Last Friday, Tim Montgomerie – right-wing political commentator, creator of the Conservative Home website and, along with Iain Duncan Smith, founder of the Centre for Social Justice thinktank – made an incredible announcement. He tweeted that Kwasi Kwarteng’s mini-budget was a massive moment for the Institute of Economic Affairs (IEA), that they have been incubating Liz Truss and Kwarteng for years, and that Britain is now their laboratory.
So, assuming he’s correct, what can we look forward to as subjects of this experiment?
What does the Institute of Economic Affairs want?
In 1955, using the fortune he made as Britain’s first battery-cage chicken farmer, Eton-educated Anthony Fisher established the IEA as a horrified response to the election of a Labour government, and the post-war policies of centralisation, regulation and the creation of the welfare state. He went on to establish Atlas Network in the United States which, as of 2017, works with close to 500 similar right wing thinktanks in over 90 countries.
The IEA was specifically created to counter the post-war social democratic consensus through a re-direction of the narrative. Their tactics from the outset have concentrated on an avoidance of scrutiny. Fisher was advised by his ally, Major Oliver Smedley, to give no indication as to their real agenda and to draft the aims of the IEA in “rather cagey terms”.
Those tactics have not changed, and neither have their aims. Complete deregulation. This obviously attracts a lot of interest from industries that are subject to significant regulation for the public good, such as tobacco, fossil fuel, arms, sugar and construction.
Fast forward to now
So, in his tweet, Mongomerie claims that Truss has been ‘incubated’ by the IEA for years. It is known that during this time she has been advised by several Tufton Street big hitters. One of whom is Shanker Singham, an IEA trade fellow and formerly their director of international trade and competition. He was made her adviser on trade policy when she was international trade secretary in 2020, (although mention of his IEA affiliation was removed from the press release announcing his appointment).
Singham, a dual British-American national, was until 2012 a lobbyist in Washington where he supported Republican Mitt Romney’s campaign against Barack Obama. He believes the role of government should be strictly limited to “protecting physical safety, private property and economic liberty” and takes credit for Romney’s policy proposal of ‘Prosperity Zones’.
Creating such zones is Singham’s passion.
Alongside political lobbying, Singham was also managing director of the competitiveness and enterprise development project at Babson Global with the role of working with entrepreneurs and government officials to establish the pre-conditions required for the creation of enterprise cities with regulatory autonomy from their host governments.
Deregulation under Truss
Under Prime Minister Truss, the government has just released plans for what some may consider to be such pre-conditions: the creation of 38 new investment zones across the country, in which tax and planning regulations will be minimal. Alongside this it has announced the retained EU law bill which allows for the bonfire of regulations promised by Truss in her recent leadership campaign.
This has led to outcry from nature and wildlife organisations across the country, with the RSPB issuing an unprecedented call to arms over the weekend as the legislation allows for potentially unfettered construction and the suspension of rules on nature protection. It could also lead to a dramatic reduction in workers’ rights, alongside the abolition of the 48-hour week, agency workers’ protection, paid annual leave and part-time and fixed-term workers’ regulations.
The levelling up and regeneration bill, currently at committee stage, expands and reforms the role of development corporations to give the private sector a much-increased role in local authority function. Many roles previously handled by central government will be transferred to a new model of local authority – the combined county authority (CCA).
These CCAs can nominate private stakeholders and “change their governance model to a stronger form” by having a directly elected mayor. These zones can then amend the title of mayor to (the more American-sounding) governor, or county commissioner. These entities will have a range of powers including the provision of infrastructure such as water, electricity, gas, sewerage, transport and health. They will also be able to issue compulsory land purchase orders.
Freeports boundaries extended
The finance bill of 2021 allowed for the creation of up to ten freeports. Initially these deregulated zones were to be restricted to a 45km outer boundary limit, but most freeport areas seem to have expanded to include large areas of natural beauty and national parks.
Initially these outer boundaries were described as merely administrative but the government’s own documents confirm that “wider freeport levers including planning freedoms … should be targeted within the freeport outer boundary”. So, for example, the New Forest, Dartmoor and the North York Moors are now in areas with ‘planning freedoms’. And none of them were consulted.
Starving the beast
Another major factor in any potential IEA experiment would be achieving an almost total reduction in social spending to relinquish the role of the state in areas concerning welfare, health care and benefits – all of those post-war provisions that Fisher so detested. Massive spending cuts are never popular and attacking the NHS has often been equated with political suicide. Instead, Kwarteng’s mini-budget slashed taxes and sent the pound into free fall.
Grover Norquist is another right-wing libertarian and American political lobbyist. He is the founder of Americans for Tax Reform, board member of the National Rifle Association and contributor to the IEA. He gave their 2013 Hayek Memorial Lecture, writes papers and holds webinars for them.
Norquist is a proponent of a policy known in the United States as ‘starving the beast’. Economist Paul Krugman explains the policy in these terms: instead of pushing through unpopular spending cuts, you slash taxes with the “deliberate intention of worsening the government’s fiscal position”; spending cuts can then be sold as a necessity.
If the currency crashes that’s ok too. Thom Hartmann in his book The Undeclared War on the Middle Class and What We Can Do About It writes that:
“Crashing the currency is what they want. They want an economic crisis because they figure it’s the only way they can force a cut in spending on social programmes.”
It has the added benefit of making British assets cheap for foreign investors.
Ideology over image
Truss has stated that she is prepared to be unpopular. She seems prepared to be perceived as incompetent too, but behind everything this government is doing there is a forceful ideology that would transform Britain into a colder, harder place where private entities have unprecedented control over public life, being overseen from afar by a minister of state in a much-reduced form of government.
If the Bank of England increases interest rates, the Truss and Kwarteng double act may run into trouble. If the pound and dollar reach parity, several Tory backbenchers have suggested that this would trigger letters to the 1922 committee. Until that time the experiment goes on.