Ian McConnell: Did Tories think populist front would let them get away with anything, forever?

The speed of the unravelling of things for the Conservatives has been fairly spectacular.

However, it had probably seemed to many, who have watched the mess the Tories have made of the economy over so many years with growing dismay, that this unravelling would never come.

That said, it has been remarkable that the ruling Conservatives, including members of the various Cabinets, have for years been able to get away scot-free for their dire judgement when it has come to economic policymaking. Most other people have for long enough been paying the price, whether directly through austerity or as a result of lost economic output and the associated hit to living standards.

In the last few months, however, the Tories’ astoundingly protracted popularity has been vanishing fast, with the transformation having become particularly dramatic in recent weeks. So at long last members of the Conservative Government (not just the population at large, which has since 2010 been paying the price for dismal Tory policymaking) are facing some consequences of their behaviour.

And, in recent weeks, it has certainly become more difficult for the Conservatives to blame someone else for their mess (as has been their wont).

Of course, Boris Johnson raced to a resounding victory in the December 2019 general election on a tide of support from Brexiters, with a change in voting patterns in the north of England particularly notable.

Brexit, of course, has proved to be the disaster that anyone with even a passing knowledge of the situation and an objective mind could have predicted.

The pound plunged in the wake of the Brexit vote, so financial markets were giving a clear view of the realities.

However, in spite of this disruptive and for many expensive embarrassment as well as ever more clarity on the extent of the Brexit foolishness, the Johnson support held strong.

Mr Johnson and his Cabinet colleagues, including successor Liz Truss, picked fights with the European Union and their Brexiter supporters lapped this up.

Even after the transition period which had protected the UK from the actual effects of Brexit came to an end in December 2020, and amid the ensuing chaos of shortages, the Conservative support held firm.

Exporters were laid low by the folly, and continue to bear huge costs from the loss of frictionless trade with the world’s largest free trade bloc.

Companies across a raft of sectors throughout the UK have meanwhile been hammered by skills and labour shortages with the ending of free movement of people between the UK and European Economic Area countries.

Yet still the Brexiters who voted for the Tories at the 2019 general election have not appeared to care.

It is easy to see how this type of situation might make Tory Cabinet members believe they could do more or less whatever they liked as long as they kept up their populist diatribes, given the degree to which their utterances were being lapped up by their loyal support regardless of the hardship caused by their policies.

Tory Brexiters managed in the 2016 referendum to hoodwink large numbers of people into believing their woes and hardship had somehow been caused by the EU, rather than by the savage Conservative austerity which had begun in 2010.

However, after getting away with the Brexit stupidity for so many years, the ruling Conservatives have in recent weeks had a long-overdue reminder that actions have consequences, and that people cannot get away forever with trying to pass the buck.

You cannot, of course, hoodwink financial markets with the sort of populist drivel that might appeal to some voters.

And there has been absolutely no hiding place for Ms Truss, Chancellor Kwasi Kwarteng, and other Cabinet members in the wake of the Conservatives’ disastrous mini-Budget.

As with previous Conservative “fiscal events”, to use the term chosen by the Tories for the latest one, the mini-Budget was huge on ideology. There was a boldness and swagger, entirely misplaced, around it, as there has been in the past.

However, even relative to the poor standards we have seen from the Tories on policymaking since 2010, the mini-Budget was particularly ill-judged.

This week, we have seen the continuing fall-out from the mayhem unleashed by Ms Truss and Mr Kwarteng on financial markets, with mini-Budget measures having included the reversal, at a cost of £17 billion a year, of the planned rise in corporation tax from 19% to 25% which had been announced by former chancellor Rishi Sunak in his March 2021 Budget. There is now talk of a U-turn on the reversal, which would be the right thing to do.

As the Tories have made policy on the hoof, we have thankfully seen a U-turn on the scrapping of the 45p top rate of income tax announced so ebulliently by Mr Kwarteng on September 23.

However, while this U-turn was welcome given the top rate abolition was entirely unacceptable from a societal perspective amid a grim cost-of-living crisis, this was only around £2 billion of £45bn a year of tax cuts (including the reversal of the planned corporation tax rise) unveiled in the mini-Budget.

Financial markets have, understandably, been well and truly spooked by the Tory tax largesse.

And experts believe the Conservatives will fall way, way short of Mr Kwarteng’s “Growth Plan” ambition of boosting UK expansion to 2.5% a year. Investment bank Citi is forecasting UK growth will average 0.8% per annum over the next five years.

There was no hiding place for the Conservatives as the pound fell to an all-time low of $1.0327 a few days after the mini-Budget.

And there was no bogeyman (such as the EU) for them to point the finger at as the Bank of England was forced into a huge intervention in financial markets, after gilt yields surged.

The cost of fixed-rate mortgages rocketed as financial markets moved to price in the possibility of UK base rates, which were at a record low of 0.1% in late 2021 and are now at 2.25%, rising to 6% by next year.

Mr Kwarteng has brought forward his “medium-term fiscal plan” to Hallowe’en, from November 23, but that is still more than two weeks away.

The lack of urgency has been staggering. Then again, it was astonishing too for the Tories to decide that the Office for Budget Responsibility should not publish forecasts to accompany the September 23 “fiscal event”.

With the extraordinary shambles generated by the Tories far from over, the Bank of England has faced another massively challenging week in terms of its financial market intervention.

Whether Ms Truss and her Cabinet like it or not, and whatever Secretary of State for Business, Energy and Industrial Strategy Jacob Rees-Mogg imagines, it is surely impossible to see this huge intervention as anything other than clearing up the Tories’ mess. And the shambles, this time round, appears to be much plainer to see for swathes of the electorate.

Read more by Ian McConnell:

Sensible proposal by Holyrood, bizarre rejection from Westminster

Man in Lego boat without paddle sums up Brexit fiasco frustration

Tories’ utter failure to land US trade deal shines light on fantasy world of Brexiters