Liz Truss and Kwasi Kwarteng

U.K. Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng visit Berkeley Modular on September 23, 2022 in Northfleet, England.

(Photo: Dylan Martinez - WPA Pool/Getty Images)

Truss' Tories Plan to Slash Public Spending While Clinging to Chaos-Causing Tax Cuts

"When the IMF tells you, 'hang on guys, this is going to be so bad for inequality it needs a rethink,' you've got a serious problem," one U.K. activist said of the new mini-budget.

"So now the Tories are going to slash your already shredded local services because they crashed the economy because they want to cut the taxes of the top 1%."

"What was intended as mere bribery has turned out to be a gigantic financial bomb."

That's how socialist Guardian columnist Owen Jones on Wednesday summarized the recent revelations about U.K. Prime Minister Liz Truss and other Conservative leaders' fiscal policies.

Following reports that U.K. Chief Secretary to the Treasury Chris Philp will send letters asking government departments to identify potential "savings," the Tory confirmed on television Wednesday that they are being asked to "look for efficiencies wherever they can find them."

The push to cut public spending came as The Guardianrevealed Wednesday the National Health Service (NHS)--the U.K.'s publicly funded healthcare system--has admitted that "dangerous roofs that could collapse at any time at hospitals across England will not be fixed until 2035."

That admission came in response to a request from Liberal Democrats, whose health spokesperson and deputy leader, Daisy Cooper, took aim at Chancellor of the Exchequer Kwasi Kwarteng's "mini-budget," which was unveiled last Friday and includes major tax cuts for the rich, funded by extra borrowing.

"Kwasi Kwarteng's first budget prioritized slashing taxes on the big banks over fixing crumbling hospitals. There was a deafening silence from government on how it intends to deal with dangerous ambulance wait times or lack of local NHS dentists, let alone buildings at risk of collapse," Cooper told the newspaper. "This is a disaster waiting to happen and Conservative ministers just don't seem to care."

The tax plan--which caused the pound to fall to its lowest level against the U.S. dollar in nearly four decades and ultimately led to emergency action by the Bank of England to calm the markets--has been criticized across the British political spectrum and around the world, including by the credit agency Moody's.

Even Tory members of Parliament are voicing concerns. BBC reports:

Few Conservative MPs are commenting publicly about Chancellor Kwasi Kwarteng's handling of the economic turmoil sparked by his mini-budget--but they are not mincing their words in off-the-record conversations.

Inept, humiliating, naive, and reckless are just some of the words that have cropped up.

Perhaps most notably, the International Monetary Fund (IMF), known worldwide as "a bastion of free market economics and fiscal austerity," on Tuesday delivered a rare critique of the policy--which Guardian economics editor Larry Elliott called "a global embarrassment for Truss and Kwarteng."

The mini-budget "will likely increase inequality," the IMF warned, adding that the next full budget announcement--which Kwarteng is expected to outline in November--gives the U.K. government "an early opportunity... to consider ways to provide support that is more targeted and re-evaluate the tax measures, especially those that benefit high-income earners."

Nick Dearden, director of the U.K.-based group Global Justice Now, tweeted Tuesday, "When the IMF tells you, 'hang on guys, this is going to be so bad for inequality it needs a rethink,' you've got a serious problem."

Economist and former Greek Finance Minister Yanis Varoufakis said the IMF and the U.S. Federal Reserve are concerned the United Kingdom "may trigger a financial crisis" by doing to the United States and other wealthy nations what "Greece did to the Eurozone."

"The particular focus of the concern... is the impact that the destabilization of the markets in Britain will have on the U.S. treasuries, in other words on the public debt of the United States," he said. "Because that kind of domino effect would have quite severe repercussions for the whole world."

Keir Starmer, the Labour leader, said during a BBC radio interview Wednesday that Truss must urgently review the budget following "very serious" criticism from the IMF, noting concerns that November would be too late.

According to Starmer, Truss needs to explain: "How are you going to fix the problems that you caused ...on Friday? The government caused this on the theory, the ideology that the way we fix our country is to make the rich richer."

Other critics also delivered broader rebukes of Truss-aligned ideology, with some going as far back as former Conservative U.K. Prime Minister Margaret Thatcher.

"September 2022 will forever be remembered as the month in which the febrile fantasies of neoliberalism ran full-tilt into reality," saidGuardian columnist and author George Monbiot.

Referencing a London road that's home to various think tanks, one Twitter user dubbed this September "the month of the Tufton Street Massacre." Monbiot concurred.

"This catastrophe isn't all on Truss and Kwarteng," Jones stressed Wednesday.

"This is the logical end point of a 43-year-long Thatcherite experiment--brought to us by Tory MPs, right-wing newspapers, and think tanks--which has brought nothing but stagnation, economic turmoil, and mass insecurity," he continued.

Summarizing the chaos since last week, Guardian columnist and and senior economics commentator Aditya Chakrabortty wrote Wednesday:

What was intended as mere bribery has turned out to be a gigantic financial bomb. The pound dived so far that it won a new name: shitcoin. (One wag mused on Reddit: "Apparently britbongs use it to purchase crumpets and tea, but other than that doesn't have any usage.") Lending rates in the markets soared, so Halifax and other big mortgage firms had to pull some of their products. The Bank of England essentially lost control over interest rates, while pension funds and other investors began scrabbling around for cash. Finally, today, the bank started buying government bonds in a bid to quell panic.

A week is a long time in financial wreckage. Thanks to Kwarteng and Truss, you have just got a lot poorer. If you're a homeowner on a standard variable mortgage or looking to renew, your bills have spiraled. If you have a money-purchase pension or a nest-egg ISA, you probably don't want to check your balance. Prices for pretty much anything from overseas--from food to T-shirts to cars--have just gone up.

Institutionally, the Treasury's credibility has been ruined and the Bank of England's monetary policy destroyed.

"This is their crisis, not ours," Chakrabortty concluded of the Conservatives. "You didn't benefit from these big tax cuts, the Tory donors did. Truss can reverse her stupid, cynical budget, resign, and force a general election--and Labour should demand she does so."

Meanwhile, Tory leadership is showing no sign of reconsidering its path, with Financial Secretary to the Treasury Andrew Griffith claiming Wednesday that the proposals were the "right plans" for the U.K.'s economy--despite the mounting evidence to the contrary.

As U.K. Conservatives doubled down on their controversial policies, a coalition of civil society groups launched the End Austerity campaign and warned that next year, 85% of the global population is set to live under "deadly" measures, from cuts to social programs to privatization of public services.

"This austerity recipe has been tried and failed many times," the campaign's website says, "and only inflicted hardship and pain on populations all over the world, supercharging the inequality crisis."

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