Liz Truss's Radical Economics May Be A Gift For Labour

(Bloomberg Opinion) -- Who is the real “change candidate” after 12 years of Conservative government in the UK: Keir Starmer, the leader of the opposition Labour party? Or Liz Truss, the fourth successive Tory prime minister? 

That is the question Starmer must answer at his annual party conference in Liverpool this weekend. The result of the next general election in two years’ time hangs on it.

Truss stood as the figure heralding a change of direction in order to clinch the leadership of her party against her chief rival, former Chancellor of the Exchequer Rishi Sunak. She trashed the Conservatives’ record of low growth, low investment and poor productivity. Starmer himself couldn’t have put it better. And yesterday her new chancellor, Kwasi Kwarteng, unveiled a radical shift in economic policy in his first mini-budget. The message to the country is that the Tories are under new management — and weary voters are being asked to give them a fresh look.

Decades ago, Margaret Thatcher taught Tory chancellors to treat the public finances as if they were a household budget that needed to be balanced. Yesterday’s mini-budget turned that homespun wisdom on its head. In pursuit of an ambitious 2.5% growth target, Truss has gambled upon a massive program of tax cuts turbocharged by borrowing and a libertarian dim-sum menu of deregulation. Treasury orthodoxy has gone out of the window. 

The markets reacted nervously. The pound fell to a 37-year low, dropping almost 3.35% against the dollar, but depreciating against the ailing euro too. The FTSE 100 also saw the value of major stocks fall. Investors are worried that government borrowing is soaring while the interest rate for UK debt is rising too — from 1.8% at the beginning of Truss’s leadership campaign to 4% today.

The prime minister, however, is following a well-trodden path by breaking with her predecessors, although she served in all three previous Conservative administrations. Boris Johnson, let us remember, campaigned against “Tory austerity” and the “bad Brexit deal” negotiated by his predecessor, Theresa May. May in turn blamed David Cameron for policies that favored hypermobile, rich “citizens of nowhere” over “just-about-managing” Britons.  

Now it’s Truss’s turn to plough her own furrow. Protean reinvention has been a largely successful Tory election winning formula, but will her radicalism connect with the voters in anxious times? The emotional reaction to the death of the UK’s longest-reigning monarch suggests that the country may not relish another wild ride.

It is a truism that governments lose elections rather than oppositions win them. If Truss’s  gamble on going for growth at breakneck speed fails to meet the expectations that she has raised or, worse still, ends in a crisis of economic confidence, then it’s odds on that she loses the election. Electoral arithmetic, however, makes it hard for Labour to win an outright majority. Indeed, calls for a change in the voting system will be heard at Liverpool. Yet across the Western world, electorates have never been more volatile. The Labour party has all to play for. Is its leader up to the task?

Starmer takes his inspiration from Harold Wilson, a four time Labour election winner in the 1960s and 1970s, now the subject of a new biography by a member of his Shadow Cabinet team. Like Wilson, Starmer is not a natural politician but a hard-working meritocrat from another walk in life who has had to learn on the job. Starmer may lack obvious charisma, but then so did Wilson at first — he sweated bricks to turn himself into the most exciting politician of his day. 

Labour’s leader has already done much to lick his party into shape. He has defeated the unpopular leftist faction that ran the party before him, put the issue of Brexit to bed, apologized for an unedifying row over anti-semitism and jettisoned ultra-radical policies that frighten floating voters.

Working class patriots abandoned Labour in droves at the last election because they thought its leaders took the side of every country but Britain; Starmer — who was knighted in 2014 — now drapes his television appearances in the Union flag. To the consternation of republican intellectuals, the national anthem, God Save the King, will also ring out at the party conference. The party is back on the center ground. He needs to keep it there.

Starmer can call on a talented shadow cabinet team too. Heavyweights from the last Labour government are back from political exile, while the younger stars display an appetite for power sorely lacking among their leftist predecessors. His shadow chancellor Rachel Reeves, a former Bank of England economist, gave an authoritative performance in the House of Commons this past week.

The tide should be moving in Labour’s direction — this time for a change of party not Conservative leader.

Truss has an unenviable task. She must somehow keep together a shaky coalition of “Singaporeans” — Tories who favor a small state and lower taxes — with so-called “Red Wallers” outside the affluent shires who want investment in high-quality public services. After two popular state spending splurges to alleviate the effects of the pandemic and the energy crunch, the prime minister may find her brand of libertarianism goes against the grain. 

And the concerns that last propelled Labour to power in 1997 are uppermost again. A majority of voters want the government to offer security in a volatile uncertain world, while still satisfying the aspirations of individuals and families to better themselves. Falling real wages, failing public services and lower rates of home ownership are immediate threats.

But the Opposition leader still has to articulate a compelling political narrative. Policies are no substitute. On the brink of power, neither Thatcher nor Tony Blair, the UK’s last two significant change-making leaders, produced a detailed manifesto. Nonetheless, everyone knew what they stood for.

At his party conference, and in the year and a half that follows before a likely election season, the test for Keir Starmer is convincingly completing the sentence “Labour stands for…” without recourse to old saws about helping the underdog. Much has changed in Britain. How has Labour evolved to meet that challenge? Sir Keir must answer that.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Martin Ivens is the editor of the Times Literary Supplement. Previously, he was editor of the Sunday Times of London and its chief political commentator.

More stories like this are available on bloomberg.com/opinion

©2022 Bloomberg L.P.