This is a government in a hurry. Boris Johnson secured an 80-seat majority but due to a combination of Covid, scandal and ideological torpor, did not get much done. Liz Truss, on the other hand, has no plans to let this majority go to waste.
The prime minister wants to “revisit the mandate“ of the Bank of England. She’s sacked Tom Scholar, the Treasury’s top civil servant. And her Chancellor is considering scrapping the cap on bankers’ bonuses.
What connects these three seemingly disparate policies is one overarching goal shared by Truss and her chancellor, Kwasi Kwarteng: to raise the UK economy’s trend growth to 2.5 per cent. You can’t fault the ambition. Problem is, GDP growth has for the most part struggled to hit even 2 per cent since the Great Recession.
Nor is it clear what tools the government has at its disposal to meaningfully bridge that gap. George Osborne tried cutting corporation tax, Rishi Sunak went for a super-deduction for capital investment, while Theresa May’s industrial strategy feels like several epochs ago.
Investors don’t seem convinced. The pound has fallen to its lowest level against the dollar since 1985. And they will be further concerned by a macroeconomic policy that risks stoking inflation and a further deterioration of the public finances.
What is clear is that trend growth and with it, living standards, are unlikely to rise precipitously unless the UK fixes its productivity growth problem. This is not ‘lazy Britons must work harder‘. Rather, it requires fixing weak business investment, boosting adult skills and doubling down on research and development.
What is striking in this dash for growth is the absence of an underpinning philosophy. Because growth itself is not one. And supply-side reforms, even successful ones, take time – a commodity Truss, who must call an election by January 2025, does not have.
As such, the real problem with the bankers’ bonuses proposal isn’t that it polls badly. Truss and Kwarteng know this. But that it is not entirely clear it would have much of an impact on growth at all.
And even though it is tedious and a political non-starter, I’ll say it anyway. If you truly cared about maximising economic growth, if you jumped out of your bed in Number 10 or 11 Downing Street every day determined to smash that 2.5 per cent target, you simply would not have left the EU’s customs union and single market.
In the comment pages, the Standard’s former Political Editor Joe Murphy has a lovely piece on Westminster Hall and how the magic of the monarchy lives on after 900 years. While Harris Bokhari says Her Majesty had a special place in Muslim hearts.
And finally, Roger Federer has announced his retirement from professional tennis. The 20-time major champion will play one final tournament, the Laver Cup, in London later this month. If you want to watch the point that defined his era, check this out. I have no further statement to make at this time.
This article appears in our newsletter, West End Final – delivered 4pm daily – bringing you the very best of the paper, from culture and comment to features and sport. Sign up here.