Truss and Luxon

Students of international politics will have registered the disaster created by the new British Prime Minister, Liz Truss – a disaster which she has now had to disown and reverse.

In what was apparently a feeble attempt to emulate “the Iron Lady”, Liz Truss proclaimed that she would cut taxes for the seriously wealthy and “kick-start” the economy as a consequence. In this, she was demonstrating her belief in what came to be called the “trickle down” theory of economic policy – that, if you increased the wealth of the already wealthy, their increased spending would “trickle down” and benefit the economy as a whole and, in due course, help those who needed it most.

It is a theory that enjoyed a brief period of support during Ronald Reagan’s presidency but was quickly discredited when it didn’t work. Liz Truss quickly discovered that today’s money markets were not persuaded by it either, when the British economy nose-dived and the pound sterling dropped sharply in value. So severe was that adverse reaction that she abandoned the policy and dismissed the Chancellor of the Exchequer she had herself appointed only weeks earlier.

Keen-eyed observers will have drawn the lesson that tax cuts for the wealthy, without any indication of what cuts in public services will be necessary to fund them, are a recipe for disaster. Even keener-eye observers, here in New Zealand, will have seen the obvious parallels between Liz Truss and our own National party. Christopher Luxon has at least had the benefit of a trial run of the policies which he has threatened to impose on us.