In a single week, Britain has gone from being one among many nations facing fierce economic headwinds to being a financial basket case, its currency plunging, bond yields and mortgage rates rising and pension funds scrambling to stay afloat.
One question has repeatedly popped up: why did the mini-Budget trigger such chaos, given that most of it had already been trailed and that the cost of the unexpected 1p cut to the basic rate of income tax and elimination of the top rate pales in comparison to the energy price guarantee.
This misses two key things. First, the government’s hand was forced on energy bills. Their policy will save livelihoods and perhaps even lives. It’s not cheap, but it’s perfectly rational. Last Friday’s tax cuts, by comparison, were an unforced fiscal error. The number may be smaller, but it signals a departure from sensible economic thinking.
And that brings us to the second problem: the scale of this departure. A week into “Trussonomics”, one could make the case that this represents the first time in modern history that the government of a major developed country has decided to completely unmoor itself from not only economic orthodoxy but its own electorate.
Every few years, hundreds of political scientists evaluate political parties on various issues, from the environment to law and order, gender issues to the redistribution of wealth. As part of this they place these parties along the left-right scale of economics, with the far left indicating full-blown communism and the far right the most extreme low regulation, low tax, free-market approach.
Until last week, the Conservative party looked like a relatively normal centre-right party on economics, scoring a 7 on the scale from 0 (far left) to 10 (far right). This placed it equidistant between Emmanuel Macron’s centrist Renaissance party in France and the more hardline US Republicans.
Last Friday, that all changed. In a snap FT survey of a group of British political scientists across the political spectrum, the consensus was that under Prime Minister Liz Truss and chancellor Kwasi Kwarteng, the Tories now score a stunning 9.4. This puts them well beyond where the Republicans stood under Donald Trump, and just to the right of the Brazilian Social Liberal party that took Jair Bolsonaro to power in 2018.
Out of 275 parties in 61 countries, the Tories under Trussonomics rank as the most rightwing of all. It should not then be surprising that such a voluntary swerve to the right spooked the markets far more than other costlier but sensible policies.
Between the Bank of England’s interventions and the possibility of some moderation before the Kwarteng’s November statement, the economic crisis may abate somewhat. But the damage to the UK’s reputation, and that of the Conservative party, may already be done.
On the same economic scale where Truss’s government now scores a 9.4, the average UK voter positions themselves at 3.1 and the average Conservative at 4.2. The Tories have plotted a course to the very edge of the economic map, and when they scan the horizon there is nobody to be seen.