Turmoil is an opportunity for the ambitious man, for the dishonest and the foolish man. They convince listeners of an instant false narrative, as we have seen in the swirling waters following the mini-budget.
Even amongst Conservative MPs a tale has gone round that the failure of Liz Truss’s mini-budget disproved the principle of low taxes, or of the ideal of economic growth and that somehow it proved we must have high taxes and high spending. It is an instant false narrative, and shocking that it should come from those who call themselves Conservatives.
We were all there though: we saw what happened and in reaction to what. The market reaction to lower taxes was a good one – shares rose. The shock was in the bond markets and the currency markets, when it appeared that spending was not to be curbed at the same time, and when ‘experts’ were side-lined. This is the very opposite of the narrative pressed by advocates of high taxes.
This needs saying, because the advocates of tax-and-spend were out on the airwaves immediately, pushing their line in the face of all demonstrable facts. To the average voter it is an attractive idea, bypassing the complexity of truth: Truss supported low taxes and cut taxes – there was an immediate market crash and hike in interest rates; therefore the one led from the other. It is no more accurate than to say that I was ill after a blow-out meal that included beef and cabbage, preceded by mussels which had gone off – so beef and cabbage are dangerous, ignoring the moules frites. Indeed, concentrating on the beef will encourage the consumption of curdled mussels, which would be deadly.
The beneficiary of this dishonest narrative will be the Labour Party: the very party whole pledges make Liz Truss’s misstep seem the path of virtue – unfunded spending even beyond their crippling taxes, and money printed with abandon.
The specific point about the mini-budget was that it contained new spending without announcing cuts, which made the government spending unaffordable. The price demanded by the market to lend shot up, Moody’s became moody, fears began that the Treasury would print money, collapsing the value of the pound, Weimar-style – and if Truss did not, Starmer would have no conscience about printing fake money. Is it any wonder the market went into meltdown? Nothing about it was about low taxes as such. The reducing in tax levels was the one thing the market liked.
(The bank of England has been blamed too: some economists have accused the Bank of misconduct in the matter, when the ramped up interest rates and this was enough on its own to spook the market – a high cost of borrowing collapses the profit margin in new ventures and so deters investment. I will leave economists to chide the Bank. It looks bizarre to increase interest rates as the economy teeters on recession. Inflation at present is not caused by an overheating economy- we are far from over heating – but by the cost of raw materials and components resulting from the Lockdown and by the cost of energy during the Ukrainian War.
Talk of the markets governing policy looks uncomfortably like the overthrow of democracy by a trapezocracy – but if the Government will get itself into unsustainable debt, then it is dependent on the banks, and if (as for the last half a century it has been, the state becomes so vast as to create an inescapable gravitational well around itself that the entire economy is swirling around the rim of the maelstrom, then we are all dependent on those markets, and democracy can go hang. It is not just liberty which depends on shrinking the state, but the very being of democracy.)
This matters, because the “accepted version of events” will shape the political debate for years to come, and those who get in first get to shape it. The proponents of high-tax-high-spending-strict-control have got their version round the world before the truth has got its boots on. This is a danger, and a lesson to those who should have been making the argument for liberty and prudence.
- Illogical crisis
- From Boris to Liz
- The Truss issue
- The Bill and the Rights
- Closing the Web
- Differences of Fit And Unfit Counsellours:
- The Borisiad
- By Boris Johnson:
- The Borisaurus: The Dictionary of Boris Johnson by Simon Walter
- William Pitt The Elder: a biography by William Hague
- Pistols at Dawn: Two Hundred Years of Political Rivalry from Pitt and Fox to Blair and Brown by John Campbell
- Politics in the Age of Fox, Pitt and Liverpool by John W Derry
- An Utterly Impartial History of Britain by John O’Farrell
- 1000 Years of Annoying the French by Stephen Clarke