Tories, think tanks and the struggle to win the battle of ideas

The free-market-led ideas of Liz Truss and her government didn’t last long – but, asks Rory Sullivan, can we still expect libertarian thinking to guide the direction of the Conservative Party?

A number of Tufton Street alumni have been appointed as Downing Street advisers over the years (PA Wire)

The UK economy was crashed here,” proclaimed a sign outside a Georgian townhouse in Westminster, a few hundred metres from parliament.

As commemorative plaques go, it was unusual for its pointed message, its bloated size, and its only fleeting presence on the bricks of 55 Tufton Street, a building that is home to free-market think tanks and campaign groups.

Led by Donkeys, a crowdfunded activist group that challenges the wisdom of the decisions ministers make, had chosen the location for its latest stunt carefully. In the 44 days since Liz Truss took power, Tufton Street has come under increasing scrutiny for its perceived influence on government policy, given that a number of its alumni have been appointed over the years as Downing Street advisers.

Last month’s disastrous mini-Budget, which ended Truss’s short-lived reign, is widely considered to owe at least parts of its creation to the ideas of institutions clustered around the central London road. They include the Adam Smith Institute, the Centre for Policy Studies, the Institute of Economic Affairs (IEA) and the TaxPayers’ Alliance.

As adherents to the theories of 20th-century economists Milton Friedman and Friedrich von Hayek, their research proposes that life would improve with lower taxes, greater deregulation and less state intervention in public life. The Truss government similarly argued that slashing taxes for the wealthiest and introducing supply-side reforms would lead to economic growth.

However, the UK’s most radical departure from financial orthodoxy in decades did not go to plan. With the markets spooked by the prospect of unfunded tax cuts at a time of vast government spending on energy support, the pound went into free fall, dropping to its lowest ever level against the US dollar. The Bank of England intervened to safeguard pensions amid trouble in the gilts market. And mortgage costs are still climbing, leaving property owners in despair.

Under pressure from the electorate as well as her own MPs, Truss sacked Kwasi Kwarteng as chancellor. Jeremy Hunt was quick to reverse his predecessor’s measures in a bid to reassure the markets, declaring on Monday that he faced decisions of “eye-watering difficulty” to balance the books.

Liz Truss resigned as prime minister earlier this week after her government’s economic proposals sent the pound into free fall (PA Wire)

Three days later, the chorus of people calling for Truss to resign proved too loud. When she announced her decision to step aside on Thursday, she became Britain’s shortest-serving prime minister, having lasted, by then, just 45 days.

Her departure had been predicted across the Conservative Party, with former levelling-up secretary Michael Gove saying she could not survive after her entire programme had been shredded. But what was the ideology underpinning her unpopular – and now abandoned – economic agenda? And how much sway did the Tufton Street set have in shaping it?

Angela Rayner, Labour’s deputy leader, believes she has an answer. The shadow cabinet minister believes Truss and her government were in thrall to libertarian institutions, which she thinks pose “an ongoing threat to British infrastructure, our social fabric and our country’s prospects” due to their undisclosed funding.

“Liz Truss’s dangerous, discredited ideological agenda had its origins in a group of closely connected ‘think tanks’ who refuse to disclose their donors,” Rayner alleges.

“These shadowy ‘think tanks’ with murky funding arrangements have an extreme agenda completely out of step with the British public, but were at the heart of this Tory administration.”

Mark Littlewood, who has been the director of the libertarian IEA think tank since 2009, is dismissive of such criticism. He believes his private donors have the right to remain anonymous, and that the ties between free-market institutions and the Truss administration have been blown out of proportion.

If you work at huge speed, missteps happen. This has been a political misstep

Mark Littlewood

“It’s very flattering but not wholly accurate. I think it’s overstated the influence that we’ve had on policy areas,” says the former Liberal Democrat, who has known the outgoing prime minister since their Oxford days.

However, the 50-year-old acknowledges that his think tank, which was established in the 1950s to further the work of thinkers like Hayek, may have had some influence on her thinking.

“What we do is to encourage not just politicians but all sorts of people in public life to think in a free-market direction. To try to look at the world through that lens,” he says. “We’ve helped Liz Truss in that view over the last 10 years. But most of our work was probably done [from] 2010 to 2020, rather than 2020 to 2022. She was a free-market-leaning person before she came to the IEA. I think we’ve helped focus this.”

To Littlewood, Truss is more of a classical liberal than a libertarian. By this he means that she backs lower taxes, a smaller state, and more lifestyle freedoms. However, she might not go so far as to support the libertarian end goal of a “minarchist” – or night-watchman – state. Under this model, individuals are essentially left to their own devices, with the government’s main function being to protect its citizens.

The IEA director says the two positions are broadly similar, though. “They’re a badge that indicates a scepticism about big government in both the economic and, crucially, the personal lifestyle sphere,” he notes. As an example of the latter, he mentions that Truss did not want to impose a sugar tax, preferring to let people decide what they eat.

Returning to economic matters, Littlewood says the way the mini-Budget was delivered might have set back the progress of these doctrines slightly. Unlike the urgently required energy package, the Truss administration did not need to rush through policies like the 45p tax rate cut, he adds.

“If you work at huge speed, missteps happen. This has been a political misstep, although I think the economic theory that’s guiding the direction they’re taking us in is extremely sound,” the IEA boss argues.

The 50-year-old attributes some of the adverse market reaction to the government’s poor communication. He says Downing Street should have explained its reasoning, instead of relying on the public to take it on trust that free-market reforms would stimulate growth. “The messaging has been dire. In part because very few politicians have been put through a free-market case in recent decades,” he says.

For all the market volatility and public backlash, Littlewood, who spoke to The Independent before Kwarteng was sacked, ventures that libertarian ideas could retain their influence even after Truss.

“Those ideas are pretty embedded in the Conservative Party’s grassroots,” he says, downplaying their unpopularity among the wider electorate. “It seems to me that free-market reform is often relatively unpopular in contemplation but extremely popular in effect. And more statist, socialist reforms often tend to be more extremely popular in contemplation, but not popular in effect,” he suggests.

Rob Ford, a political scientist at the University of Manchester who has written extensively about the Conservative Party, holds another view.

“It’s really interesting because you get this dynamic by which activists, think tanks and influential MPs try to drag the Conservative Party in a direction that makes no electoral sense. Because there aren’t any votes in it.” As if to underscore his point, polls show that support for the Conservatives has plunged to catastrophic lows in recent weeks.

“There’s nobody there – it’s like a desert,” he says of the libertarian segment of a graph showing ideological allegiance.

Ford goes on to stress the disjoint between the policies unveiled in the “mini” Budget and No 10’s communications strategy around it. The “fiscal event” was cloaked in the language of libertarianism but contained some very non-libertarian actions, he says. He singles out the government’s intervention in the energy market – to lower bills this winter – as a distinctly large-state decision; one that went against the grain of its rhetoric.

Asked why the policies and their communication appear to have been so far out of kilter, he says: “Maybe the mistake of Truss and Kwarteng was to believe there’s more support for that kind of stuff than there is – to believe the Tufton Street PR too much.”

Andrew Withers, the leader of the Libertarian Party, a fringe political outfit, believes libertarianism is a “dirty word” for an altogether different reason.

“I think that people don’t want to hear the libertarian message because they just want to live off the state. There’s far too much entitlement,” he says, mirroring the opinion expressed in Britannia Unchained, a 2012 book co-authored by Truss, that Britons “are among the worst idlers in the world”.

Speaking after the government’s U-turn on the 45p tax rate cut but before Hunt’s later reversals, Withers’ faith in the government’s free-market policies was diminishing. “We were hopeful, but that hope is fading fast because we don’t think Truss has the courage to bring this forward.” A week later, the prime minister’s economic plans were fully discarded, and her resignation soon followed.

For all the recent bad press the ideology has attracted, Adam Tebble, a reader in political theory at King’s College London, notes that classical liberalism and libertarianism have come a long way since Hayek formed the Mont Pelerin Society in 1947, paving the way for the rise of free-market think tanks on both sides of the Atlantic.

Tebble puts himself in the mind of Hayek and his colleagues when they met in the Swiss village of Mont Pelerin 75 years ago, troubled by the ascendancy of the state.

“They thought, ‘Well, what we can do as intellectuals is participate in the battle of ideas. And we need to organise in order to do that. We can’t just be random, scattered people in darkened university corridors, who no one actually listens to.’”

Tebble says this mission has been successful, citing the number of libertarian-style institutes and the enduring impact of the free-market reforms of Reagan and Thatcher.

“If the financial crisis [of 2008] can’t dislodge corporate capitalism, then what can? That was the golden opportunity. There was an absolute meltdown of the international capitalist system, but it’s still here,” he says. “That’s a symptom for me of just how embedded Thatcher and Reagan’s legacy has actually become.”

Littlewood, the director of the IEA, also speaks of the ideology’s success. “What is intriguing is that the think-tank scene has developed a lot more than Hayek could have imagined when he founded the Mont Pelerin Society,” he says.

The movement has spawned organisations – such as the Cato Institute in Washington – that are now far larger than the IAE, and have far more resources at their disposal.

Although their American cousins have deeper pockets, Littlewood alludes to the reach of British libertarian institutions. “If you were trying to find the most market-liberal sympathisers to form a government, out of the cohort of 650 MPs who are there, I guess it would look like this one,” he says of Truss’s cabinet. “Perhaps Steve Baker would have a bit more of a role or be prime minister. As a broad cohort, it’s the market liberals in the most senior positions.”

Littlewood, however, does not have his sights set as much on politics as he does on universities, which he believes are the bastion of progressives.

He wants to discover the next Friedman or Hayek. “If we could find one such person, that would do more to change the climate of opinion and to win the battle of ideas than however many lunches you organise with Tory backbench MPs.”

But Ford, the University of Manchester academic, thinks libertarianism will continue to remain unpopular in the UK. He explains that economic liberalism is destined to fail in a country the size of Britain.

“The US is the hegemonic power financially in the world, which means that it gets to play by its own rules. If the American government wants to spew out lots of debt, people will buy it because it is seen as a safe haven for investment,” he says.

“The idea that you can play Reaganomics here just doesn’t work, because the context is not the same. We’re not big enough to be able to get away with it.”

This will not stop libertarians from continuing to make excuses about Truss’s failed economic experiment, Ford predicts. “I can pretty much guarantee you that the Tufton Street libertarian types will say, ‘It would have worked, we could have unchained Britannia, but we were sabotaged by these lily-livered, spineless, weak-willed Conservative MPs who voted it all down. It’s not our fault, we had a plan but they torched it.’ That’s what they’ll say.”