Liz Truss was voted in as the new Conservative leader in Britain and automatically became the prime minister. With the votes of 81,326 citizens, she now runs a country with a population of 68.7 million.
She immediately fulfilled her promise to those 81,326 supporters by announcing £45 billion in unfunded tax cuts. Her mini-budget reversed recent tax increases, cancelled planned increases, removed the top income-tax bracket completely and implemented new tax incentives to attract investment. It also conveniently excluded the forecasts from Britain’s Independent Office for Budget, a normal accountability feature of all budgets in Britain.
In the days after, the pound dropped to an all-time low, the mortgage sector was in chaos, interest and bond rates rose, and the stock market clearly showed their displeasure with massive sell-offs.
The Bank of England had to aggressively step in and buy up £65 billion in government bonds to help stop the economic freefall.
It was a populous paradox. Truss’s primary goal was to grow the economy, yet her actions caused the markets to convulse and do the exact opposite.
Truss based her decision on the power of the free market and ‘trickle-down economics’, a theory long ago discredited for poor performance. Rather than money trickling down to low and middle income classes, it only created greater income inequality and increased public debt.
Adding £45 billion in public debt, without targeted outcomes, was quickly rejected by the free market.
The free market understood that Great Britain’s debt to GDP ratio (public debt as a percentage of economic growth) had risen from 82.7 per cent in 2019 to almost 100 per cent by 2022—the most rapid growth of public debt ever recorded in a first-world country. Adding even more public debt under these circumstances was inane.
The conservative government’s previous 12 years of austerity had resulted in the collapse of the court system, brought the national health service to its knees and a social care system that is all but non-existent.
Britain’s inflation rate, 10 per cent, has been consistently the highest amongst G-7 and Euro Zone countries. The falling pound against the Euro and American dollar has made all imports even more expensive.
Truss’ rash behaviour is a cautionary tale that our new Premier Danielle Smith should consider before she prioritizes passing the Sovereignty Act and other controversial far-right policies.
Smith does not have a strong mandate from either her party—it took the sixth and final ballot to gain 54 per cent support to win the leadership race—nor does she have any mandate from Albertans.
The Sovereignty Act comes with lots of risks including business and investment uncertainty, distraction from what really matters to Albertans and unnecessary legal costs.
Both Truss and Smith were chosen by a small group of party members, 41,510 in Smith’s case, and although legally they have the power to do legally they have the power to do whatever they want, they do not have electoral legitimacy to outright change the course of their respective political parties.
Brenda Schimke
ECA Review
