Where did it all go wrong for Liz Truss?

That was the question which I – and fellow guest Harry Cole – sought to answer at this week’s IEA Book Club, which was hosted by IEA Director General Mark Littlewood and is now available to watch on YouTube. The implosion of Truss’s 49-day premiership left many asking what lessons there are to be gleaned from her failure – not least myself and Harry, as the co-biographers of the former Prime Minister. We have produced a first rough draft of history: more accounts will follow as other relevant actors choose to offer their testimony.



There are several lessons which Harry and I believe can be learned from the Truss experiment and in particular the handling of the energy package and the mini-Budget in September. There was a political consensus around the former but not an economic consensus on borrowing so much. The need to find billions for the energy package should have tempered Truss’s ambitions but instead appeared to harden her resolve to be radical in the mini-Budget weeks later. 

There is a clear difference between policies in principle and their implementation in practice. Rightly or wrongly, the Office for Budget Responsibility’s Budget forecasts have become politically sacrosanct: the government should not have tried to go around the regulator. Market opinion has become paramount in policymaking given Britain’s debt position. Once credibility is lost, it is much harder to regain. More effort should have therefore been put into offering reassurance that the sums of the mini-Budget would add up.



Another lesson is the importance of preparation.  A more staggered approach to tax cuts in the mini-Budget was more likely to yield dividends than pulling all the levers at once. Margaret Thatcher was careful to pick her battles at a time of maximum strength, such as defeating the miners in 1984 when coal stocks were high, having ducked the fight in 1981.

The pitch could have been rolled better for the measures announced in Kwasi Kwarteng’s statement: a lesson that the Rishi Sunak administration has subsequently learned. More checks and balances in the late-August, early-September Chevening period before Truss took office could have stress-tested the arguments for her fiscal agenda. And when the mini-Budget was subsequently criticised and ridiculed, the government could have communicated and explained its mission and goals quicker and more articulately.

James Heale
Diary Editor, The Spectator and co-author of 'Out of the Blue: The inside story of the unexpected rise and rapid fall of Liz Truss'

WINTERTIME BLUES

Industrial action caused widespread disruption across the UK this week and left both the government and unions under mounting pressure to reach an agreement. Our Editorial and Research Fellow Professor Len Shackleton, who authored the recent IEA paper 'Summertime Blues: Unions, Strikes and the Law in 2022,' was quoted widely across the media on the strikes' economic impact.



He told The Telegraph: 

“I calculate that RMT members will have lost about 5 per cent of their pay this year, a sizeable chunk when set against the likely gains from any marginally enhanced settlement.”



Commenting in The Daily Express, Len warned:

“The hospitality business, which normally relies on the festive season to generate most of the year’s profits, is being hugely hit by rail strikes. Many clubs and restaurants, already desperate after two years of lockdown, will close for good. Entertainment is also being hit, with pantos and West End shows likely to suffer.”



Len was also interviewed for the BBC iPlayer programme: 'Make Sense of Your World: Why are so many people on strike?'. Commenting on the viability of the union demands, he said:

"If we want to make our public sector have a sustainable increase in pay over time... then they have got to increase productivity."

Watch in full here.

iN THE MEDIA



Turning off the taps... IEA Chairman Neil Record wrote for The Telegraph highlighting the consequences of excessive money printing since the 2008 financial crisis. Neil said:

"Who is responsible for this sorry state of affairs? The answer is complex – but I would point the finger at democratic politicians of all hues across the West. They allowed themselves to be persuaded by radical economists who peddled a strange theory called ‘Modern Monetary Theory’ (MMT). The politicians didn’t understand the theory, but they liked the idea that they could spend money without taxing their electorate, and without raising interest rates.”



Talking pints... IEA Director General Mark Littlewood joined Nigel Farage on his flagship show, 'Talking Pints'. They discussed a variety of topics ranging from Mark's introduction to politics to the reasons behind increasingly burdensome regulation.

Watch here.



Short-term gain... In his fortnightly column for The Times, Mark argued that the long-term solution to industrial strife could be return to an era where unions were many, varied and perhaps smaller. Mark wrote:

“The problem is that the union movement has become too formally politicised. Unions aren’t treated as clubs or societies but as an area of civil society requiring vast amounts of controversial legislation.”



Carpe diem... IEA Head of Public Policy Matthew Lesh urged the government to seize Brexit opportunities in City AM this week, including by repealing the EU’s net neutrality regulations. Matthew wrote:

"The regulatory divergence so far is minimal. EU legislation which applied to the UK was retained in domestic UK law on Brexit day, 31 January, 2020. Most of this, with some small technical changes, remains in place – whether or not in Britain’s interest."

You can read Matthew's recent paper on net neutrality, Expanding the Web, here or watch his explainer here.

EU regulations were also discussed on this week's IEA Blog, with IEA Regulation Fellow Keith Boyfield authoring a piece on the importance of taking fisheries back under domestic control.

Read here.



School's out... In an article for CapX, IEA Director of Communications Annabel Denham questioned the need for pupils to stay home following the recent dusting of snow. She said:

“While transport disruption and commuter misery may be an inevitable consequence of snowy weather, school closures are harder to comprehend... does a few inches of the white stuff really meet the education department’s criteria of ‘truly exceptional circumstances… when there is no other option’?”

Annabel also took part in the CapX '2022 Year in Review' podcast, which you can listen to here.

IEA DIGITAL



Parallax Views... In this episode of Parallax Views, IEA Head of Cultural Affairs Marc Glendening sits down with Head of Public Policy at Christian Concern, Tim Dieppe, to discuss pervasive threats to religious freedom and to find out whether the police and UK justice system are partly to blame.

Watch here.



IEA Podcast... In this week's IEA Podcast,  IEA Head of Public Policy Matthew Lesh talks to James Sean Dickson, co-author of the Adam Smith Institute's new paper, 'Boomer And Bust: Realigning Incentives To Reduce Intergenerational Inequality', to discuss whether Britain is generationally unfair.

Watch here.

VINSON CENTRE EVENTS

The Vinson Centre for the Public Understanding of Economics And Entrepreneurship (University of Buckingham) offers programmes in economics and related fields aimed at sixth-form and college students, undergraduates, recent graduates, PhD students, post docs and young academics.

The programmes and events are designed to promote a wider understanding of classical liberal economics with a particular focus on the understanding and pursuit of trade and enterprise in a free society.  



You can now register for two seminars in the Classical Political Economy series taking part during winter term 2023:

Dr Nick Cohen (Lincoln University) on 'Neoliberal social justice':
Vinson Building, Buckingham Enterprise Hub, University of Buckingham, 15 February 2023, 4pm. 
To register, please email [email protected] 

Dr Lawrence Haar (Brighton University) on 'The fiscal incidence of renewable energy support':
Institute of Economic Affairs London, 22 March 2023, 5pm.
To register, please email [email protected]

CALLING ALL STUDENTS!



Global Internship... The Initiative for African Trade and Prosperity partners with think tanks across Africa and works with them to make their push for greater free trade more effective and louder. If you are interested in African trade and development, want to work with cutting-edge think tanks across the continent, and develop your knowledge on the biggest issues facing Africa, then this internship is for you!

The IATP is a project of the Institute of Economic Affairs and the Vinson Centre at the University of Buckingham. We are housed at the Vinson Centre at the University of Buckingham, where we work under the same roof as dozens of world renowned academics and popular think tanks.

Click here for more details on how to apply for this exciting opportunity.



Future thought leaders... Applications for our Future Thought Leader Programmes for sixth-formers and undergraduates are now open. There will be two weeks for sixth formers in April, and one in July. The undergraduate programmes will be in July and August.

You can find out more information on the programmes, and how to apply here.



Monetary policy essay prize... Applications remain open for the monetary policy essay prize, organised by the IEA, the Institute of International Monetary Policy Research and the Vinson Centre at the University of Buckingham.

This year's question is: Are the central banks to blame for the current inflation episode?

To be in with a chance of winning up to £500, you must submit your answer by 6 January 2023. Further details on how to enter can be found here.