It looks like Kwasi Kwarteng will be the shortest-lived chancellor in history. Liz Truss’s admission this morning that she had not discussed her top-rate tax cut with her cabinet is merely alarming. That the cut was ‘a decision the chancellor made’, as if she, the prime minister, had no part in it, can only mean one thing: the unfunded cut will be reversed, at least ‘delayed’ – a tactical retreat forced on her by the markets and her own MPs, and Kwarteng will be the scapegoat.
Truss’s reaction, when quizzed on Kwarteng’s grotesquely ill-advised and ill-timed attendance at a champagne reception for hedge-fund managers – including old friends (Kwarteng once worked for a hedge fund) and party donors who made millions selling the pound short – the very evening of his mini-budget, cannot have been very reassuring either for her chancellor. She said, ‘I do not manage Kwasi Kwarteng’s diary, believe me’. To mix one’s metaphors, one might say that reading between the lines, the writing is on the wall.
But Kwarteng’s imminent demise does not alter the basic problem, which is that Truss has no serious plan for generating economic growth than turning us into an offshore tax haven. That might be a good idea for a dependent island territory in the Caribbean but does not wash for a developed economy populated by some 70 million people.
Singapore-on-sea is not such a bad idea. But a key part of Singapore’s success is that it ensures the free market works for its own citizens – whether through state holding companies, sovereign wealth funds, state investment in infrastructure and new industries like biotechnology, state ownership of land, and above all, investment in the education and training so that its people are highly skilled. There is lots of foreign investment in Singapore, but it is on terms that benefit the people of Singapore. Foreign investment in Britain consists largely of foreign purchase of British assets, much of it by private equity funds in search of a quick profit through asset stripping.
With Truss now talking of opening our borders to low as well as high skilled immigrant labour in a desperate bid to relieve inflationary pressure and ‘grow the economy’ (you can forget investment and training in our own people, or raising productivity), the question arises ‘Why vote Conservative?’ Labour’s record lead in the opinion polls suggests that the electorate is having great difficulty finding an answer to that question.
Will Labour ‘deliver’ on the economy? Involving bolshy unions in policy making conjures up the spectre of the 70s. But involving workers in management, as in Germany, is essential if long-term investment is to be prioritised. Nationalisation has a poor record in this country – but then no-one is suggesting it.
Rachel Reeves’ Labour Party conference speech on the economy was a good one. The central theme was investment – investment in new industries and technologies, investment in skills and apprenticeships, changing the tax system to encourage long-term business investment, and encouraging entrepreneurs.
A National Wealth Fund to fund new technologies and new industries, in collaboration with the private sector, is a very good idea. Talk of new ways of doing business ‘in partnership with workers and communities’ is also welcome. Few would object to a windfall tax on the energy companies. Borrowing to invest but not to fund day-to-day spending is fiscally prudent. And even though it is off the agenda for now, the restoration of the public utilities to public ownership (as in most of Europe) would be hugely popular.
There is nothing in this to which Tories – that is, one nation Tories in the old sense – could object. Whether any of it will get off the drawing board is another matter. But at least the tune is the right one.
If there were an election tomorrow, to be decided on this one great issue of the economy, I would vote Labour too.