Liz Truss says she wants to overturn Treasury orthodoxy on economics- but where on earth did she find anyone who thinks her alternative prescription makes sense?
We have high inflation- higher than other countries similarly affected by energy prices. Living standards are falling further and faster than at any time in living memory.
We have a high level of Government borrowing, adding to a public debt that is already at historically high levels relative to GDP.
We have a large balance of payments deficit, and declining exchange rate.
Financing these deficits has been relatively cheap but that is changing, with higher interest rates and a declining exchange rate both raising the cost of Government borrowing.
After 12 years of austerity there is a massive backlog of public expenditure costs that will have to be addressed. Almost every area of public spending is in crisis, before even considering the intense pressure to begin to restore the value of public sector pay.
All this follows a prolonged period of slow growth and declining real wages since the conservatives took over in 2010.
Her solution to this perfect storm of economic problems is to cut taxes and cut public spending.
In normal times, there is no reason to believe that this would increase economic growth. In a situation where the Government already faces high inflation and large fiscal and balance of payments deficits, it will have the opposite effect. Irresponsible economic management will drive investment down even further.
There is a narrow path out of the problems. It requires higher taxes on the better off ( preferably on wealth which largely escapes tax), support targeting those on low incomes, and a rebuilding of public services including local Government. It requires serious policies to rebuild economic growth- including a closer economic relationship with Europe. It doesn’t require the Government to throw more fuel on the fire through unnecessary tax cuts for those who don’t need them.
It beggars belief that she was employed as an economist.