The chancellor has revived the Thatcherite ploy that successfully blamed the inflation caused by oil shocks in the 1970s on high public spending
Just as Russian tanks were starting to roll into Ukraine, Rishi Sunak revealed himself to be a Thatcherite in trainers. His Mais lecture last month was a paean to his heroine’s philosophy. Yet the past decade has shown this creed to have been a failure in the light of its original aims. It has not increased productivity. It has not led to lower inflation. It has not seen the national debt fall. Mr Sunak says the problem is that businesses won’t invest – yet why would they if sales are drying up? Thatcherism’s economic legacy has seen wages stagnate, insecure work increase and the government starved of resources.
Rather than rethink, Mr Sunak dug his heels in. In his speech he called for a “new culture of enterprise” and lower taxes to promote growth. But this has been on the song sheet of every chancellor since 1979. Mr Sunak may be reverting to type because of a largely forgotten component of Thatcherism that may prove useful in the years ahead. Margaret Thatcher came to power after a decade of economic problems. In the 1970s, these were captured by the portmanteau “stagflation” to describe what happened when high unemployment and high inflation rates occurred simultaneously. In most nations, the double-digit inflation of the 1970s was caused by oil shocks. Thatcherism’s insight was to shift blame for price rises away from commodity producers to high public spending.
