Liz Truss’s tired market mantras mask plans for a remarkable state intervention

Dodging a downpour as she entered Downing Street on a stormy day in London, Liz Truss kept her speech short and mostly free of rhetorical flourishes. It included a dreary echo of Churchill with the promise of “action this day” on the economy and the puzzling observation that Britain “was built by people who get things done”.

For the most part, however, it was a pep talk to a country facing severe challenges and a promise that the state would protect people from their immediate impact while trying to build a more dynamic economy.

“Now is the time to tackle the issues that are holding Britain back,” she said.

After 12 years of Conservative government, Britain’s economy is in deep trouble, with growth and productivity lower than its competitors. As a net importer of food, energy and manufactured goods, higher import prices combined with a post-Brexit labour shortage have driven inflation in Britain higher than elsewhere in Europe.

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For a politician who has portrayed herself as an economic liberal who wants to shrink the state, it will be a remarkable act of state intervention in the economy

Truss is committed to boosting Britain’s economic growth, forecast to be the lowest in the G7 next year, by cutting taxes and loosening regulation. But first she must prevent a massive increase in energy prices from driving millions of people into poverty and putting hundreds of firms out of business.

[ New British prime minister Liz Truss begins cabinet reshuffle ]

The plan she is expected to announce on Thursday would freeze energy bills for private consumers and businesses at their current level for up to 18 months at a cost of more than £100 billion (€116 billion). For a politician who has portrayed herself as an economic liberal who wants to shrink the state, it will be a remarkable act of state intervention in the economy.

Given the scale of the challenges and the severity of the storm she spoke of, Truss might be wise to avoid making it worse by provoking a trade war over the Northern Ireland protocol

It will also mean the state takes on uncapped liabilities by promising to pay the difference between the current price of energy and any price it reaches over the next year-and-a-half. The cost will be met by borrowing, adding to a national debt that is already £2.3 trillion and increasing the budget deficit.

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In her speech outside Downing Street, Truss spoke about standing up for freedom and democracy around the world “united with our allies”. She did not name those allies, nor did she offer any sign about how she will deal with Britain’s relationship with its closest neighbours in Europe.

Given the scale of the challenges and the severity of the storm she spoke of, Truss might be wise to avoid making it worse by provoking a trade war over the Northern Ireland protocol.