The ideas that swept her to power now face extinction
This morning, Liz Truss conceded to Laura Kuenssberg that she should have done more to ‘prepare the ground’ before her mini-budget last Friday. This may be too little, too late.
Ironically, off the back of a successful leadership pitch based around free-market policy, Liz Truss might just have killed off the free-market wing of the Conservative Party for a generation. Kwasi Kwarteng’s not-so-mini-budget has spooked markets, tanked the Tories’ already-pitiful polling, and delighted the Labour Party.
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We all watched the pound sink further against the dollar and euro in real time, and this has naturally drawn comparisons with another source of Tory shame. Black Wednesday, which happened almost 30 years ago to the day, saw the UK forced to exit the European Exchange Rate Mechanism. This sealed the fate of the Major government, just five months after the Tories’ surprise win in the 1992 general election, and trashed the party’s reputation for economic competence for more than a decade.
Although the ERM debacle was terrible for the Conservatives, many argue that expulsion from the ERM set the course for the UK’s economic revival, which came to an end with the global financial crisis of 2008. To that end, Black Wednesday did not harbour the end of free-market thinking within the Conservative Party – in fact, it strengthened it.
The impact of the Truss government’s own Black Friday, however, is likely to be the reverse: the expulsion of free-market thinking to the fringes of the Conservative Party.
Firstly, Black Wednesday was not seen as the fault of a specific government decision, even if the subsequent attempt to try to prop up the currency was judged a foolish waste of money on the part of the Major ministry. Black Friday, on the other hand, is due to Truss and Kwarteng going too far too quickly. The mantra ‘move fast and break things’ might be fine for Silicon Valley start-ups, but our ministers need to be more careful when they’re running a country.
Secondly, after Black Wednesday there was still a strong cohort of Thatcherites, including Thatcher herself, who strongly believed in and pushed for free-market economics. The wets had largely been vanquished, or had given up trying, and there was no real source of ideological debate within the party. The picture could not be more different in today’s Conservative Party. There is no Thatcher-figure lurking in the background to push for free-market ideas.
Thirdly, many of the problems we have in the UK at the moment are not necessarily ripe for free-market solutions. Yes, there are areas of our tax code which could do with simplification, but the answer to the housing crisis isn’t a complete removal of planning restrictions, NHS backlogs are going to require a boatload of money to fix, and the private sector won’t fund HS3. What are the free-market answers to knife crime in London, ethnically-motivated violence in Leicester, or the collapse of our court systems?
Truss came to office promising a free-market revolution, only to see those very free-market policies being discredited by financial markets and voters, with polling putting the Conservatives 33 points behind Labour (to paraphrase Churchill: never in the history of the Conservative Party has so much been spent to please so few). If Tory MPs associate this aggressive free-market push with the party’s current low poll ratings (not unfairly, given the public broadly lean left-ish on economics and right-ish on culture) then the stage will be set for a resurgence of red Toryism.
Truss can, of course, power through for as long as MPs allow her, and perhaps things will all come good. But it’s worth remembering the experience of another former Conservative prime minister, Robert Peel, who pushed through free-market reforms which were unpopular with his own backbenchers and split the party. Peel ended up being replaced as leader by Edward Smith-Stanley, 14th Earl of Derby, a 40-something Oxford graduate based in the north and thought to be one of the richest MPs ever. I can’t think of a similar Tory MP currently on the backbenches with no love for Truss – can you?