On 20 July, when the field of UK prime ministerial contenders was whittled down to Rishi Sunak and Liz Truss, an unnamed Conservative MP briefed that party members would now be forced to decide between a ‘backstabber’ and a ‘moron’. This was a fair assessment. Whoever wins the leadership election will be no more fit for office than their toppled predecessor. But its outcome will nevertheless have major implications for Britain’s macroeconomic direction. If the candidates’ pledges are to be believed, fiscal policy will either stay on its current course, as set by the backstabber during his time at the Treasury, or it will diverge sharply, as the moron rips up the status quo. The new premier will not only decide the fate of the ambiguous political formation known as Johnsonism; they may also get to define the contemporary meaning of another, equally contested legacy: Thatcherism.
Sunak and Truss are each posing as the legitimate heir to these traditions, yet they have adopted markedly different perspectives on them. The former Chancellor describes his outlook as a ‘common-sense Thatcherism’ that prioritises whipping inflation over cutting taxes. His doxa is based on fiscal responsibility and reluctance to increase the public debt. He condemns borrowing as ‘immoral’ short-termism and insists that the tax burden can only be lightened when such reductions are within our means. The costly measures he implemented during the pandemic – such as the furlough scheme and Universal Credit uplift – were, he says, necessary to boost demand and avoid economic collapse: pragmatic adjustments to save the neoliberal model, not a repudiation of it. As the Independent’s Sean O’Grady writes, ‘Thatcher was a balanced-budget, sound money right-winger, as Rishi Sunak is now.’
A traditional Thatcherite programme might seem to conflict with the populist-interventionist tendencies of the Johnson government. But in fact, Sunak’s balanced budgets involve retaining the flagship reforms of the last three years: raising National Insurance contributions, increasing corporation tax, and keeping public service spending on its upward trajectory (though without restoring any departmental budget to its pre-2010 level). Sunak has even paid lip-service to the ‘levelling up’ plan for regional realignment, framing himself as the saviour of England’s ‘northern powerhouses’. He claims that in these turbulent times, common-sense Thatcherism means continuity Johnsonism. Sensible economic management – of the kind supposedly required to confront the cost-of-living crisis – relies on a tactical expansion of the state.
For Truss, however, Thatcherism means something more fundamental: an insurgent libertarian creed willing to drastically depart from economic orthodoxy. She plans to make annual tax cuts worth more than £30 billion, ‘putting money back into people’s pockets’ rather than swelling the state coffers. Under her administration, green levies would be scrapped while defence spending would skyrocket. Such a spree would need to be funded by higher borrowing, which Truss may enable by changing fiscal rules. Although she has officially rejected a return to austerity, she has also promised a raft of ‘public service reforms’ and an overarching Spending Review – both of which will likely lead to cutbacks. Extant regulations would meanwhile be repealed as part of a ‘red tape bonfire’.
Truss justifies these potentially inflationary policies by appealing to the essence of Thatcherism – viewed as a disruptive individualist philosophy rather than a conservative approach to budgeting. Whereas Sunak is seen as a joyless ‘bean-counter’, Truss has cast herself as a ‘new Iron Lady’ capable of revitalising the party and reversing its downward polling trend. Yet, far from marking a break with Boris, her campaign purports to be more Johnsonist than Johnson himself. Of all the Tory candidates, Truss has been the least willing to criticise the PM, declaring that he should have stayed on in the job and refusing to question his personal integrity. Johnson’s loyalists have lined up to endorse her, and his final remarks at the dispatch box – ‘cut taxes and deregulate wherever you can’ – seemed to resonate with her agenda. Although the candidate pledges to upend the economic consensus, she is clear that this consensus came from Number 11, not from Number 10. Truss’s wing of the party views the big-state policies of the Johnson era as the Chancellor’s impositions, which the PM grudgingly accepted to mitigate the Covid meltdown. They believe that Prime Minister Truss will realise the free-market reforms which Johnson always wanted. By returning to authentic Thatcherism, she will rescue the rebellious spirit of Johnsonism from the prison-house of the Treasury.
What we have, then, are competing attempts to define – and reconcile – the legacies of the Tory Party’s two most successful leaders in living memory. The stakes of the struggle are high, as one can glean from the gloves-off atmosphere of the campaign. Sunak labels Truss a ‘socialist’ for her uncosted ‘something-for-nothing’ policies. Jacob Rees-Mogg, in turn, excoriates Sunak as the ‘much-lamented socialist Chancellor’ for his soaring taxes and pandemic hand-outs. These recriminations are more than just the typical mudslinging of Tory husting events. They are a symptom of the present economic conjuncture, in which it is impossible to act as both a competent bean-counter and a radical free-marketeer. Amid the spiralling costs of the pandemic, the care crisis and the knock-on effects of the Ukraine conflict, a ‘sound money’ approach requires constant intervention, while shrinking the state entails piling up debt and flouting restrictions on expenditure. In the post-Covid landscape, these two features of Conservative ideology – fiscal discipline and laissez-faire – can no longer be synthesized. The different factions of the party must decide which is more important and denounce the other as a leftist deviation.
This rupture within the Tories also helps to explain the peculiar tone of Sunak’s leadership bid. During the last decade, opposition to spending cuts was dismissed as infantile and unrealistic. Theresa May famously told voters there was ‘no magic money tree’ that could be used to maintain public sector wages. Now, Sunak has mobilised the same themes – railing against ‘comforting fairy-tales’ and ‘fantasy economics’ – to attack a programme which, according to the Institute for Fiscal Studies, is more austerian than his own. The discourse of capitalist realism, of making the ‘tough choices’ that the market dictates, has been harnessed to a post-austerity politics based on rising investment and selective tax hikes. Against this new norm, Truss has managed to imbue her low-tax policies with a utopian energy. Whereas Sunak claims there is no alternative to measures like the National Insurance rise, Truss offers a forward-looking vision that may, in practice, involve recalibrating the lean Conservatism of the 2010s.
If there’s one lesson to be learned from the upheavals of recent British history – Brexit, Corbyn, Johnson – it is that realism has lost its grip on the popular imagination. In each instance, an optimistic force triumphed over ‘project fear’ and widened the sphere of political possibility. If this pattern holds, Sunak’s pitch to the membership will fail to cut through. His attempt to paint Trussonomics as a boosterish illusion may ultimately heighten its appeal. But, if Truss wins, the upshot of this anti-realist sentiment could be austerity 2.0, dressed up as a dynamic form of right-wing populism and accompanied by culture-war crackdowns on migrants and trans people. Should she decide to fund her policies by slashing spending, Britain may soon regress to its recent past, disguised as its non-existent future.
Read on: Tom Hazeldine, ‘Transformatrix’, NLR 131.