By Alex Callinicos
Downloading PDF. Please wait... Issue 2821

Liz Truss is only a short term solution for the Tories

This article is over 1 years, 7 months old
She may be able to hand her party a lifeline—but she can’t bail out British capitalism
Issue 2821
Liz Truss sits in an ornate Whitehall office, speaking on a video conference

New prime minister Liz Truss (Picture: UK government on Flickr)

So Boris Johnson is gone, with a hearty good riddance from the rest of us. This must include most bosses, since his government has been a disaster for British capitalism.

Johnson’s main achievement—with the help of the European Commission—was to force through a hard Brexit. Admittedly, the environment would have been difficult anyway thanks to Covid-19 and the rise in inflation.

But Britain’s abrupt departure from the European single market has unquestionably been economically damaging. Even the City, British capitalism’s greatest asset, has lost business.

Politically Johnson was an innovator. He purged the Tory party of its pro-European Union wing and adopted the anti-establishment style of the continental racist-populist right. This helped him to win the so-called “Red Wall” seats—traditionally Labour supporting constituencies that voted Leave in the Brexit referendum—in December 2019.

Johnson was greatly aided by the campaign by the Blairites and the corporate media to destroy Jeremy Corbyn’s leadership of the Labour Party. But he threw away his victory thanks to his lazy, negligent, and corrupt performance as prime minister.

Compounded by Thatcherite ideology and bureaucratic ‘group-think’, this cost tens of thousands of unnecessary deaths in the first year of the pandemic. Only stoking up inter-imperialist conflict with Russia and China got Johnson’s attention. It appears he flew to Kiev in April to block a peace agreement in Ukraine.

And what of his anointed successor, Liz Truss? The fact that she had the backing of Johnson and the right-wing European Research Group should be warning enough. Inasmuch as there was any coherence to her campaign, full of bloopers and sheer idiocies, she ran as a Margaret Thatcher tribute act.

On the face of it, this couldn’t be more irrelevant. Britain is facing a huge economic and political storm as rising gas prices bring about a savage redistribution of income from working class people to the energy companies.

This will break governments across Europe. How is the Thatcherite mantra of tax cuts supposed to address it?

More concretely, the Financial Times newspaper now calculates that Truss will help to transform a projected £30 billion budget surplus into a £60 billion deficit. That’s due to a combination of growing government interest payments with her promises to reverse proposed rises in national insurance and corporation tax, and increase defence spending.

Add to this the fact that Truss has conceded that her government will subsidise households and businesses hit by the energy crunch.

Kate Andrews in the Spectator magazine says that economists close to the Truss aren’t too worried about a rise in government borrowing, in the short term at least. According to one of them, Julian Jessop, “the Treasury has been too quick to believe you need to start paying the debt down by raising taxes, both personal and corporate taxes. Far better to let the deficit take the strain.”

But, Andrews writes, “this is just the first part of a three-pronged Trussonomics strategy—cut taxes, tackle double-digit inflation, then kick-start a stalled economy with some pro-growth reforms.” These “reforms” would be designed to boost private enterprise by shrinking the state, and, in the words of the Sunday Times newspaper, “removing some workplace rights”.

Yet the experience of the past 15 years is that capitalism is in the grip of a chronic long-term crisis that makes it increasingly dependent on state support. This is why the share of public spending and taxation rose under Johnson.

The fact that central banks have reacted to rocketing inflation by cutting back on their support to financial markets and raising interest rates doesn’t alter this. Now that climate change is increasingly hitting economies capitalism will continue to depend on life support from the state.

But this is about the long term. In the shorter term, Andrews predicts that a Truss government will mean a splurge in debt-fuelled spending and tax cuts. This is a perfect recipe for the Tories’ next election campaign. Despite the polls, Keir Starmer shouldn’t be counting any chickens.

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