Liz Truss must proceed ‘sotto voce’ – or lose markets’ confidence in a flash

It is vitally important that the second part of the Prime Minister’s economic agenda, namely the pursuit of radical supply-side reform, has real teeth. It faces a very different constraint, namely the vocal opposition of various interest groups and even of the electorate in general.

We have already seen two recent examples of the Conservative Party abandoning radical reform proposals.

The first was the reform of the planning system which was ditched after two disastrous bye-election defeats. The second was Ms. Truss’s suggestion during her election campaign of introducing regional pay bargaining in the public sector which would see the rate of pay for the same job differing considerably in different parts of the country.

In my view, this suggestion was eminently sensible. However, it was dropped when the scale of the opposition became clear.

The two threats to the Truss programme are related. Let us imagine that, because of the innate difficulty of getting radical reforms through and intense opposition, in practice hardly any reform happens. In that case, there won’t be much prospect of achieving 2.5pc real growth, other than fleetingly.

The Truss team’s faith that substantially higher borrowing can be sustained because economic growth will reduce the debt ratio to acceptable levels reasonably quickly would be undermined. In that case, the financial markets’ confidence would fray.

Given all this, just thinking radically about economic reform is not going to cut the mustard. The Truss team will have to forget, for the time being anyway, about tackling the two huge sources of inefficiency in our economy, namely the NHS and the housing market. These will have to wait for another day.

Instead, the Truss team must focus on reform measures that can both bring tangible results and command considerable public support. I suspect that the most promising area is energy policy and the pursuit of net zero.

Of course, there is widespread and heartfelt support for pursuing the net zero agenda. But this does not necessarily translate into widespread support for particular measures or the achievement of a certain result by a particular date, especially when people can see the consequent hit to their living standards.

This is not just about economics. We are now deep in the realm of what used to be called “political economy”. To succeed with her economic agenda, Liz Truss will need to exercise political skills of the highest order.

Roger Bootle is chairman of Capital Economics. You can contact him at


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