The song expressed Costello's anger after seeing former British Union of Fascists leader Oswald Mosley interviewed on television attempting to deny his racist past. In the liner notes to the Rhino edition of the album, Costello writes:

"Less Than Zero" was a song I had written after seeing the despicable Oswald Mosley being interviewed on BBC television. The former leader of the British Union of Fascists seemed unrepentant about his poisonous actions of the 1930s. The song was more of a slandering fantasy than a reasoned argument.

The song therefore fits in with a number of others on early Costello albums that deal with themes of fascism and totalitarianism, which also include "Night Rally" from This Year's Model and "Goon Squad" from Armed Forces. In this case, a racist and totalitarian movement is seen in terms of sub rosa teenage sex: "Turn up the TV... Even your mother won't detect it/So your father won't know."

Allmusic critic Mark Deming describes the melody as "slow, slinky [and] sinister." Deming also suggests that the melody shows some reggae influences, even though the rhythm does not incorporate reggae syncopations. Deming describes the song as "controversial, audacious, and highly effective" as well as "a truly remarkable debut."

On his first visit to the United States, Costello found that American audiences didn’t understand the song, writing in his 2015 autobiography, Unfaithful Music and Disappearing Ink, "I'm not sure if anyone in Cleveland has ever heard of Oswald Mosley or gave a damn about him when we played "Less Than Zero" that night. It was just some rock and roll music with a fashionable-sounding title". Later, he substantially rewrote the lyrics to refer to Lee Harvey Oswald. This was a reference to the common misconception among American fans that this was the "Mr. Oswald" referred to in the original lyrics. This version is usually referred to as the "Dallas version" and is available as a bonus track on the My Aim is True reissue, and a live version can be found on Live at the El Mocambo.

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Wikipedia