The Guardian Weekly

Jonathan Freedland

Jonathan Freedland

Jonathan Freedland is a Guardian columnist

Truss and Kwarteng’s economic class war

Liz Truss has embarked on an ideological project so extreme that the de facto budget announced by her chancellor last Friday amounts to a declaration of class war. It was a reverse Robin Hood: taking from those who have least, lavishing gifts on those who have most. It is morally indefensible, economically reckless and so politically risky as to suggest a death wish. Trussonomics rests on a simple article of faith: that by rewarding the already wealthy, life will improve for everyone else. Trickle-down economics, they called it in the 1980s, and it didn’t work then. Now it’s back in a form more stark, more extravagant, than even its most ardent apostles ever dared contemplate.

The generosity towards the amply blessed was breathtaking. Kwasi Kwarteng’s totemic move was the removal of the cap on bankers’ bonuses – as if the number one problem confronting Britain today was that bankers aren’t rich enough. It’ll be Cristal magnums all round in the City, obviously, but Labour should celebrate an attack line that cannot fail. Truss and Kwarteng’s Conservative predecessors had no principled objection to letting bankers receive telephone-number bonuses, but held off because they knew the optics were so screamingly awful. The new duo has no such restraint.

They have delivered the biggest tax cuts in half a century, outstripping the landmark Nigel Lawson budget of 1988 – and their largesse is aimed squarely at the top. Kwarteng abolished the top tax rate altogether. That will hand an average £10,000 ($10,700) to the highest-earning 600,000 people in the country: literally the one per cent.

The chancellor cancelled a planned increase in corporation tax. Even the scrapped rise in national insurance will benefit the highest earners most. (As for social care, which desperately needs the money that rise was going to pay for, who knows where that cash will come from – if it comes at all?)

We shouldn’t forget what remains the largest fiscal

move of the Truss administration: the £150bn to be spent on freezing energy bills. To be sure, that will benefit everyone, but guess who’s going to pay for it? It could have been a windfall tax on the gargantuan profits of the fossil fuel giants, which have seen billions fall into their laps thanks to the surging price of oil and gas caused by the war on Ukraine. That pot of money could, and should, have helped hold down energy bills. But Truss and Kwarteng preferred to protect the energy companies and to borrow instead. That will rack up a debt that will have to be repaid by the taxpayers of today and tomorrow.

Class war is never just about looking after your own. It’s also about hurting the enemy. So the chancellor announced that the unemployed will see their benefits slashed if they can’t prove they’re searching for more work. And even though the trade unions have a fraction of their former strength, Kwarteng promised legislation to shrink workers’ ability to act together yet further. No matter how little cash or power the neediest have, the sheriff of Nottingham is after it.

The moral case against Trussonomics is compelling,

but some of the most trenchant opposition to last week’s announcements were on grounds of economics. Analysts were struggling not to be rude, as they examined measures whose premise has been discredited by historical experience. The notion that cutting taxes for the wealthiest fuels growth to such an extent that “tax cuts pay for themselves” is a theory for which there is scant evidence. It’s likely the Office for Budget Responsibility would have made this point, had it not been silenced by Truss, apparently anxious to avoid independent scrutiny of her plans.

Even stout defenders of Thatcherism and Reaganomics balk at the comparison with their heroes. Truss may have forgotten that Thatcher’s early cuts to income tax were balanced by a near doubling of VAT: the first female PM wanted the country’s sums to add up. As for her 1988 tax cuts, they came only once inflation was low and the economy growing. Reagan cut taxes and massively increased the US deficit, but he too acted at a time when inflation was coming under control.

By contrast, Kwarteng’s stimulus package, designed to jolt the economy into growth, arrives alongside soaring inflation: it’s throwing petrol on the fire. That will push the Bank of England to raise interest rates, making life perilously hard for those with a mortgage. Meanwhile, government borrowing is getting more expensive.

As for the politics, perhaps people will be so happy with the extra £330 they get from the cancelled national insurance rise, they’ll overlook the fact that the Tories are handing at least 30 times that sum to the wealthiest one per cent. It’s possible they’ll just be grateful their energy bill is capped. Alternatively, the Truss government has just written the script for Labour’s next election campaign.

This is a policy that violates the most basic notion of fairness. What a sight to behold: a government that spent 10 days of national mourning piously extolling British values now trampling all over them •

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