It would be easy to dismiss the political chaos in the UK in recent days as the logical outcome of a hapless prime minister implementing reckless economic policies. And yes, Liz Truss was indeed hapless, and her economic policies were utterly reckless.

But the staggering rise and fall of Liz Truss highlight a deeper and more dangerous malfunction within Britain. Quite simply, our nearest neighbour has no idea of where it stands in the world, or what its own political economy should look like.  The nation, as manifested by its policymakers, is confused, divided, and increasingly alienated.

I take no pleasure in writing those words. It was just over a decade ago when the UK lent Ireland €3.8 billion as part of the €85 billion bailout.

Since those dark days, Ireland has dusted itself down and rebuilt both its economy and its sense of self. The painful austerity of the troika years could well have provoked anger with the technocrats in Brussels and Frankfurt who demanded cuts to spending and increases in taxation. Instead, close to nine years after Ireland exited the bailout and regained its economic sovereignty, our relationship with Europe has never been stronger.

The economic model that has underpinned Ireland’s recovery – seducing multinationals and foreign direct investment – is not without its risks. The fact that so much of our taxation comes from so few companies is clearly a massive threat, something Irish policymakers readily admit.

But it is an economic model that has widespread political buy-in. Sinn Fein might want to do a lot of things in government, but one thing the party would dare not touch is Ireland’s corporation tax regime.

In the decade since it helped Ireland in its time of need, the UK has become a more divided nation. The Brexit vote was an obvious expression of that division.

A duped public bought into the idea that Europe was killing the British economy with its nonsense regulations and rules.

As events have since shown, Britain’s access to the European market was masking a growing productivity and growth crisis in the UK. Without easy access to its neighbours, this crisis was exposed and became more pronounced.

Suddenly, Britain found itself politically isolated, and with no clear idea of what its economic model should be.

Theresa May was too busy trying (and failing) to cut a deal with Europe that was acceptable to her party to worry about a growth strategy for the economy.

Boris Johnson had ‘levelling up’, a mission to give people and communities that feel they were left behind a chance to catch up. However, the nonsense that enveloped his premiership meant he was always unlikely to hang around long enough to turn the rhetoric into something close to reality.

Liz Truss replaced him on a platform of growth at all costs and an end to what she blithely dismissed as “abacus economics”. The trouble, however, is that most people like the books to add up, particularly the financial markets you are asking to borrow money from.

It’s hard to fault Truss’s diagnosis: chronically low growth is, clearly, Britain’s most pressing problem. The issue was with her solutions.

Truss and Kwarteng argued that lowering taxes, particularly on high owners, would ignite the economy. But the UK’s income and corporation taxes are not exceptionally high. The idea that tax cuts ignite the economy fell out of favour thirty years ago. 

Fixing the UK economy is a bigger job. It requires a long-term structural approach to redesigning the economy (particular in the north of England) as opposed to unfunded and uncosted tax cuts and spending hikes.

It is worth noting that Ireland needs to start thinking about its long-term structural approach for when the multinational money ends. Stephen suggested last week that we should use some of the multinational loot to create a new economic model around offshore wind, and there is certainly merit in ensuring we are buffered into the future.

But it is easier to have that conversation when your economy is growing, and you have money in the bank.

Britain, however, is heading into a recession. The UK government has pushed the blame on the pandemic, inflation, and global political instability. All are factors, but the core reason is Brexit.

Research published by the ESRI last week showed that Brexit reduced UK trade with the EU by between 15 and 20 per cent. Inflation and Covid just made a bad situation even worse.
Fixing the problems caused by Brexit requires first acknowledging the problems caused by Brexit, and that’s something the Conservatives can never do.

The Conservatives can’t admit Britain’s success since the 1980s was built on openness and trade with Europe. They can’t admit that the UK’s most important sector was service exports — the sector they threw under the bus in Brexit negotiations. 

As John Looby put it last week: “Politics matters. Politicians matter. Voting decisions matter. The tribal indulgence of Brexit is progressively impoverishing those who voted for it. Maybe they’re surprised; maybe they’re not.”

In the days after Ireland’s recent budget, I asked Paschal Donohoe about the bubbling financial crisis in the UK as a result of Kwasi Kwarteng’s mini-budget. His response was to the point: “The events of the last number of months have reminded me very, very strongly of the shield that is the euro, and how important our membership of the euro area is.”

The UK is unlikely to join the euro. But hopefully, it can rebuild its relationship with the European Union. 

The country needs to start facing some difficult, hard truths, as opposed to looking for silver bullets. 

*****

Meanwhile last week, Rosanna talked to Damien Grey, the chef-owner of two-star Michelin restaurant Liath. By his own admission, he is first and foremost a businessperson, and he spoke passionately about the hospitality sector needs to do to survive the next year. He also talked about his obsession with numbers, the storm facing his sector, and having integrity above all else.

True to form, Sinead had a thoughtful, and somewhat left field, solution to the looming pension crisis: promiscuity.  As she put it: “There is a real economic and political case to be made for promiscuity. If we can at least keep our population levels stable, never mind increasing, we will have a strong strategic advantage over nearly every other developed nation.”

The Central bank last week eased its mortgage lending rules. Sean last week outlined how the move will make houses less affordable. However, with construction costs and interest rates rising, he wondered if this was price worth paying.

When three security firms first tried to block sector-wide wage hikes a year ago, many employers in the industry agreed it was not the right time to raise pay. But second time round, the mood music has changed. Francesca had the story.

Zeb Evans has built a $4bn valued business from the ground up. In a wide-ranging discission with Tom, he outlines the company’s ambitions for Dublin, explains how he balances creativity with being a CEO, and talks about what makes a great company.