LIZ Truss has been told she has “no mandate whatsoever” to impose a new wave of austerity in order to fund her sweeping tax cuts for the rich.
The Tory government announced a £45 billion package of tax cuts, funded by public borrowing, in late September, leading to the collapse of the value of the pound.
The International Monetary Fund made an extraordinary intervention urging Truss to “re-evaluate” the plans, while the Bank of England was forced to step in with a £65bn bond-buying scheme to prevent pension funds collapsing.
In order to help fund their policies, the Tories have signalled that a return to austerity is on the cards.
Simon Clarke (below), the Levelling Up Secretary and one of Truss’s closest allies, said in an interview with The Times that western Europe is “just living in a fool’s paradise” and that the UK would need to “trim the fat”.
He went on: “I think it is important that we look at a state which is extremely large, and look at how we can make sure that it is in full alignment with a lower tax economy.”
The upshot of Clarke’s statement is clear: cuts to taxes will necessitate cuts to public services.
However, the move would be in direct contravention to pledges made by both Truss and disgraced former prime minister Boris Johnson.
In July, Truss said that any tax cuts would not be paid for through austerity. She added: “I’m very clear I’m not planning public spending reductions.”
And in 2020, Johnson repeatedly pledged that austerity would “certainly” not form part of his government’s policy.
The SNP’s Westminster leader, Ian Blackford, called out the austerity politics of Truss’s new government – which has already broken promises made in the Tories’ 2019 election manifesto with its end to the ban on fracking.
He wrote on Twitter: “Liz Truss has no mandate whatsoever to impose another wave of Tory austerity cuts on Scotland. She’s robbing the poor to pay the rich, and threatening our NHS.
“Scotland urgently needs independence so we can escape Westminster control and get rid of the Tories for good.”
Highlighting Truss's previous promises, Deputy First Minister John Swinney wrote: "Ferocious spending cuts are the consequence of reckless tax cuts for the rich. And the direct opposite on spending of what Liz Truss promised. All of this at the hands of the Tories."
The Tory government has stood by its disastrous “mini-budget” – although it has refused to publish any economic forecasts on its impact from the Office for Budget Responsibility (OBR).
Although Truss has now accepted that it caused some “disruption” to markets, she has pinned the blame for the majority of the problems on Vladimir Putin, who she said has “sparked a global economic crisis” with his illegal invasion of Ukraine.
Clarke told The Times that the Tories had known implementing their economic policies would not be “a comfortable process”, but added: “[Truss] is clear in her own mind and her conscience is clear that this is the right thing to do.”
Treasury ministers including Chancellor Kwasi Kwarteng have also failed to confirm that they will not bring in a real-terms cut to benefits in order to help fund their tax cuts for the rich.
The Resolution Foundation has warned that the Government may be forced to return to the type of spending cuts not seen since the days when George Osborne was Conservative chancellor.
Torsten Bell, the think tank’s chief executive, called Friday’s mini-budget “the biggest unforced economic policy error of my lifetime”.
“Lower taxes combined with a loss of market confidence mean rising interest rates, leading to higher mortgages and lower living standards. But looking further ahead they will mean lower spending too.”
According to the think tank’s analysis, that could mean cutting public investment back to average levels seen between 1996 and 2016, as well as the uprating of benefits by earnings instead of inflation next year – effectively a four percentage point real-terms cut.
The latter would raise £11 billion in one year before rising to £20 billion over two years.
But the Resolution Foundation suggests such a move would cost a typical low-income working family with two children over £1000 a year.
Significantly, the think-tank also warns that the Prime Minister’s pledge to increase defence spending to 3% of GDP by 2030 could become a casualty, if deeper spending cuts are to be avoided.
