Even Liz Truss’s Supporters Worry Her Plans Could Create Havoc for the UK

03 September 2022 - 10:46 By Alex Wickham
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She’s the strong front-runner to be named prime minister next week, but her policies on tax and energy have MPs and investors on edge.
She’s the strong front-runner to be named prime minister next week, but her policies on tax and energy have MPs and investors on edge.
Image: Bloomberg

Liz Truss has spent the past week preparing to become prime minister of the UK. She’s been firming up plans to help households and businesses hit by soaring energy costs and finalising her cabinet appointments.

Some of her closest supporters are worried that those first moves in office prove to be big mistakes.

Conservative lawmakers who backed the 47-year-old foreign secretary in the party leadership contest that concludes Monday are increasingly worried that her energy-aid package won’t go far enough, potentially undermining her authority with a U-turn during her first weeks in office. Her tax-cutting plans risk deepening the sell-off in UK markets.

To compound the problem, her determination to promote ideological loyalists over seasoned officials risks leaving her with little protection if the public backlash starts to grow. A clip of Health Secretary Steve Barclay being harangued by a woman outside a hospital last month was seen as a warning shot of the public anger that could come. A spokesperson for the Truss campaign didn’t respond to a request for comment on the concerns about her plans.

The next British prime minister will take office at a moment of desperate anxiety for the UK, with gas shortages triggered by the war in Ukraine sending inflation to rates that haven’t been seen for a generation. With millions of families struggling to cover their bills, dockers, railworkers and even lawyers have held strikes to demand higher pay while teachers and nurses may follow in the fall. 

The British public have been souring on the governing Conservatives after Boris Johnson was forced from office in July follow a string of scandals and the party is running about 10 percentage points behind the opposition Labor Party, with an election due in 2024. Truss’s policies have struck a chord with the Tory party members whose votes will decide the next prime minister when the result of their ballot is announced on Monday, but MPs are concerned about whether she will also be able to address the problems facing the country as a whole.

One ally insists Truss’s energy support package will be more radical than she indicated as she built a commanding lead over former Chancellor of the Exchequer Rishi Sunak by courting the Tory party base. Despite her criticism of government “handouts,” the final policy will involve state support as well as wide-ranging tax cuts, the person said.

A drastic cut to sales tax, as well as reversing the National Insurance rise and removing green levies on energy bills, have all been discussed to help individuals. Some Truss supporters have urged her to cut income tax or increase the thresholds at which it is paid.

None of those measures would focus resources on the poorest Britons, who pay little or no income tax and use far less energy than the middle classes.

There is expected to be more state support for vulnerable people and pensioners, with one person involved in policy discussions saying Truss is likely to abandon her campaign pledge on handouts to effectively cover the increase in energy bills for the poorest. One plan discussed this week looked at increasing existing discounts for households that Sunak lined up for this winter when he was chancellor under Johnson, according to people familiar.

Even so, one supporter said that MPs are worried that the sums being considered aren’t enough to help millions of lower- and middle- earning Britons who will struggle to pay their bills. Another predicted Truss would have to announce a second package because the first would be met with a public outcry.

One government aide involved in discussions on her first policy moves said they had watched the last two weeks of the contest with trepidation. They were alarmed that Truss ruled out energy rationing despite internal government documents clearly making contingencies for organised blackouts for heavy industry. They also said it was amateurish to rule out ever raising tax, arguing this would be a hostage to fortune.

Her plans to cut taxes, subsidise energy bills and raise defence spending to 3% of GDP simply don’t add up, the aide said, adding that she doesn’t not look prepared for a coming collision with reality.

The other big worry is over her key appointments. Some Truss backers who are familiar with her planned cabinet are nervous that the names in the frame won’t provide her with the heavyweight backing she’s going to need.

Ben Wallace, likely to stay on as defence secretary, has won plaudits at home and abroad for his leadership on the war in Ukraine, where he worked closely with Truss. Kwasi Kwarteng, a likely chancellor, served in Johnson’s cabinet for 18 months as business secretary, and has led the government’s policy on energy security in that time.

But Kwarteng is considering ditching the experienced Treasury Permanent Secretary Tom Scholar, who is seen as representing the traditional government thinking that Truss rejects. One official said that Scholar is one of the few people in Britain capable of managing the economy through the coming storm and removing him would be suicidal.

Suella Braverman is being touted for Home Secretary after less than a year in cabinet as attorney-general, fuelling speculation that she negotiated a top cabinet job in exchange for backing Truss earlier in the contest. She will take on the huge task of stopping channel crossings by undocumented migrants, which is seen vital to Tory hopes at the next election.

Jacob Rees-Mogg is likely to take charge of the business and energy portfolio despite repeatedly criticising the previous government’s push to eliminate greenhouse gas emissions. Other Johnson advisers who hoped to stay in government have been told there won’t be jobs for them, with previously junior staff replacing them.

Other names in the frame for top jobs are four other leadership candidates, Kemi Badenoch, Penny Mordaunt, Nadhim Zahawi and Tom Tugendhat, as well as early supporters Simon Clarke, Chloe Smith, Ranil Jayawardena and Wendy Morton.

Some other ministers from the Johnson administration may remain in top government jobs, but Sunak supporters such as Dominic Raab, Michael Gove and Oliver Dowden, are expected to leave government and join the ranks of backbench MPs, who played a role in toppling three of the last four Tory prime ministers. (David Cameron was the exception. He quit after losing the Brexit referendum in 2016.)

In that respect, Truss would start in a more vulnerable position than her predecessors.

Most prime ministers derive their authority from a core support of MPs, but there are few Truss diehards in parliament. She only scraped into the runoff contest against Sunak and it’s her popularity with the rank-and-file that is likely to see her into Downing Street.

The parliamentary party though is so fractious that MPs are already speculating about how soon it will be before rumours start circulating about letters of no confidence being submitted. Some MPs suggested this may be why several senior politicians who were expected to leave politics after the contest have recently committed to staying in parliament.

One Tory minister said the story of the contest was that Sunak’s campaign had been blown up in the first week by the perception that he had betrayed Johnson, but he was objectively the more credible candidate with the better economic plan.

The minister voted for Truss anyway, but is having second thoughts about staying on to serve in her government.

More stories like this are available on bloomberg.com

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