Liz Truss, who railed against years of Treasury orthodoxy on the campaign trail, had her chance on Friday to put into practice an economic vision that marks a clean break from the past decade of Conservative rule.
The Prime Minister sat nodding approvingly behind Kwasi Kwarteng as the Chancellor announced a multibillion-pound package of tax cuts that delighted free-market supporters but spooked markets and shocked traditional economists.
Mr Kwarteng, an ideological bedfellow to the Prime Minister, told MPs that growth would be his guiding light as he pledged to abolish the top income tax rate for top earners and, using more than £70billion of increased borrowing, presented a planned reduction in the basic rate of income tax to 19p in the pound a year at the start of April.
Dubbed “the trickle-down economy” by critics, described as a “gamble” by others, for the Truss administration it was a 30-minute crystallization of the difference between the Conservative Party under the new Prime Minister.
In 2010, David Cameron entered number 10 promising that reducing the national debt would be a priority. Seven years later, Theresa May said there was no “magic money tree”.
More recently, state spending has increased under Boris Johnson to tackle the pandemic and his leveling promise, but his largesse has not extended to major tax cuts. Instead, his Chancellor Rishi Sunak pushed through a financial package that includes a groundbreaking increase in National Insurance.
With a stroke on Friday, that policy was swept away, and with it decades of conservative dogma.
“During this leadership campaign, I have campaigned as a Conservative and I will govern as a Conservative,” Ms Truss said in her victory speech just weeks ago.
The longer Mr. Kwarteng spoke, the clearer his particular view of conservatism became.
The Chancellor spoke of a ‘new era’, as he stood in the Commons and told MPs his aim was to achieve a 2.5% growth target.
“This is how we will deliver higher wages, better opportunities and fund public services now and in the future. This is how we will successfully compete with dynamic economies around the world.
“This is how we will turn the vicious circle of stagnation into a virtuous circle of growth.”
Economists analyzing the discourse looked not to Margaret Thatcher, but to the early 1970s during the time of her predecessor Edward Heath, for a comparative government that showed such zeal in tax cuts .
It also raised questions about the prime minister’s commitment to the 2019 Conservative manifesto. the whole country in order to increase productivity and wages”.
The focus on Friday was on new borrowing and tax cuts which are expected to amount to nearly £45billion a year by 2026. The government says these measures will boost growth and, in the long term, increase tax revenues.
There were reports of unease on the Tory benches after the announcement, as a leader who initially struggled to win the support of his party colleagues embarked on a mission to redefine Britain’s economy.
It is not just the policies that have changed, but the language.
In an interview with the BBC in the final days of the leadership campaign, Ms Truss calmly dismissed concerns that reversing the National Insurance hike would benefit the wealthiest people.
“Looking at everything through the prism of redistribution, I think it’s a mistake, because what interests me is the growth of the economy. And the growth of the economy benefits everyone.
It’s a stance she and her ministers have doubled down on since then, even admitting that if her personal popularity is the price of growth, so be it.
It was a brave admission for a prime minister whose government is up for re-election in January 2025 and will likely seek to plan an election before then.
There were jeers and laughs in the Commons as the Chancellor admitted ‘none of this is going to happen overnight’.
But if the conservatives are to stay in power, Trussonomics will have to reap dividends – and fast.