I am always comforted by the kindness of strangers. Makes one feel a little more optimistic about the future of the world. Last week I was in my local Coop glancing through the newspaper headlines when the young woman on the counter said I could have a copy of the Daily Mail if I wanted. I think it had already been marked up to go back but it was still a generous gesture.
The Daily Mail is not a newspaper I often read. I do not care for its often unkind and ungenerous view of the world. But I thought at least I might find out what supporters of Liz Truss think before I write my column. I saw an article by Michelle Donelan MP explaining why she was backing Liz Truss, and I thought this might give me some ideas for my next piece. Alas I was disappointed. The piece was totally vacuous. It seemed to argue that Ms Truss was a strong leader because she has stuck up for Ukraine in the past and would be just what the country needs. No attempt to explain what she might actually do.
Liz Truss makes much of the fact that she went to a state school (one of the best in Leeds I am told) and from there to Oxford where she studied Politics, Philosophy and Economics. It appears she did not spend much time on the economics bit because her economic ideas seem foolish and exactly what the country does not want.
John Maynard Keyes
If she wanted to see some serious economics, she might do worse than to look at the famous Cambridge theorist John Maynard Keynes. He wrote at the time of the Great Depression in the 1930s when the Government tried to escape from an economic crisis by cutting state spending. Civil Service pay was cut – my father was a victim – and there was a mutiny in the Navy. The effect of all this was that people had less money to spend and the economy shrank. More people were unemployed.
Keynes’ idea was that if the state actually tried to stimulate the economy and expand it then more people would have jobs and be able to spend money. An expanding economy would mean the government could raise tax more easily and provide better services. This is exactly what Roosevelt did in America with his “New Deal” in the 1930s and what Biden is doing now.
Liz Truss’ ideas of cutting tax rates might appeal to the small number of well-off Tory Party members. But I don’t think they will feel they are benefitting the country by taking this tax decrease. They are unlikely to rush out and invest it in new enterprises in the north. It is more likely sales of holidays and new homes will increase.
Liz Truss seems to believe that cutting taxes, along with a bonfire of government regulations, will unleash enterprise which will create jobs. This is a belief, not backed up by any evidence. I expect many of you will have seen the TV series Heartbeat. My favourite character is Claude Greengrass. He is always trying to evade rules and set up dodgy enterprises which usually fail. Is the future of our economy to have legions of Claude Greengrasses being enterprising?
How economies work
But, joking apart, Liz Truss should look at how economies actually work. For economic growth to happen and people to be employed, there was to be demand so that people can buy things. Allowing the economy to contract which cutting taxes and reducing government spending will do could result in more unemployment and it is likely the less well-off will suffer most. Someone also needs to point out to Liz Truss that many low-paid workers do not pay either tax or national insurance. Those who are worst off in our society will not benefit from tax cuts. The better off will.
We are rightly concerned about water shortages at the moment. Yet privatised water companies are giving their directors large bonuses and big dividends to their shareholders. This money could, and should, in my opinion, be invested in building new reservoirs and stopping leaks. This is what could happen with Liz Truss’ proposed tax cuts. Instead of encouraging enterprise and investment, they could result in large companies paying bigger dividends and directors receiving bigger bonuses.
Running the country properly means looking at what works and managing the economy properly and fairly. That last word is important. The energy price hikes are due to external factors, and it is vitally important that those less well off are properly protected. If the government wants the economy to thrive and expand it needs to create the conditions where companies will want to invest. This means improving infrastructure and less well-off areas. If companies invest there are more jobs and more spending so the tax take will increase. I agree with Liz that getting people into jobs is better than handouts, but she needs to demonstrate she knows how to do it.
One final point. Liz Truss has made much of how important it is to support Ukraine. I agree. But if she manages to tank the economy there will be little enthusiasm or spare resources for that. My message to Ms Truss is to think of everybody, not just a few rich people who might vote for you.