An economist trashes Liz Truss on her policies
Liz Truss and money: she doesn’t understand it and her fiscal policy reflects that.
The Liz Truss Tory administration’s focus on growth is a public relations stunt, it seems, from what an Oxford professor of macroeconomics has to say about it.
Simon Wren-Lewis, who write’s the Mainly Macro blog, has published a harsh critique of Truss’s plan for 2.5 per cent growth.
He says the concentration on building the economy represents a PR departure from previous Tory governments that have let it shrink – but none of her proposed tactics will achieve this strategy goal.
In particular, policies that promote inequality (tax cuts, lifting the cap on bankers’ bonuses, refusing to impose a windfall tax on energy producers) may be based on a notion that greater inequality encourages growth – but this is not true; the evidence suggests no such association or the exact opposite.
Higher inequality, in fact, reduces growth. In contrast, there is a wealth of evidence to show that lower inequality might promote it. Furthermore, fiscal measures that favour the rich were tried by George Osborne and did nothing to stop, but may even have assisted, the last 12 years of UK economic decline.
Truss’s other big idea is to cut back on regulation. This is nonsense because of Brexit, which has increased red tape exponentially.
And we have a perfect example of how de-regulation hinders growth in her plan to review (read: scrap) anti-obesity measures. As Professor Wren-Lewis states,
it is clear that more obese people implies a greater burden on the NHS, requiring either higher taxes to fund it or a reduction in social welfare as other care is rationed.
Also the reduction of regulations to keep our beaches clean of sewage means more people taking holidays abroad and fewer overseas tourists coming to the UK.
Even the 2.5 per cent growth target is wrong, according to Prof Wren-Lewis; GDP per head is what assists social welfare, not GDP as a whole, so the target is for the wrong thing. It is an empty gesture – like sacking the Treasury’s permanent secretary for no reason other than to show things have changed.
The verdict is that
this decade or more of economic decline will not end by cutting taxes, deregulation, making exporting harder, and increasing inequality.
Either Truss is lying to us while trying to create an extremely short-term bounce that might win an election for her – or she is monumentally stupid. Which do you think it is?
Source: mainly macro: Going for growth?
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