In search of Trussonomics

When Liz Truss entered the leadership race there was no such thing as ‘Trussonomics’. She began her campaign with no real expectation of winning and without any serious guiding philosophy. Rishi Sunak did her a great service by portraying her throughout the leadership campaign as a crazed tax-cutter, a disciple of Ronald Reagan. But in truth, her economic policy was nowhere near as coherent as Sunak made out.

Truss just about scraped through the soundbite war of the debates, but without any real pro-growth, tax-cutting agenda. All she pledged to do during her campaign was to freeze forthcoming corporation tax rises and shave 1 per cent off National Insurance. This she did mainly because the 2019 Tory manifesto promised not to raise tax. Reneging on manifesto pledges damages trust in politics, Truss argued. But this is a tiny tax cut and unlikely to inspire any sort of economic growth.

Kwasi Kwarteng, the Chancellor, talks about a plan to return Britain to 2.5 per cent growth, and he’s right to say that ‘supply-side reform’ is the remedy, but there will need to be a lot more of it to have any hope of producing the sort of growth he has in mind. His tax cuts, hailed as the biggest in 50 years, would take the overall tax burden back to where it was last year. The verbal promise is intriguing: a radical, pro-growth agenda! But the small print (in this case the Institute of Fiscal Studies report – as Team Truss banned the Office for Budget Responsibility’s small print) shows that it would still leave Britain saddled with a tax burden 34.9 per cent of GDP: bigger than any that Tony Blair and Gordon Brown dared to imposed in 13 years of Labour rule.

One of the reasons the economy is being held back is that five million people – a scandalous 13 per cent of the potential labour force – are on out-of-work benefits.