Emmanuel Igwe: There’s no such thing as unfunded tax cuts
Ask why this angle was chosen.
Dr Emmanuel Igwe is lead economist at the Prosperity Institute.
One may be forgiven for being fatigued by Liz Truss’ repeated assertion that ‘the Blob’ derailed her short-lived premiership in 2022.
Yet, in a recent appearance on the Daily T, she made a thought-provoking comment amidst her usual diatribes. When Tim Stanley challenged her about recent criticisms levelled by broadcast media and colleagues in the Conservative party which described her proposed tax cuts as “unfunded”, and thereby fiscally reckless, Truss dismissed the entire framing. “Unfunded tax cuts” she said, “are just a left-wing attack line”.
This may seem like merely another bellicose remark, attempting to wave away a substantive criticism with mere rhetoric. But, placing any reservations readers may have about Mrs. Truss to one side, we are faced with a serious point: is the idea of ‘unfunded tax cuts’ one we should accept without question?
Accepting the idea of “unfunded tax cuts” implies that the current level of taxation is the natural baseline, and that people holding onto more of their money is an extravagance that needs to be justified. Such framing, championed by the Treasury and associated independent bodies, is now unanimously shared across the political spectrum. Even Reform Party’s new shadow chancellor, Robert Jenrick proposed that a Reform Government would only cut taxes if there is sufficient fiscal headroom to do so.
At what point did tax cuts cease to be a distinctive feature of the British economic Right? Somewhere between kowtowing to the bean counters at the Treasury and the need to court votes from a public made allergic to wealth it has lost its way. The policy objective that defined the Thatcher years, Reaganomics, New Zealand’s Rogernomics, and Australia’s Hawke-Keating administration is now derided as inherently fiscally irresponsible by many Tories, as well as their flagship newspaper.
Granted, there are clear reasons to criticise the ill-fated 2022 mini-budget, though not the ones so often touted. The Energy Price Guarantee, for instance, a £40 billion subsidy which capped household bills at £2,500 distorting price signals, was an interventionist policy which command economies would envy. These errors were compounded by the institutional warfare unleashed in response to Truss dismissing the Permanent Secretary to the Treasury and disregarding the OBR forecast, damaging market confidence in the process.
Nonetheless, as the Bank of England admitted in 2024, the mini-budget only accounted for nearly 50 per cent of the turbulence that led to the fall in gilt prices, with the remaining 50 per cent attributed to its lacklustre regulations on liability-driven investment strategies used in pension funds at the time. In other words, although the …
Ask why this angle was chosen.
Dr Emmanuel Igwe is lead economist at the Prosperity Institute.
One may be forgiven for being fatigued by Liz Truss’ repeated assertion that ‘the Blob’ derailed her short-lived premiership in 2022.
Yet, in a recent appearance on the Daily T, she made a thought-provoking comment amidst her usual diatribes. When Tim Stanley challenged her about recent criticisms levelled by broadcast media and colleagues in the Conservative party which described her proposed tax cuts as “unfunded”, and thereby fiscally reckless, Truss dismissed the entire framing. “Unfunded tax cuts” she said, “are just a left-wing attack line”.
This may seem like merely another bellicose remark, attempting to wave away a substantive criticism with mere rhetoric. But, placing any reservations readers may have about Mrs. Truss to one side, we are faced with a serious point: is the idea of ‘unfunded tax cuts’ one we should accept without question?
Accepting the idea of “unfunded tax cuts” implies that the current level of taxation is the natural baseline, and that people holding onto more of their money is an extravagance that needs to be justified. Such framing, championed by the Treasury and associated independent bodies, is now unanimously shared across the political spectrum. Even Reform Party’s new shadow chancellor, Robert Jenrick proposed that a Reform Government would only cut taxes if there is sufficient fiscal headroom to do so.
At what point did tax cuts cease to be a distinctive feature of the British economic Right? Somewhere between kowtowing to the bean counters at the Treasury and the need to court votes from a public made allergic to wealth it has lost its way. The policy objective that defined the Thatcher years, Reaganomics, New Zealand’s Rogernomics, and Australia’s Hawke-Keating administration is now derided as inherently fiscally irresponsible by many Tories, as well as their flagship newspaper.
Granted, there are clear reasons to criticise the ill-fated 2022 mini-budget, though not the ones so often touted. The Energy Price Guarantee, for instance, a £40 billion subsidy which capped household bills at £2,500 distorting price signals, was an interventionist policy which command economies would envy. These errors were compounded by the institutional warfare unleashed in response to Truss dismissing the Permanent Secretary to the Treasury and disregarding the OBR forecast, damaging market confidence in the process.
Nonetheless, as the Bank of England admitted in 2024, the mini-budget only accounted for nearly 50 per cent of the turbulence that led to the fall in gilt prices, with the remaining 50 per cent attributed to its lacklustre regulations on liability-driven investment strategies used in pension funds at the time. In other words, although the …
Emmanuel Igwe: There’s no such thing as unfunded tax cuts
Ask why this angle was chosen.
Dr Emmanuel Igwe is lead economist at the Prosperity Institute.
One may be forgiven for being fatigued by Liz Truss’ repeated assertion that ‘the Blob’ derailed her short-lived premiership in 2022.
Yet, in a recent appearance on the Daily T, she made a thought-provoking comment amidst her usual diatribes. When Tim Stanley challenged her about recent criticisms levelled by broadcast media and colleagues in the Conservative party which described her proposed tax cuts as “unfunded”, and thereby fiscally reckless, Truss dismissed the entire framing. “Unfunded tax cuts” she said, “are just a left-wing attack line”.
This may seem like merely another bellicose remark, attempting to wave away a substantive criticism with mere rhetoric. But, placing any reservations readers may have about Mrs. Truss to one side, we are faced with a serious point: is the idea of ‘unfunded tax cuts’ one we should accept without question?
Accepting the idea of “unfunded tax cuts” implies that the current level of taxation is the natural baseline, and that people holding onto more of their money is an extravagance that needs to be justified. Such framing, championed by the Treasury and associated independent bodies, is now unanimously shared across the political spectrum. Even Reform Party’s new shadow chancellor, Robert Jenrick proposed that a Reform Government would only cut taxes if there is sufficient fiscal headroom to do so.
At what point did tax cuts cease to be a distinctive feature of the British economic Right? Somewhere between kowtowing to the bean counters at the Treasury and the need to court votes from a public made allergic to wealth it has lost its way. The policy objective that defined the Thatcher years, Reaganomics, New Zealand’s Rogernomics, and Australia’s Hawke-Keating administration is now derided as inherently fiscally irresponsible by many Tories, as well as their flagship newspaper.
Granted, there are clear reasons to criticise the ill-fated 2022 mini-budget, though not the ones so often touted. The Energy Price Guarantee, for instance, a £40 billion subsidy which capped household bills at £2,500 distorting price signals, was an interventionist policy which command economies would envy. These errors were compounded by the institutional warfare unleashed in response to Truss dismissing the Permanent Secretary to the Treasury and disregarding the OBR forecast, damaging market confidence in the process.
Nonetheless, as the Bank of England admitted in 2024, the mini-budget only accounted for nearly 50 per cent of the turbulence that led to the fall in gilt prices, with the remaining 50 per cent attributed to its lacklustre regulations on liability-driven investment strategies used in pension funds at the time. In other words, although the …
