SNP's claim that Liz Truss’s government cost UK economy £30bn is not reliable

“Let us reflect upon the damage that was caused: £30 billion wiped off the UK economy.”

During Prime Minister’s Questions on 8 February 2023, Stephen Flynn MP, the Westminster Leader of the Scottish National Party, claimed that former Prime Minister Liz Truss’s government cost the UK economy £30 billion. 

Although this figure corresponds with an estimated cost to the public purse of Ms Truss’s premiership, this is not the same thing as the cost to the economy overall which is significantly more difficult to estimate.

Full Fact contacted the SNP to ask where the figure Mr Flynn used came from. The party pointed us towards a report stating that, upon leaving the Treasury in July 2022 (in a move which ultimately led to the resignation of then-Prime Minister Boris Johnson), then-chancellor Rishi Sunak had built up a “war chest” of £30 billion. However, when he became Prime Minister following the resignation of Ms Truss, this surplus had vanished. 

The SNP also cited widely-reported analysis by the Resolution Foundation, an economics think tank, which also stated in November that Ms Truss’s decisions were responsible for about £30 billion of the gap between government spending and revenues. 

This comprised approximately £20 billion of reduced government income from tax reductions which survived from the September mini-Budget and an estimated £10 billion for permanent increased borrowing costs.

This figure may no longer be relevant. The Resolution Foundation has since said the “mini-budget premium” on borrowing costs has now “unwound”, and we have asked the think tank whether it has produced a more recent estimate on the costs of Ms Truss’s premiership.

But regardless of its accuracy, this was only ever an estimate of the impact on the Treasury’s bottom line, not an estimate of the impact on the economy at large.  

It’s incorrect to suggest that reducing taxes directly reduces the size of the economy, just as it would be incorrect to suggest increasing taxes directly increases the cost to the economy. 

Of course these fiscal decisions do ultimately have some impact on the overall size of the economy, but estimating this is much more complex. 

An SNP spokesperson told Full Fact: “The role of opposition parties at PMQs is to ask questions and get answers. In answering Stephen Flynn MP's question, the Prime Minister notably chose not to contest the £30 billion figure or provide any alternative UK government figure.”

Defining the economy

According to the Bank of England, a country’s economy is usually measured in terms of its Gross Domestic Product (GDP), the total value of goods and services produced over a specific time period. 

The mini-Budget was unveiled on 23 September 2022. According to the latest figures released by the Office for National Statistics, the UK’s GDP fell by 0.68% that month but grew by 0.55% in October and 0.15% in November, before falling again by 0.55% in December. 

This put GDP in December slightly above the level in September.

But it is simply not possible to say with any accuracy what GDP may have been had the mini-Budget not taken place, and therefore what impact Ms Truss may have had on the economy at large.. 

Jonathan Portes, Professor of Economics and Public Policy at King’s College London told Full Fact: “I don’t think there’s any plausible way you could estimate this at present.  You could argue it’s basically zero, on the grounds that markets and policy are basically where they would have been if [Mr] Sunak had been elected in September. 

“Or you could argue that it’s very large, on the grounds that [Ms] Truss has done lasting damage to the UK’s international economic credibility, investor confidence, etc.  Both are respectable positions, but I see no credible way to quantify the latter (nor to disprove it).”