On 6th September 2022 Liz Truss became Prime Minister of the United Kingdom. She moved quickly to appoint her cabinet, placing supporters of her leadership campaign in all the key roles. Suella Braverman for Home Secretary, James Cleverly for Foreign Secretary and Kwasi Kwarteng as Chancellor. For the first time there was no white man occupying one of four great offices of state. She also sacked Tom Scholar, the Secretary to the Treasury. This sacking was seen as a sign of the new government’s willingness to challenge “Treasury Orthodoxy”. On 23rd September Kwarteng announced a “mini-budget” containing tax cuts for industry and individuals, alongside financial support to help with dramatically increased energy bills in the wake of the impact to supplies (predominantly gas supplies) as a result of the war in Ukraine. The bond markets reacted badly and suddenly it was hard to sell UK government bonds. In order to prevent a destructive chain reaction in UK financial institutions the Bank of England embarked on a short-term programme of Quantitive Easing (QE), basically buying up UK government bonds in order to shore up the price. Kwarteng was sacked 14th October and the vast majority of measures announced in the mini-budget were reversed. In the following week there was a growing clamour both in Westminster and in the UK press for Truss to resign. Finally, following a chaotic vote in the commons, and the resignation of Braverman (who implicitly criticised Truss in her resignation letter), Truss resigned on 20th October.
It’s a reasonable assumption that the above set of events was not what Truss/Kwarteng intended to set in motion when they released the mini-budget on 23rd September. When I run workshops on critical thinking I like to get the attendees into the topic by investigating the reasons why decision making sometimes go awry – in other words why things don’t always work out the way we plan. I encourage the attendees to provide examples from their own experience. I have some of my own and I occasionally use one or two from the world of business or politics. One of my earliest articles for this blog also provided an example from history: the disastrous Bay of Pigs invasion supported by the Kennedy government. In that article I described how Kennedy learnt from this experience and ensured he had greater diversity of thinking involved in the meetings when facing the Cuban missile crisis later on.
The Truss/Kwarteng mini-budget fits the bill perfectly as an example of “decision making going awry” – a topic I can’t avoid in workshops currently. So I think it’s worth looking at a few aspects of how we ended up here and considering this example of in terms of critical thinking. Firstly, let’s take the topic of diversity. The Truss cabinet certainly had diversity in terms of racial background and gender. What seems clear though, is that diversity of thinking was not encouraged – hence the sacking of the Secretary to the Treasury. Speed and compliance would appear to be the priority of the Truss/Kwarteng approach. There was shocked commentary in the media at the lack of consultation prior to the mini-budget announcement and dismay at the lack of forecasts or funding plans for these policy announcements. Critical thinking research provides evidence that it’s not sufficient to expect diversity of race and gender alone to improve the quality of decision making. Different points of view must be included, and time and space provided for such discussion for any benefit to accrue. Different points of view are more likely to arise with people from diverse backgrounds, including race and gender, but this is not guaranteed. In fact, if you only recruit people to your team who agree with you, and you severely limit time for any such debate, the quality of your decision making will decrease. Our former PM did both, recruiting allies to all key positions, firing dissenting voices, and announcing proposals without allowing time for any consultation with any differing point of view.
Mike Tyson said before his first fight with Evander Holyfield that “everyone has a plan until they get punched in the mouth”. Using more sober critical thinking terminology we might say “before fully committing to our proposals it would be a good idea to reality test our assumptions”. The point is predicting the future is quite difficult. One of the assumptions embedded in the Truss/Kwarteng mini-budget was that any reaction of the bond markets would be mild. They had some precedent for this assumption – many budget proposals have been announced previously which have not provoked such a reaction. On this occasion though, it proved a step too far. We cannot know whether the bond markets would have behaved similarly with a different set of (or even no) proposals but we do know that predicting the behaviour of financial markets is notoriously difficult. Tyson actually lost his fight with Holyfield. Holyfield didn’t just have one plan to deal with Tyson, but a whole set of tactics designed to minimize Tyson’s fighting style. Many different scenarios had been considered and many different proposals on how to deal with Tyson had been “reality tested” in the gym with numerous sparring partners. Different points of view were considered. Holyfield anticipated that Tyson would punch him in the mouth. When the bond markets punched Truss/Kwarteng in the mouth, they seemed to have no idea that it was coming, and a round one knockout became inevitable.
John Mitchell 