After “doomsters” and the “liberal elite”, a British Conservative prime minister has coined a new term of disparagement for those who question their policy agenda: the “anti-growth coalition”. Liz Truss turned her fire on this supposed bunch of subversives in a party conference speech on Wednesday that attempted to fend off criticism of her chancellor Kwasi Kwarteng’s “mini” Budget — which launched unfunded and unaudited tax cuts on a historic scale. The dissenting cabal included opposition parties, podcasters, “vested interests dressed up as think tanks” and north Londoners living in townhouses. The government did not rule out that Jamie Oliver, the celebrity chef, might also be a member, though his campaigning has been against growth in a different area — the waistline.
The absurdity of the term is matched by its hypocrisy. Expanding economic output is a laudable goal, but the government’s plan to hit 2.5 per cent annual growth, which it relies on to bring debt under control, is dubious. It depends heavily on tax cuts. The volatile financial market reaction to the chancellor’s announcements reflected as much, as investors fled from British assets. Indeed, it remains unclear whether the City of London, which Truss and Kwarteng have been trying to court, is part of the “anti-growth coalition” too.
Almost sparking a run on pension funds and sending mortgage costs surging is hardly a solid basis for considering oneself to be “pro-growth”. But Truss’s posturing belies another harsh reality. There are plenty of barriers to growth in the shape of Nimbies who block housing, renewable energy, and infrastructure projects. Sadly for the prime minister, many are her fellow Conservative MPs, councillors and party members who filled the conference hall and cheered her speech.
There are a number of other ironies here. One is that there is a school of thought that genuinely considers economic growth to be a bad thing: the “degrowth” movement, which includes ardent green activists. It decries the endless pursuit of growth as causing social and environmental harm and damaging biodiversity.
Yet the representatives of economic “orthodoxy” that Truss and her allies denigrate — including the IMF and some former prime ministers — are all pro-growth. The disagreement is over how best to achieve expansion, without ignoring economic realities. Truss’s catch-all term undermines the many who are debating those issues in good faith. The public, meanwhile, seeks growth that is tangible — felt in their spending power, and the services they use every day.
Belittling criticism in the present macroeconomic environment is especially problematic. Next week’s annual World Bank and IMF meetings will thrash out how the global economy can best weather what has been called a “poly-crisis” that includes soaring inflation, rising interest rates, a strong dollar and the war in Ukraine. The British economy faces all these headwinds. Loading more unfunded borrowing into the powder keg through tax cuts was particularly reckless, as reflected by the ructions in financial markets. By stoking inflationary pressures and forcing the Bank of England into what are likely to be steeper rate rises, it is also hardly pro-growth.
Searching for ways to stimulate growth in a stagflationary era is the right thing to do. But the policies need to be credible and promote stability. Better efforts to boost skills, labour supply, innovation, and business investment — which will raise long-term growth by supporting productivity — are essential. Growth is a serious matter; Liz Truss should not be so flippant about it.