Chancellor of the Exchequer Kwasi Kwarteng, left, and British Prime Minister Liz Truss and attend the annual Conservative Party conference in Birmingham, Britain, on Oct. 2.HANNAH MCKAY/Reuters
Colin Horgan is a communications professional and a former journalist and Liberal Party speechwriter.
Liz Truss and Kwasi Kwarteng like Canada. At least, that’s what Britain’s new Prime Minister and Chancellor of the Exchequer said in 2012, when they and three other Tory MPs imagined a more prosperous and innovative future for their country in the wake of the eurozone crisis. Britain “can be successful,” they wrote in their book, Britannia Unchained, “but changing Britain’s fortunes needs a relentless energy and determined focus.” To achieve its goals, the country had to look to examples abroad, including “the Canadian approach to public spending.”
Specifically, the British MPs were interested in the Liberal Party of Canada’s program review of the mid-1990s, which, under former prime minister Jean Chrétien and finance minister Paul Martin, aimed to reduce the country’s ballooning debt-to-GDP ratio by requiring every federal department review spending to target only “priority requirements.”
Cuts duly followed. In 1993, program spending accounted for 16.8 per cent of Canada’s GDP; by 2000, it was 12.1 per cent. In the short term, the review was largely deemed a success insofar as it helped reduce the federal deficit – much to the awe of Ms. Truss and company. They seemed especially impressed with Canada’s Crown asset sell-off, civil servant layoffs and cuts to unemployment insurance.
Unmentioned were the human costs of Canada’s reforms. Social assistance was cut and downloaded to the provinces, which tightened eligibility requirements. The proportion of unemployed who received jobless benefits was cut in half in seven years. Mr. Chrétien even later said he regretted the seasonal-worker EI cuts.
Instead, the “boldness” appealed to the five MPs: “If Britain is to get its spending back under control, it has hard choices to make. If we want a more prosperous tomorrow, we must save more today.”
You could hear the echoes of the Chrétien-Martin plan as Ms. Truss campaigned for Britain’s Conservative leadership this summer. In July, she vowed that she would “run a leaner, more efficient, more focused Whitehall.”
This ambitious plan for public-sector reform didn’t appear in Mr. Kwarteng’s recently proposed mini-budget. Instead, the Truss government committed to billions in cuts to corporate, payroll and income taxes that would favour the wealthy. Markets quickly punished the sterling, and the Bank of England took the unprecedented step of buying government bonds to protect pension funds.
After a week of holding firm, Ms. Truss and Mr. Kwarteng finally dumped the idea to abolish the top-tier income tax rate, vowing instead to focus on other tax cuts and “driving supply-side reforms.” But they are still on course to implement the majority of their proposals: The upper-income tax cut constituted only 5 per cent of Mr. Kwarteng’s £45-billion (about 60-billion) plan, and the goal to reduce national debt remains.
Most crucially, public spending will need to be slashed, perhaps by as much as £36-billion (about 48-billion) a year, according to a Resolution Foundation estimate, or “broadly equivalent to the total cut to public spending” the Tories announced in 2010 as they embarked on radical austerity – a program the UN later said unnecessarily inflicted “great misery.”
As we see how our past is influencing Britain’s present, Canadians should ask: What does our future hold?
While the current Liberal government preps its next budget, things sound a bit Truss-ian across the aisle. In his promise to take aim at the “gatekeepers” and reduce inflation, Conservative Leader Pierre Poilievre has vowed to reform taxes: “We must simplify and cut taxes to make Canada the best place to work, save, invest, and make things,” he has said.
Mr. Poilievre has a similar plan for public spending. He aims to implement a failed American idea requiring every dollar of new government spending to be offset with a cut elsewhere: “Ministers would not be able to introduce new programs without getting rid of old ones,” he said during his leadership campaign. “They would need to scour for waste that would otherwise go on robbing taxpayers into perpetuity.” How much will this save every year? He hasn’t offered an estimate.
Policy, like anything else, is not immune to the forces of time; its effects are rarely visible until decades later. And those effects are never just financial; they’re mostly human. Indeed, the short-term results from the Liberal program review were not the end of that policy story: Its legacy continues still, here in Canada, and now, across the Atlantic, too.
“The test of successful reform is whether the desired outcome is accomplished at the lowest possible cost to society while minimizing the unintended consequences,” Jocelyne Bourgon, Canada’s former clerk of the Privy Council, wrote in her 2009 summary of the Liberal policy review.
To the detriment of millions of Britons, Ms. Truss and Mr. Kwarteng still seem to be ignoring that advice. Canadians deserve to know if Mr. Poilievre will, too.
Editor’s note: Editor's note (Oct. 5, 2022): This piece has been updated to reflect that the author was a speechwriter for the Liberal Party from September, 2014, to December, 2015.