The dividing line between Sunak and Truss has been economic policy. Sunak has tried to paint himself as the frugal guardian of the nation’s wealth, with the implication that Truss has got it wrong. The problem is, Rishinomics does not work.
A generous interpretation of his mistaken economic philosophy is that he is caught in the vice of Treasury Groupthink. A less generous interpretation is that he has not got a clue. I am drawn to the latter.
“He has forgotten that it was his policies which resulted in national debt accelerating to nearly 100% of GDP”
He talks about his desire to leave sound finances for our children and theirs in turn. He has forgotten that it was his policies which resulted in national debt accelerating to nearly 100% of GDP, with an increase of £500 billion or 33%. In just two years he added a debt burden equivalent to the entire national debt taken on in all of history until 2005!
He talks about the need to maintain high tax rates to avoid stoking inflation. He has forgotten that he took taxes to a post-war high before inflation raised its ugly head. His high tax rates did not head off inflation, so why would they help curb it now?
Indeed, if taxes on goods are reduced, the cost of these goods reduces. Inflation does not increase, it reduces. There are many taxes which fall into this category: VAT, green taxes on domestic fuel, tax on fuel, tax on alcohol and cigarettes, and for those familiar with the property market, stamp duty. Raising this latter property tax was one of his predecessor’s penchants, who hiked it claiming property prices would reduce. It had no such effect. An increase in stamp duty adds to the price of a property and reduces liquidity in the market, in turn further driving up prices.
