UK Tories ditch ‘sound money’ and embrace the world of Trussonomics – POLITICO

UK Tories ditch ‘sound money’ and embrace the world of Trussonomics – POLITICO

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LONDON — With her famous wooden speaking style and wardrobe inspired by Margaret Thatcher, Liz Truss seems like an unlikely figure to lead a revolution.

But the glowing favorite to be crowned Britain’s new prime minister next month plans to tear up years of conservative orthodoxy with an immediate tax-cutting program that party traditionalists fear the debt-ridden UK – with its soaring inflation levels – could fare badly. to afford .

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“My number one priority is cutting taxes,” Truss urged a leadership meeting in the northern city of Darlington Tuesday night. “I think it’s important that people love their own money more, and that we grow the economy.”

These, Truss emphasizes, are “conservative principles.” But her tone is markedly different from the ‘healthy money’ message with which former Conservative Prime Minister David Cameron and his Chancellor George Osborne dominated British politics during the UK’s last major economic crisis and beyond. Beginning in the late 2000s, they delivered a relentless message that borrowing more was irresponsible, and that Britain in particular must learn to ‘live within its means’.

Their philosophy was one of “sound money,” which Osborne declared the “oldest conservative principle of all” in a landmark speech as Shadow Chancellor in 2007. this would jeopardize low interest rates and low inflation.

Subsequent Tory chancellors have largely followed the same blueprint. While Rishi Sunak, who took over the reins at the Treasury weeks before the COVID pandemic hit, oversaw a major emergency intervention to save jobs and businesses, he always warned of tougher tax and spending decisions when the crisis was over.

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Now, a rival to Truss’s leadership, he sticks to that message, warning party members that tax cuts now would only fuel inflation and later lead to higher interest rates.

“The tradition of the British Conservative Party is sound money and fiscal responsibility,” a senior ally told POLITICO. “Rishi Sunak is definitely in that tradition.”

But it is Truss – with her strikingly different economic outlook – who is now the overwhelming choice of members of the Tory party to become their next leader, according to polls. She has pledged to immediately scrap Sunak’s planned increases in national insurance and corporate tax, while imposing a moratorium on green energy taxes, costing the UK Treasury a combined £48.2bn.

Paul Johnson, director of the Institute of Fiscal Studies, said tax cuts have been the main dividing line between the two candidates so far.

“As for their rhetoric, Rishi Sunak is right to focus on inflation as the big problem. It’s a little surprising that that’s something Liz Truss hasn’t talked about much,” he said.

David Cameron and his Chancellor sidekick George Osborne dominated British politics for half a decade with the message that it was irresponsible to have a high deficit and that deep cuts in public spending were needed to push it back | Pool Photo by Petar Kujundzic/Getty Images

Still, Johnson stressed that neither candidate has come up against the fact that rising inflation means the next prime minister will face tough choices when it comes to government spending.

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“None of them tell us how they will react to the higher inflation facing public services,” he said. “There are big challenges there, because the spending review a year ago assumed an inflation rate of 3 percent and it turns out to be 13 percent. They have much less money than they expected.”

Skewed selector rate

There is indeed something surreal about the way Truss and Sunak have argued over tax cuts as the UK economy teeters on the brink of a massive crisis. Energy bills are expected to rise in October and again in January 2023, while the Bank of England has forecast a recession that will last as long as the 2008 banking crisis. An internal document leaked to Bloomberg on Tuesday suggested that “worst -case scenario’ plans are being made for power outages this winter.

But if it sometimes seems like the economic debate is on another planet, it’s because the voters Sunak and Truss are currently trying to win are not the British public as a whole, but the 180,000 grassroots Conservative Party members who elect the next leader. through a ballot.

Tim Bale, professor of politics at Queen Mary University in London, has studied the makeup of this all-important group that will anoint the next British Prime Minister. “By our calculation, the average participant is in their late 50s and about four in ten are receiving or nearing their retirement,” he said. “It is also disproportionately likely that in the [typically wealthier] south of England, instead of the north or the Midlands – the Blue instead of the Red Wall, if you will.”

Tory members are disproportionately older, wealthy, white and male. They tend to own their own homes, often outright, and many have reached or are approaching retirement. As a result, their priorities are not fully aligned with young professionals and other working-age voters who have mortgages – and for whom inflation is a major concern.

Giles Wilkes, a partner at Flint Global and former No. 10 adviser on economic issues, said Truss’s policy platform was informed in part by the profile of this Tory selectorate. “They’re safe, they’re doing well, so they’re the kind of people who could cover up the risks of Brexit and some of the risks that are going on right now. If people warn you about inflation, if you already own a house that you think it’s alright, i’m mostly protected – i got the thing i really need.

Patrick English, associate director of political and social research at YouGov, which has surveyed party members, said there was “certainly a sense of priority shift — they still care about the deficit and running a well-balanced economy, but that’s the priority.” list now.”

“They’re willing to believe in this idea, you know, we don’t have to get rid of it [the deficit] now,” said Engels. “We know that members of the Conservative Party love to cut taxes, and we know that the tax hikes introduced under the Johnson administration were very unpopular with the Conservative Party.”

fighting it out

Due to the demographics of Tory membership, neither candidate has made it their priority to craft a plan to alleviate the cost of living crisis that will affect those on low and middle incomes the most.

But both Truss and Sunak have come under fire for failing to specify what they will do to tackle what will undoubtedly be the government’s biggest challenge this fall.

Truss supporters claim its economic policies will help households by boosting economic growth and putting more money in people’s pockets by cutting taxes | Jack Taylor/Getty Images

On Tuesday, Sunak tried to come to the fore by promising to introduce a new support package for families struggling with utility bills, though he declined to say how much more he would spend. Speaking to ITV, he said it was “difficult to be exact”, but agreed that hundreds of pounds per household could be needed.

Asked by broadcasters on Tuesday, Truss repeatedly declined to commit to increased support for utility bills, saying, “What I’m talking about is enabling people to keep more money in their own pockets.” In an interview with the Financial Times over the weekend, she insisted that “the way I would do things conservatively is to lower the tax burden, not hand out alms,” a comment that caught the attention of the public. Sunak campaign.

Wilkes said Truss’ plan may not survive a collision with reality. “I think she will almost certainly have to change course on so-called handouts because it’s very difficult to realize how bad it will be.”

Public View

Ed Shackle, policy manager at the consulting firm Public First, which held focus groups in 2019 in so-called “Red Wall” areas claimed by the Labor Tories, said Truss’ promises of tax cuts have some appeal to working-class voters in the United States. wider electorate, with more middle-class voters leaning towards Sunak’s “steady hand on the helm” field.

“They are generally well informed about the positions of the candidates,” he said. “Especially in the more recent focus groups we’ve done, they’re largely aware that Truss stands for cutting taxes, and they’re largely aware that Rishi doesn’t immediately want and is in favor of balancing the taxes. books. It is impossible to follow how that has a huge impact this winter.”

Enthusiasm for both candidates’ economic proposals is scarce, Shackle said. “There was no sense of hope. There was no sense of excitement about the race. Even people who wanted certain candidates to win were not enthusiastic about the candidate.”

Matt Honeycombe-Foster contributed to reporting.

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