The Tufton Street Mindset Will Endure Under Rishi Sunak
Sam Bright warns that, despite crashing the economy, dark money libertarian groups will retain influence on the new Prime Minister
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“Governments that lose control of their finances eventually lose control of their own destiny,” Liz Truss and her Conservative co-authors wrote in Britannia Unchained a decade ago – a phrase that captures her short-lived reign.
An economic plan created by Truss and her former Chancellor Kwasi Kwarteng designed to liberate the British economy has instead saddled the public with higher mortgage payments and import costs, served alongside a renewed era of state austerity. As Shadow Chancellor Rachel Reeves pointed out in the House of Commons, responding to new Chancellor Jeremy Hunt’s claim that Government departments would need to find savings, “No one was talking about spending cuts until the Tories crashed the economy with their mini budget.”
The last few days has been a blood-letting exercise in Downing Street, intended to quell several weeks of economic chaos that had seen the pound nosedive and billions wiped from domestic markets. The former Prime Minister was forced to relinquish control of her Government’s economic agenda to Hunt, sacking her first-choice Chancellor.
This “growth” agenda was not the divine invention of Truss, however. It was an embodiment of the libertarian principles that have emanated from Tufton Street and the hive of free market lobbying groups that cluster in this Westminster hideout. These opaquely-funded organisations “incubated Truss and Kwarteng during their early years as MPs”, according to former Downing Street advisor Tim Montgomerie, solidifying their small-state, low-tax convictions.
Tufton Street took 12 years to create Prime Minister Truss and six weeks to destroy her Government.
In other economic circumstances, the Tufton Street plan may well have generated growth. As many economists have observed, lowering tax rates provides an automatic stimulus by giving people more money to spend – something that will also be facilitated by the Government’s capping of energy bills.
However, the spoils of economic growth would have been shared by already rich people in already wealthy areas of the country (particularly central London). Truss’ tax plans intended to hand £1 billion to just 2,500 people, each of whom have an income in excess of £3.5 million, while households in London and the south-east were set to gain three times as much on average as those living in Wales, the north-east of England and Yorkshire.
As recent elections have proven – particularly the Brexit referendum – voters are not particularly interested in arbitrary economic growth if it’s not properly distributed.
Ultimately, circumstances got in the way. Crucially, the Government didn’t explain how it was going to pay for tens of billions in tax cuts and energy relief, triggering underlying market anxieties. As tax expert Richard Murphy writes: “Truss was looking like she needed quantitative easing to fund her plan,” which is essentially when a central bank (in this case the Bank of England) purchases government bonds or other financial assets in order to keep credit flowing. However, at this precise moment, the Bank “was looking as if it was reversing quantitative easing,” Murphy writes.
This lack of coordination and foresight, in seems, tanked the Tufton Street budget – spooking the markets and requiring several emergency interventions from the Bank to prevent a run on pension funds. Truss unsheathed her free market fundamentalism, only for it – and her premiership – to dissolve when exposed to the harsh light of economic reality.
Though campaigners have now installed a blue plaque on 55 Tufton Street with the words “the UK economy was crashed here”, there are still reasons to be wary of this street’s enduring influence. Not least because the mini budget did not signify the worst excess of libertarian economic thought in the UK.
Take the 2020 Tax Commission produced by the TaxPayer’s Alliance, a libertarian group based in 55 Tufton Street. Chaired by Sunday Telegraph editor Allister Health and edited by Truss’ chief economic advisor Matthew Sinclair, the commission proposed the creation of a single income tax fixed at 33% – replacing the current progressive tax system, whereby higher incomes are charged higher rates of tax – alongside the abolition of inheritance tax.
Truss herself appears to have seen Britain’s economic fortunes as a venture capital exercise – the goal being to minimise costs (i.e. welfare spending) and maximise profits (economic growth). Throughout Britannia Unchained, co-authored by Truss and Kwarteng a decade ago, there are repeated references to the innovative startup culture of Silicon Valley in California, contrasted with supposedly indolent Brits, who are described as “among the worst idlers in the world”. The Truss worldview is an attempt to grow the shareholder dividends of UK Plc, without much interest in the prosperity of ordinary workers.
Truss is not an outlier, however. While she will be blamed for the present economic mess, there are a host of fellow travellers on the Conservative benches who will readily pick up the free market grenade and launch it back towards the frontline of British politics. Indeed, eight members of Truss’ Cabinet belonged to the ‘Free Enterprise Group’ of Tory MPs co-founded by the Prime Minister in 2011 and supported by the libertarian Institute of Economic Affairs (IEA).
Moreover, while new Prime Minister Rishi Sunak has not been quite as close to this wing of Conservative thought, he undoubtedly shares political instincts with Truss. Sunak has bragged about channelling money away from “deprived urban areas” and authored a paper in 2015 advocating for the creation of low-tax, low-regulation ‘freeports’ across the country – a policy keenly supported by Truss and free market Brexiters. This paper was written for the Centre for Policy Studies – a Tufton Street ‘think tank’ – while the new Prime Minister has also spoken at its ideological ally, the IEA.
Even if they don’t, Sunak’s agenda will invariably be shaped by Tufton Street. For, while this libertarian gang has seen its reputation wounded, shapeshifting is one of its most valuable assets – allowing its representatives to wriggle onto the media in recent years, presented as ‘impartial’ experts. Indeed, the arsonists have already emerged from the fire, lamenting the economic U-turns designed to put out the blaze. No sense of responsibility or contrition currently bothers the free market think tanks.
And the finance for this endeavour will keep on flowing – without receipts – because those with money and power have an abiding interest in funding a retrenched state. The consensus among Conservative MPs for a renewed era of austerity – a prospectus that looks set to be adopted by the Prime Minister – proves the enduring and pervasive influence of the Tufton Street mindset, even though its vanguard has exited Downing Street.
Sunak is not quite as reckless as his predecessor, but he did use this summer’s Conservative leadership election to promise “radical” tax cuts – of the sort that knocked the economy into a tailspin under Truss.
Indeed, accountability did eventually arrive for Truss, but there will be little accountability for Tufton Street and its infantry of unelected bureaucrats. We may see fewer TV appearances from these groups in the coming months, as broadcasters become more aware of Tufton Street’s bias and culpability, but their grip on right-wing thought will likely remain, funded by dark money.
The only prospect of these groups being meaningfully held to account is after the next general election – Labour now pledging to review the lobbying rules to ensure transparency on who funds right-wing lobbying outfits.
So, as Tufton Street keeps on turning to the tune of anonymous cash, an already flagging economy has been immobilised by self-inflicted wounds – the cost of which will be paid for by the masses, not by the venture capitalists who concocted this crisis.