Liz Truss’s mini-budget looms large in the election campaign – here’s why it was such a disaster
- Written by Ben Clift, Professor of Political Economy, University of Warwick
The words “Liz Truss[1]” and “mini-budget”[2] have become shorthand for financial recklessness and economic chaos. But what was it about the former prime minister’s economic management that was so disastrous?
Truss’s premiership was defined by the mini-budget disaster, where she promised £45 billion of unfunded tax cuts and hoped to unleash runaway growth.
In the UK, the Office for Budget Responsibility[3] (OBR) normally provides the economic forecast on which government taxing and spending plans are based. Before a budget, it works closely with the Treasury and other government departments.
But Truss rebuffed offers of OBR oversight – so none of this happened ahead of her mini-budget. This arguably set the wrecking ball rolling.
The OBR is what’s known as a fiscal council – in other words a spending watchdog aimed at increasing transparency around economic policymaking and protecting public finances.
It was set up in 2010 to provide independent evaluation and oversight[4] of the government’s budgeting choices.
Previously, the Treasury was tasked with economic forecasting, but shifting this to the independent OBR transformed[5] how economic policy was formed. With forecasts no longer line-managed by the chancellor, the scope for wishful thinking, excess optimism and political manipulation[6] was eliminated.
References
- ^ Liz Truss (www.youtube.com)
- ^ “mini-budget” (theconversation.com)
- ^ Office for Budget Responsibility (obr.uk)
- ^ independent evaluation and oversight (global.oup.com)
- ^ transformed (web-archive.oecd.org)
- ^ political manipulation (link.springer.com)
- ^ election newsletter (theconversation.com)
- ^ rules (researchbriefings.files.parliament.uk)
- ^ risks (obr.uk)
- ^ team (www.ft.com)
- ^ Treasury orthodoxy (www.theguardian.com)
- ^ Tom Scholar (www.bbc.co.uk)
- ^ market fundamentalist (en.wikipedia.org)
- ^ tax cuts (www.ft.com)
- ^ “burdomsome” (www.ft.com)
- ^ constitutional status (blogs.lse.ac.uk)
- ^ downbeat projections (obr.uk)
- ^ Ignoring the OBR (www.bbc.co.uk)
- ^ delayed (www.theguardian.com)
- ^ Downing Street meeting (www.theguardian.com)
- ^ mini-budget (ukandeu.ac.uk)
- ^ her approach (www.telegraph.co.uk)
- ^ “anti-growth coalition” (www.theguardian.com)
- ^ groupthink (www.theguardian.com)
- ^ around 1.75% (obr.uk)
- ^ collapse in sterling (www.theguardian.com)
- ^ UK government borrowing costs (www.ft.com)
