October 2022

Prime Minister Liz Truss alongside COP26 President Alok Sharma.

Photo: Andrew Parsons/10 Downing Street

Max Colbert reports on the well-funded, well-connected groups seemingly determined to water-down Britain’s climate commitments

As Liz Truss’ administration doubles-down on its heavily-criticised pledge to expand licences for North Sea oil and gas drilling, attempts to force English farms to ban solar-related projects, and plans to overturn the fracking ban, there are swirling questions about the providence of this anti-green agenda.

An important group in this story is the Global Warming Policy Foundation (GWPF), which overlaps with the Tufton Street lobbying groups that have such influence over the Truss regime and the Conservative Party itself.

Dubbed the UK’s “principal climate science denial campaign group” by the investigative site DeSmog and founded by former Conservative Chancellor Lord Nigel Lawson, the GWPF earlier this year posted a gross income of £387,490 for the year ending September 2021 – up from £374,330 in 2020, despite a drop of 21.9% in funds from ordinary members.

The GWPF has said it seeks to debate the supposedly “contested” science of global warming and is “deeply concerned about the costs and other implications of many of the policies currently being advocated”.

In the past 11 years, the organisation has received £4.2 million in funding, while the group’s income from donations dwarfs that of any other type. £134,000 has been raised since 2010 from membership fees, compared to almost £4 million from individual donations.

The GWPF is based in 55 Tufton Street – the command centre of Westminster’s libertarian lobbying groups. Mirroring its Tufton Street counterparts, the GWPF does not declare its donors and maintains charitable status. However, investigative reporting has revealed donations from some notable entities.

The GWPF and its campaigning arm, Net Zero Watch, recently had some of its funding unpicked by openDemocracy. The investigation detailed $1.3 million received from funds linked to US libertarian billionaires with ties to the fossil fuel industry – though the specifics are disputed by the GWPF.

The Sarah Scaife Foundation, established by the heir to an oil and banking dynasty, and the Donors Trust, which contributes substantially to libertarian causes, have both donated to the GWPF. The latter has received millions from the Koch brothers – libertarian billionaires equally notorious for funding right-wing causes, with their fortunes tied up in fossil fuels. At least $864,884 has been channelled into the UK through its US fundraising arm, the American Friends of the GWPF.

The GWPF has denied accepting donations from energy firms or from individuals who have a significant interest in an energy company – claiming that the Sarah Scaife Foundation does not represent a fossil fuel interest, and that it is able to reject funding from the Donors Trust if the money has been given by fossil fuel interests.

However, the GWPF has other links to the energy sector – much closer to home.

Institute of Economic Affairs (IEA) director Mark Littlewood is a close friend of Liz Truss. The pair went to Oxford University together and Littlewood says that Truss has spoken at IEA events more “than any other politician over the past 12 years”.

The IEA, part of the Tufton Street network, has received donations from fossil fuel interests, including energy firms Exxon Mobil and BP. The self-proclaimed think tank has likewise received money from the Koch-linked National Philanthropic Trust, with its most recent filings revealing a grant of $130,000 in 2020.

Neil Record, chairman of the IEA and the Global Warming Policy Forum (a wholly owned subsidiary of the GWPF) and Net Zero Watch, has donated to the GWPF – as has Nigel Vinson, the life vice president of the IEA having first joined its board in 1971.

Sir Michael Hintze, hedge fund manager and Conservative donor – who has given more than £4.3 million to the party – was revealed in 2012 to be a financial backer of the GWPF. He is also a founding member and trustee of the IEA, and sat on the advisory board of the lobbying firm run by Truss’ new chief of staff, Mark Fullbrook.

“I personally regard the continuing contribution of the GWPF to the climate change debate as very positive in assisting balance and rationality in this contentious area,” Record previously told the Guardian – while Vinson added that “I am very proud to fund [the GWPF]. You have to put a question mark over climate change if over the last 14 years the world has not got any hotter”.

Hintze, Record and Vinson have collectively donated £5.1 million to Conservative causes and politicians. Vinson was also revealed last week to have donated £5,000 directly to Liz Truss. It is not suggested that funding to the IEA from energy interests has influenced the opinions of any of these individual donors.

The IEA refused to respond on the record to requests for comment.

‘Who Voted for This?’

Byline Times has documented the extensive involvement of the Tufton Street network in Liz Truss’ Downing Street operation, which seems to be operating a ‘revolving door’ between current and former members of the IEA, Policy Exchange, the TaxPayers’ Alliance, the Adam Smith Institute, and the Centre for Policy Studies.

The presence of the groups was also strongly felt at this year’s Conservative Party Conference, where members of the IEA were represented in 19 different talks, alongside staff working for the aforementioned Tufton Street groups, who spoke at more than 50 events.

The Tufton Street network is notoriously opaque about its sources of funding, but almost all of its members have accepted money from those with vested interests in polluting industries through ‘friends of’ entities with extensive transatlantic ties, fed by opaque trusts.

Within Parliament itself, Conservative MP Steve Baker has been close to the GWPF, joining its board of trustees last May. He is an ideological ally of Truss. While now having left the GWPF to take up a role as Northern Ireland Minister, Baker is still allied with the group, which after the Conservative conference praised an “important intervention” of his at a fringe event.

Baker suggested that the UK’s net zero carbon emission plans are “not affordable in the short-term” and called for a “temporary suspension” of the policy. He has also received donations from Neil Record, logging £5,000 in January.

Baker has, as of July this year, gone on to relaunch the Thatcherite-era campaigning group, Conservative Way Forward (CWF), which calls for extensive tax cuts, reductions in fuel VAT, and the suspension of green levies on energy bills designed to fund renewables. The money donated to Baker by Record was to hire a “media and strategic campaign consultant” for the relaunch of the CWF.

Concerns have also been raised about the appointment of Jacob Rees-Mogg as Business, Energy and Industrial Strategy Secretary, who has previously decried “climate alarmism”. As recently revealed by Byline Times, Rees-Mogg – who is in charge of accelerating Britain’s Net Zero strategy and who has just announced the Government’s intention to lift restrictions on fracking – has links via his investment firm to palm oil deforestation and Canadian pipeline polluters.

In defence of her libertarian tax policies, Truss herself has cited economist Patrick Minford, a fellow at the Centre for Brexit Policy, which has multiple ties through fellowships to the GWPF.

Lifting the fracking ban puts Truss and Rees-Mogg at loggerheads with Conservative MP Chris Skidmore, appointed to lead the Government’s net zero review. Skidmore has already said that fracking won’t be included in the review as it doesn’t constitute a “significant energy source” and is a “non-starter” – claims corroborated by experts.

Skidmore has also urged the Prime Minister to ignore a “tiny vocal minority in Westminster” pushing for a bonfire of environmental red tape. Even the founder of fracking company Cuadrilla has openly criticised the Government’s plans, calling them a “political gesture” and saying that “no sensible investors” would choose fracking in this country.

Meanwhile, the UK has some of the highest public levels of concern in the world regarding climate change, with 81% of people ‘believing’ in the climate emergency, and 77% saying we must do ‘everything necessary, urgently as a response’. However, it is unclear how Britain will ever be able to take action while the people running the country, and those advising them, hold both ideological and financial interests that are antithetical to addressing the climate emergency.

The Conservative Party itself directly received £1.3 million in donations from fossil fuel interests and climate sceptics from December 2019 to October 2021.

While they may have been received with jeers and boos by the Tory faithful, the Greenpeace protestors who interrupted Liz Truss during her keynote conference speech, it turns out, were asking exactly the right question: “Who voted for this?”