Editor’s Note: On October 20, Liz Truss resigned as leader of the Conservative Party and will therefore step down as prime minister. The party will organize a new leadership contest, the third in three years, to elect his successor within seven days.
In 2012, Liz Truss and Kwasi Kwartengtwo of the authors of a pamphlet called “Britannia Unchained”, used the Italy as alert. Bloated public machine, low growth and low productivity: the problems of Italy and other southern European countries were also present in the UK. Ten years later, in their botched attempt to forge a different path, Truss and Kwarteng helped make this comparison inescapable. The UK is still beset by disappointing growth and regional inequalities. But now it is also buffeted by political instability and at the mercy of the stock markets. Welcome to Great Britain.
The comparison between the two countries is not exact. Between 2009 and 2019, the UK’s productivity index was the lowest among the G7, but Italy’s was much worse. The UK is younger and has a more competitive economy. Italy’s problems stem, in part, from being part of the European club; those in the UK, for being out. Comparing the bond yields of both countries is misleading. The UK has less debt, its own currency and its own central bank; the market considers that the chance of default is much lower in the United Kingdom than in Italy.
But while the concept of Great Britain is not a statistical truth, it does express a reality. The UK has become very close to Italy in recent years in three ways.
The first—and most obvious—is political instability; that used to define Italy and completely infected the UK. Since the end of the coalition government in May 2015, the UK has had four prime ministers (David Cameron, Theresa May, Boris Johnson and Truss), as well as Italy. Countries tend to stay at this same pace for the foreseeable future. Giorgia Meloni should become prime minister in Rome; and Truss’s future couldn’t be more precarious. Ministerial longevity is now counted in months: since July, the UK has had four Chancellors of the Exchequer; the interior secretary resigned this week after just 43 days in the job. Trust in politics has declined as the chaos has increased: 50% of Britons trusted the government in 2010, and less than 40% do today. The gap with Italy on this measure has shrunk from 17% to 4%.
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Second, just as Italy became the stock market’s joke during the eurozone crisis, they now, in the same way, visibly control the UK. The Conservatives have spent the last six years chasing the dream of improved British sovereignty, but have lost control instead. Silvio Berlusconi was removed from power in 2011 after disrespecting Brussels and Berlin; Kwarteng was sacked as Chancellor of the Exchequer because of market reaction to his package of unfunded tax cuts. Stock traders are the arbiters of UK government policy at this time. Jeremy Huntthe new chancellor of the treasury, weeded out most of the tax cuts and rightly decided to redefine the government’s energy cost guarantee scheme starting in April 2023. The decision he has to make to fill the remaining hole in the public finance is being designed with markets in mind.
Just as Italians fret over “lo spread” between government bonds and debt, the British have also learned in a crash course how the interest paid on government bonds affects everything from the price of their mortgages to the security of your pensions. In Italy, institutions such as the presidency and the central bank have long acted as bulwarks against politicians. And the same is happening in the UK today. By ending its emergency bond purchase on 14 October, the Bank of England forced the government to reverse course more quickly. There is no room for Hunt to disagree with the Office for Budget Accountability, an independent tax auditing body. These institutions put the brakes on previously elected parliamentarians, but now the chains tighten tighter and more visibly.
Third, the problem of low growth in the UK has taken deeper root. Political stability is a precondition for growth, not simply a nice thing to have. Italian governments find it difficult to do anything; and the same was true of the brief British governments. When changes in leaders and governments are constantly lurking, pantomimes and personalities replace politics. Johnson was nicknamed “Borisconi” by some; and by insisting on remaining on the political scene, he will be able to make this comparison even more accurate.
And while fiscal discipline can calm equity markets, it doesn’t in itself improve growth. Hunt was rushing to balance the accounts as part of a medium-term fiscal plan to be unveiled on October 31. Saving money by spending less on infrastructure would benefit dividends on government bonds, but it won’t help the economy grow. There is no room for excessive spending on public services. It is better to phase out the “triple lock” mechanism, the generous formula for increasing the value of pensions for the state, and raise money in more sensible ways: cutting “non-domiciled” status, for example, or raising inheritance taxes. . An increase in the income tax rate would be better than reinstituting an increase in social security contributions, which would only fall on workers.
For now, things are getting more and more British. Tory lawmakers are disjointed — evident in a chaotic fracking vote and rumors of more layoffs — and consumed again in arguments over how long their prime minister might last. Truss has become the human equivalent of Larry, the cat who lives at Number 10 Downing Street: living in the government house without wielding any kind of power. If, or rather, when the Tory MPs decide to get her out of there, they will need to find a successor themselves, rather than outsource the function to members of the Conservative Party. The odds of your belligerent factions igniting around a unifying figure are low.
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The case for an early general election, as a result, grows stronger. It’s unlikely to happen: after all, why would Tory lawmakers vote for their own downfall? The idea that Truss or any other successor would lack legitimacy is wrong in a parliamentary system. But if Parliament is unable to produce a government that works, it’s time to listen to voters. This moment is approaching.
Organizing elections did not solve Italy’s problems. But there is reason for more hope in Britain, where political instability is a single-party disease. the tories [como são chamados os membros do Partido Conservador no Reino Unido] they have become almost ungovernable as a result of the erosion of Brexit and the considerable exhaustion of his 12 years in power. Truss was correct in identifying low growth as the UK’s biggest problem. But growth doesn’t just depend on fantastic plans and big explosions, but on stable government, sensible policies and political unity. In their current incarnation, the Tories are not able to provide it. / TRANSLATION BY GUILHERME RUSSO