“What kind of prime minister will Liz Truss be? Britain’s new Leader is a small-state conservative in a big-state era”-The Economist

Declinism, that dull fear of Britain’s sunset, has shaped the country’s post-war politics. It propelled Harold Macmillan’s wish to enter the European Economic Community, the eu’s precursor, and fuelled Margaret Thatcher’s economic revolution. And now it has helped Liz Truss into Downing Street.

The Economist

On September 5th Ms Truss was declared the winner of the ballot of 172,000 Conservative members to replace Boris Johnson as the Tory leader; tomorrow, she will fly to Balmoral Castle, Queen Elizabeth’s remote Scottish home, where she will be invited to form a government.

Ms Truss won the contest in large part because she is cheerful, a characteristic she shares with Mr Johnson. On the campaign trail, she would dismiss the warnings of hard choices from Rishi Sunak, her rival in the protracted final stage of the contest. “I don’t agree with this declinist talk,” she’d say. “I believe our country’s best days are ahead of us.”

Such optimism struck a chord among party activists. Her colleagues think her positivity might appeal to the broader electorate, too. “It’s boosterism without Boris,” says a cabinet minister. “It’s a gamble, but it might be a very powerful cocktail.”

Whereas Mr Johnson’s government often seemed to run on optimism alone, Ms Truss promises substance as well as sunshine. She is a self-styled radical, and perhaps the keenest disciple of the Thatcherite tradition to hold the office since Thatcher’s own exit from Downing Street 31 years ago.

She has grand ambitions to transform Britain’s sluggish economy so it does not end up as a low-growth, high-tax social democracy. For her, this is a moral choice as much as an economic one: who wants to live in a society where the state takes half your income?

Yet she is triply constrained. Her free-market instincts are at odds with the need to intervene to navigate an immediate cost-of-living crisis. Household gas and electricity bills will jump by 80% in October; businesses are seeing even bigger spikes. By January 2025 she must contest a general election in which she will face the judgment of a deeply dissatisfied public.

She inherits a country in dismal spirits: 69% of Britons, including 60% of Conservative voters, agree that the country is “in decline”, according to polling by Ipsos for The Economist. And the party she now leads has grown insurrectionary: it has deposed her two immediate predecessors and is unenthused by her. She will bash at the walls like a wasp in a bell jar.

Story of a Tory

Ms Truss was born in 1975 in Oxford to John, a mathematics professor, and Priscilla, a nurse. They were part of a left-wing, anti-war movement that flourished in opposition to Thatcher. Her childhood was spent on peace marches, clutching an old carpet roll fashioned to look like a nuclear missile, chanting “Maggie, out!”

She attributes her political journey to her state secondary school in Leeds, which she claims suffered from an inverse snobbery against good universities and making money. Contemporaries dispute this account, but Ms Truss’s resentment seems real enough. “Too often, there’s a bit in Britain which is kind of squashing people,” she told an interviewer in 2018. “It’s the tall poppy syndrome: who does she think or who does he think he is?”

She saw too the restricted lives of her parents’ acquaintances in communist Poland, and concluded there was something to be said for the freedoms Thatcher preached about.

As a teenager, she joined the Liberal Democrats, and then, while studying philosophy, politics and economics at Oxford, she turned to conservatism. Ms Truss’s mother reconciled herself to her daughter’s new career. Her father did not; Ms Truss has joked that he consoles himself with the hope she is a sleeper agent, working to overthrow the regime from the inside.

Such a journey from left to right is not uncommon among Tory radicals. Sir Alfred Sherman, one of Mrs Thatcher’s most zealous advisers, had fought with the Communists in the Spanish Civil War. Munira Mirza, a driving figure behind Mr Johnson’s culture war, used to be a member of the Revolutionary Communist Party, a tiny Marxist clique. They may abandon a doctrine but they retain a way of thinking of the world—as a struggle of systems and ideas—and a taste for breaking a little glass.

Ms Truss was elected to parliament in 2010. She came to public prominence soon after as the co-author, with four fellow new mps (among them Kwasi Kwarteng, widely expected to be her chancellor), of “Britannia Unchained”. It is a thin book but it boils with frustration at Britain’s drift into becoming a low-productivity, unambitious country, unable to compete with fast-growing Asian economies. The authors, all children of the 1980s, credit Thatcher with rescuing Britain from an age when “Blue Peter taught children how to line blankets with newspaper to keep elderly relatives warm without heating”. More than any economic reform, her triumph, they wrote, was making Britain believe in itself again.

Ms Truss’s remedy for Britain’s economic ills is a Reaganite mixture of deficit-financed tax cuts and regulatory reform. She proposes low-tax zones with relaxed planning laws, and wants to keep the headline corporation-tax rate at 19% to pull in foreign investment. (Mr Sunak had planned to increase it to 25% in April.) She intends to reverse an increase to payroll taxes, introduced by Mr Sunak in April, and is mulling tax relief for carers. She plans to lift defence spending to 3% of gdp by 2030. Together these measures would push up the deficit by around 1.8% of gdp.
Ms Truss is convinced that Britain has room to borrow more and that over the longer term, her policies will reap rewards in the form of higher growth. On the campaign trail she said that Britain’s economy ought to be growing at 2.5% a year; the Office for Budget Responsibility currently expects a growth rate of 1.7% at the end of its forecast horizon.

She is relaxed at the prospect that tax cuts will overwhelmingly benefit wealthier people: a preoccupation with redistribution over growth has been part of the problem, she said in an interview on September 4th. That is a significant philosophical shift from a mainstay of “one nation” conservatism: that in hard times, the broadest shoulders bear the biggest burden.

She regards the job of tackling inflation as primarily a task of monetary policy, one where the Bank of England has manifestly failed to meet its target of 2%. She plans a wide-ranging review of the bank’s mandate, which could embrace everything from setting a higher inflation target to targeting nominal gdp or looking at the money supply.

As for regulatory reform Ms Truss argues that, although Thatcher blazed a trail by privatising utilities, rulebooks drawn up in the 1980s look ossified now. Her camp muses about placing a series of weak network regulators under a single agency.
She wants to free up flows of capital; she has improbably high hopes for the potential of reforming an eu insurance regime known as Solvency 2 and is happier to talk up the potential of Britain’s financial-services industry than her predecessor. She is also far keener on labour mobility than Mr Johnson, who thought the job of government was to create jobs where people are born. On the contrary Britain’s productivity is poor precisely because people stay put, Ms Truss reasons.

She will be a more effective administrator than Mr Johnson, although that is a low bar. She is proud of having signed a clutch of deals as trade secretary and of having helped negotiate the release of British hostages in Iran as foreign secretary.

Really, both revealed a knack for selling difficult concessions as triumphs. Yet for all her talk of “delivery”, her record of achieving big structural reforms is thin. “She’s travelled around lots of departments and nary made a mark,” says a colleague.

The civil service, bashed during Mr Johnson’s tenure, can expect little respite from a Truss premiership. Her career has been studded by a disdain for institutions she holds responsible for British underperformance. She claims that a Treasury orthodoxy of “abacus economics” is to blame for the country’s sluggish growth.

As Lord Chancellor under Theresa May, judges were horrified when she failed to defend them from tabloid attack. Mr Johnson sent her to the Foreign Office, where she chastised diplomats who seemed to her almost embarrassed of their country. She has recast British foreign policy as a civilisational battle between autocracies and what she terms “the free world,” with Britain at the centre of a “network of liberty”.

Yet under her, a prickly Britain may become pricklier still. She has goaded Mr Sunak for his trade overtures to China, which she regards only as a threat. For all her admiration of Ronald Reagan, she says there is no need for Britain to fret about the “special relationship” with America “like some teenage girl at a party,” and wants to find a wider pool of allies. Ties with the eu will remain, at best, in deep freeze; she is threatening to override parts of the divorce deal struck by Mr Johnson. Relations with France, Britain’s closest geographic neighbour, are unlikely to improve. Asked during the campaign whether she regarded President Emmanuel Macron of France to be a friend or foe, she declared that the jury is out. Optimists thought that mere electioneering; in reality, it reflects a genuine clash over Mr Macron’s approach toward Vladimir Putin over Ukraine.

Ms Truss regards herself as more of a social liberal, and less of a traditionalist, than Thatcher ever was. Like much of the Tory party, she is a critic of the new politics of gender identity but says it isn’t the job of the state to tell shops how to organise their changing rooms. She has dismissed calls for a new law to guarantee political neutrality in schools; better to win arguments than legislate, she says. During the campaign she resisted pressure to pledge to cut foreign aid, to leave the European Convention on Human Rights or to abolish Britain’s net zero targets on carbon emissions.

To her critics, Ms Truss offers only a mimicry of Thatcherism: all the aesthetics, little of the insight. She may have the furs and the aphorisms, they say, but she abandoned her support for planning deregulation, the single most-obvious supply-side reform, as soon as it became clear that Tory activists wouldn’t wear it. Her pledge to scrap all unnecessary eu laws by the end of 2023 may sound reassuringly radical, but it is divorced from the fine-grained work of effective regulation.

But not being taken seriously by her colleagues may, in the end, have helped her. She was first promoted to the cabinet by David Cameron in 2014, the youngest woman in history to reach that position, and has emerged as the only survivor of a decade of Tory revolutions that have sunk the careers of her rivals. She has proved just loyal enough to keep her job at the cabinet table under three prime ministers, just dissenting enough to stay interesting.

Over a long summer, her campaign improved radically as her polling improved and she relaxed into herself: abandoning the rictus Iron Lady routine, releasing the gawky machine-gun laugh. For all her reputation as an ideologue, she has tacked with the wind on Brexit, starting out as a Remainer and ending up as a committed Leaver.
Britannia chained

That pragmatism will be put to the test immediately. The leadership campaign has meant a policy vacuum on the cost-of-living crisis and in particular on the enormous rises in energy bills that will hit households and businesses imminently. She promises to announce a plan within a week of taking office. “Her fate will be determined not in the first 100 days, but the first ten,” says a cabinet minister.

Ms Truss’s instincts are clear. She has declared herself averse to a “Gordon Brown economics” of taxing with one hand and awarding “handouts” with the other. She diagnoses the crisis as one of supply. She plans to approve the new extraction of North Sea oil, end a moratorium on fracking and encourage new nuclear power. She promises to suspend environmental levies on household bills, worth around £153 ($176) a year. She has ruled out extra windfall taxes on the oil industry; nor, she insists, will rationing be necessary.
But new supply will take months or years to come on stream, and will not affect the global gas price. There is only so much families and small businesses can do to reduce energy demand. Cornwall Insight, a consultancy, predicts that average annualised energy bills could soar to above £6,000 by next summer, which would render the Bank of England’s forecast of a peak in inflation of 13% too optimistic. A plurality of Britons would support those on low incomes who refuse to pay their energy bill, according to YouGov, a pollster. Ms Truss has carefully left herself room to offer more help.

It all points to an intervention in the tens of billions, reminiscent of the support given by the government during the pandemic. Yet the pandemic was an experience much of the Conservative Party loathed. Spending billions may have been popular with the public but it was as if all their opponents’ ideas of the state, whether paying for furlough schemes or imposing lockdowns, were being vindicated and theirs discarded.

And the demands on the public purse are not confined to energy. The strain on the National Health Service (nhs)—where the waiting-list for people to receive care now stands at 6.7m people—scarcely intruded into the Tory contest. The nhs was central to Mr Johnson’s victory in working-class towns in 2019, and its woes will be a major battleground in the next contest, along with the pressures on police services, schools and courts. Ms Truss’s instinct is that the nhs requires better management and cannot simply consume an ever-growing slice of output. But the pressure to spend more will be unrelenting: the Resolution Foundation reckons that demographic changes will help drive government spending from 40% of gdp before the pandemic to about 45% by 2030, shifting Britain from a Canada-sized state to a Germany-sized one. Ms Truss has offered little detail on how the state might be shrunk.

It is this condition of political dysmorphia—a small-state party trapped in an increasingly big-state country—that is at the heart of the Tories’ restiveness. Ms Truss is the Tories’ fourth leader during their 12 years in office; rebellion has become a means of doing business.

Mr Johnson—despite his outsized brand and electoral victory of 2019—could not tame his party. And Ms Truss starts from an historically weak position. She finished behind Mr Sunak among mps in the first stage of the contest, with just 32% of the vote. That is the lowest of the five leaders elected since the current two-stage system of choosing Conservative leaders was introduced in 2001. Her winning margin against Mr Sunak in the membership vote, with 57% of the vote to his 43%, is also the lowest on record (see chart).

The party faces a choice of “unify or die”, says another Truss supporter. “mps are just going to have to suck it up.” Yet the scars left by the summer campaign will not disappear quickly: Mr Sunak’s supporters warn she spells a currency crisis and electoral defeat. Some have refused to confirm that they will vote for a planned emergency budget. Mr Johnson, still mythologised as an electoral Midas, will loom over her premiership. By a margin of 63% to 22%, Tory members would prefer him to Ms Truss, according to a poll conducted in August. Her support within the parliamentary party rests on the Eurosceptic right, which is notoriously transactional.

That corner of the party, in particular, is in a declinist mood. Some wonder what the past decade of Conservative government has been for. They see in Britain a country seemingly less conservative than ever: a tax burden at its highest in decades, a growing taste for state intervention and an untamed “woke” culture. Ms Truss is the fourth roll of the dice for a party squinting hard, searching for a simulacrum of the woman who turned Britain around before. The country she now leads may well be looking for something else entirely.

Courtesy:The Economist