If Truss was the answer it is difficult to work out what the question was

mickysavage
2 years ago
Categories: economy, International, uk politics

Liz Truss has been UK Prime Minister for just over three weeks.

I thought at the time it was a particularly strange decision. And from afar it is hard to understand how this could occur.

I initially thought that Rishi Sunak would have been disastrous. An uber rich self made man whose family’s commitment to the country is such that his wife sought non domicile status for tax purposes.

But at least he was occasionally coherent in the debates. And he would not have been as fiscally irresponsible as Truss has turned out to be.

By comparison Liz Truss campaigned essentially on slogans and drawing comparisons between herself and Margaret Thatcher. And promising tax cuts.

My left wing admittedly removed understanding of the nuances of the UK campaign meant that I thought she would be by far the worst choice but here we are and she is the next UK Prime Minister.

I could be accused of bias but I thought her first forary into Parliamentary Question Time was an absolute train wreck.

And what else has she done? Well she did promise more roads, tax cuts and she has ruled out a windfall tax on power companies that do not depend on Russian supplied natural gas but have still increased their charges to what the market can sustain. Various sectors are laughing all the way to the bank.

This is all dwarfed by the events of this week. Promising to remove the top tax rate and funding this by increased borrowing has blown the pound, increased interest rates, caused the Bank of England to take urgent action to prop up pension funds, fueled inflation and effectively guaranteed deep cuts to public spending.

Gordon Campbell captures the insanity of what is happening clearly in this passage:

It may not be complicated. At base, Liz Truss and Christopher Luxon appear to be preaching the same old neoliberal gospel. They both plan to use tax cuts to starve the government of the revenue it needs to provide public services and to rebuild the national infrastructure that’s currently falling apart. To the centre right though, poverty relief and infrastructure rebuilds should be treated first and foremost, as opportunities for private sector profit. The US neoliberal tax reformers have been pretty open about their end game:

Grover Norquist, who founded Americans for Tax Reform in 1985 at the urging of President Reagan, declared in 2001: “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub.”

As mentioned, because tax cuts have never been a path to economic growth anywhere in the world, Luxon has been forced to distance himself from the catastrophe unfolding in Britain. In that respect, Liz Truss is doing all New Zealanders a very big favour. She is providing real time evidence of the damage National’s tax policies would be likely to inflict here.

Perhaps most importantly the UK is now viewed as a economic basket case. Even the IMF has criticised the proposal and warned that it may increase inequality, which to me appears to be inevitable.

And the polls have changed dramatically.

Truss was probably hoping for a honeymoon period. Instead she is facing the prospect of a rebellion from within her party,

The shortest term for a UK Prime Minister who formed a Government and was not a caretaker was 96 days. I suspect bets are being laid about if Truss will beat this record.

And locally National continues to receive questions about how it could afford tax cuts and keeps fudging its answers.

Nicola Willis was interviewed this morning and confirmed:

Its primary goal is to index tax bracket adjustments to inflation. This is the first commitment.
It will get rid of the top tax bracket in its first term. This is so we can “retain skilled people in New Zealand” and the extra taxes have “turned off talent”.
It will reverse Labour’s new taxes.
All of these commitments sit within its commitment to “responsible fiscal management” and this is key to them.
Disciplined spending is the primary way it will be able to afford tax cuts.
It remains committed to balancing the books and over time paying off debt.
It will fund this through fiscal responsibility. Its spending track will be lower than Labour’s.
Cutting the top tax rate will not increase inequality. Really??
Three waters will be axed and public servant numbers will be cut.

The policy is dog whistling to the wealthy elite. They believe that the preferential treatment is justified because they are the wealth creators. It does not matter how often trickle down is disproved they will continue to think it is justified and they will fund political parties that share their view which is essentially based on greed.

All eyes will be on the UK’s economy over the next few months and there will be intense interest in National’s next policy release. Don’t be surprised if electors start to repudiate en masse Grover Norquist’s proposition that the state should be weakened until it can be drowned.