British Politics

Suspended Labour MP Zarah Sultana has announced she is starting a new party with former Labour leader Jeremy Corbyn.

Sultana, stripped of the Labour whip last year for backing a move to scrap the two-child benefit cap, said she was also resigning from the party after 14 years of membership.

The MP for Coventry South said the new party would be formed with other independent MPs, campaigners and activists, aiming to challenge a "broken" Westminster system.

We’ve ended up in a world where a one percentage point difference in a GDP forecast cascades down into a series of reforms that would have pushed hundreds of thousands into poverty. Why? Because the possibility of not meeting the fiscal rules was apparently spooking the markets.

The chancellor has been consistent with these fiscal rules. She told the Global Borrowers and Bond Investment Forum (ie bond investors, the same people who turned on Liz Truss) that they were essential for underpinning financial stability.

But fiscal rules have become a religion. In this self-imposed straitjacket, governments believe they can only spend if the economy is growing and borrow if the bond markets nod approvingly. These rules weren’t created by Truss, but their new totemic status in British politics was forged in the fire she left behind.

The result? We’ve boxed ourselves into a corner. Our public sector needs money. Growth is flat and threatened by global instability. Interest rates are high. But under these arbitrary rules, we’re left with just two levers: raise taxes or cut spending.

MPs and the public have shown that they are unwilling to tolerate further cuts, seemingly more alive than the government to the fact that they will create further costs in the long run. Who can blame them? The public isn’t irrational. They have seen the state decay after 14 years of cuts; they don’t believe it will be able to stand another round. They have also lived through years of stagnant wages and will be wary of tax rises on the back of already squeezed household budgets.

Plans to means-test the winter fuel payment led to this government being accused of attacking elderly people. Last week, £5bn of rushed and flawed benefit cuts were rightly destroyed through a rebellion from the government’s own MPs.

And while there is a growing consensus about the need to tax wealth fairly, this government so far appears unwilling to make these trade-offs. The closest we have come to anything resembling a bold wealth tax is a fairly meagre change to capital gains tax rates.

And so here we are, being informed that there is a “black hole” in the public finances that must be filled at all costs, yet with no politically acceptable route to make this happen. But there is a third lever that they should consider: rethink the fiscal rules themselves, and with them, our assumptions about debt and growth. Instead, Westminster treats these constraints as sacred.

That’s the legacy of Truss. Her mini-budget may have collapsed in days, but the fear it left behind governs us still. The bond market is now our unofficial second chamber. Every policy is measured against its hypothetical response. It doesn’t matter that the markets themselves aren’t demanding cuts, only that politicians think they might.
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Until someone finds the courage to govern without flinching, we will remain stuck in this loop, where fear dictates policy, and decline is dressed up as stability. Until then, this is Liz Truss’s UK – we’re all just living in it.