What Went Wrong in Britain

Twenty-twenty-two was a tumultuous year in British politics that saw three prime ministers and the UK rival Australia as the “coup capital” of the West. Great Britain is in the midst of a winter of discontent, reminiscent of 1978 with widespread industrial action, energy shortages, and a cost-of-living crisis exacerbated by inflation, interest rates, and taxation reaching levels many of us have never experienced. With crumbling public services and declining living standards, there is dismay at the state of the country, with citizens feeling that they are paying more than ever for very little in return.

However, unlike in 1979 when public outrage catapulted Margaret Thatcher into office, the Conservatives have now been in government for 13 years and cannot distance themselves from their own record. With the opposition parties making the case for bold reforms and economic growth, the Conservative Party looks exhausted and out of ideas. After 5 prime ministers in 13 years, largely spent settling intra-party squabbles, it is difficult to point to any area of British life that has improved under their leadership. This period in government is likely to be remembered as a wasted opportunity, with important lessons for advocates of freedom on both sides of the Atlantic.

The Tories have long been ideologically flexible and thus willing to adjust the sails to stay in power. When they decline in the polls or are hindered by an unpopular leader, they ruthlessly change course. It is this agility that has earned them their reputation as the world’s most successful political party, having held office for most of the last century. Despite this flexibility, one constant has been their image as the party of personal responsibility, enterprise, and low taxes. The present situation feels different, as though the party is fundamentally broken and in need of the kind of renewal only possible following an election. 

The Conservatives are having a crisis of confidence that has become existential. Despite having a significant majority in Parliament, the government has done little with it, and polls now predict a wipe-out at the general election expected next year. They do not know who or what they should stand for, and therefore, are not doing anything conservative at all. Last year exposed the chasm between Conservative MPs and the 170,000 party members who volunteer on their behalf. There is a growing frustration that the party is too centralised and that constituency associations should have greater influence in selecting their candidates for Parliament. In last summer’s leadership election, Rishi Sunak led the MP vote only for Liz Truss to secure a comfortable victory with the membership, having promised the low-tax agenda that MPs subsequently forced her to reverse. This divide leads members to conclude that many MPs are paying only lip service to traditional Conservative rhetoric on the virtues of low taxes, law and order, and personal responsibility. 

Truss correctly diagnosed the root of Britain’s problems—two decades of anaemic growth and a productivity crisis caused by structural issues crippling our economy.

In office, the Conservatives have pursued huge tax increases and a creeping encroachment of the state. British police welcome economic migrants arriving illegally in small boats on the south coast while 82% of burglaries go unsolved and London’s knife crime epidemic worsens. Apparently unsure or unwilling to defend what it is to be a conservative, the Tories mimic their centre-left opponents on behalf of voters who would prefer the real thing.

Britain had three very different prime ministers last year, each with their own interpretation of conservatism and a determination to undo the work of their predecessor. The year 2022 began with Boris Johnson, to whom the party owes its landslide majority. He embraced a high-spending, high-borrowing state in a bid to “level up” the country before falling poll numbers, and his personal conduct led colleagues to depose him. He was replaced by Liz Truss, the most freedom-oriented prime minister since Thatcher, and the closest we get to an American Republican. She went too far, too fast, before being forced out after 50 days. We are now led by Rishi Sunak, who nobody voted for and who, having managed the economy during the pandemic, is arguably responsible for many of the difficulties we now face.

Truss correctly diagnosed the root of Britain’s problems—two decades of anaemic growth and a productivity crisis caused by structural issues crippling our economy. With a refreshing intellectual honesty and political conviction that has become rare in Britain, she entered office laser-focused on unlocking growth. She planned ambitious supply-side reforms to incentivise enterprise through the tax system, abandoning our national preoccupation with redistribution. She also intended to overhaul burdensome regulation in housing and childcare, areas she had explored for years as an advocate of freedom courted by think tanks in the UK and USA. 

These were good ideas, yet she made monumental unforced errors, including her failure to “roll the pitch” to ensure that voters, the media, her party, and financial markets were sufficiently briefed on her policies. She did the right things in the wrong order, announcing tax cuts and spending increases before any of the reforms or budget cuts needed to fund them. Coinciding with rising interest rates globally, her policies and subsequent lack of leadership and poor communication made her position untenable.

The UK is facing a lost generation of growth. Poland, a country whose young used to come to Britain in search of prosperity, is projected to overtake us in economic output by 2030.

Critics of Truss were gleeful in celebrating her downfall, claiming the “free-market libertarian experiment” has now been discredited for a generation and comparing it to failed ideologies like communism. This is a wilfully dishonest attempt to reframe what happened and what free marketeers believe. In her 50 days in office, Truss did not have the chance to implement anything remotely libertarian. Her signature policy was a huge unfunded and untargeted intervention in the energy market that capped consumer bills for two years. Free-market economists counseled against this. Totally uncosted but estimated at £150bn, it seems more likely that it was this policy that spooked financial markets rather than the proposed £45bn of tax cuts that never made it to Parliament.

The UK is facing a lost generation of growth. Poland, a country whose young used to come to Britain in search of prosperity, is projected to overtake us in economic output by 2030. Average household incomes (£37,000) are lower than in every American state. This year real-term wages are expected to hit 2006 levels while the tax system discourages hard work through marginal tax rates that exceed 70%. There is fear of a “brain drain” with increasing numbers of young people making enquiries about moving abroad in despair at a lack of opportunities, declining living standards, and an ever-rising tax burden. Truss made mistakes, but those celebrating the return of “the adults in the room” must accept that they have been in charge for decades and their tax-and-spend orthodoxy has resulted in managed decline.

Americans and Brits alike should be careful not to learn the wrong lessons from the Truss premiership. Those who value freedom will reflect on its missed potential to prioritise economic growth, reduce the size of government, and promote choice and competition for citizens. The current situation was in no way inevitable and stems more from political naivety and incompetence than poor policy. Truss capitulated to her own party as well as the media, despite most of her tax cuts being popular with the public and business. She performed her first U-turn within weeks of taking office and from then on, her backbenchers knew that with enough pressure they could dilute or reverse her attempts at reform. The same is true of her successor. Truss asked us to take risks but was unable to assure the public and markets. Britain is now doing the opposite of what Truss intended, with Sunak leading us to further decline.

The Conservatives should not assume that there is no demand from voters for a pro-liberty, pro-enterprise agenda. We need only look to key American states, such as Florida and Virginia, to see that in these election battlegrounds where undecided voters determine the outcome, there is real appetite for change. At the same time, increasing numbers of parents are withdrawing their children from public schools, opting either for private tuition or home-schooling. Movements such as that to “fund students, not systems” are garnering support and achieving much greater choice and competition in education. 

They are also “voting with their feet,” with migration patterns showing an exodus of people deciding to move from states with higher taxes, costs, crime, and regulation to those without.

It would be a huge mistake for Britain’s Conservative Party to conclude that the lesson of 2022 is that people want less control over their lives, a larger state bureaucracy, and higher taxes. On both sides of the pond, there are real signs of progress for those who believe in freedom. In both countries, there is an appetite for secure borders, a leaner state, and smarter taxation. This requires strong leadership and communication, as well as conviction, rather than careerist politicians who are easily buffeted by the groupthink of the political and media class.