Prime Minister Truss: Just What is Deliver, Deliver, Deliver?

A personal viewpoint from Dr Stephen Barber
September 6, 2022

Few Prime Min­is­ters come to office fac­ing such tumul­tuous chal­lenges and few fig­ures have been per­ceived as so polit­i­cal­ly shape-shift­ing as Liz Truss.  The con­se­quence is, whether it is the loom­ing ener­gy cri­sis, ram­pant infla­tion, the impend­ing reces­sion, the pres­sures on the NHS, the war in Ukraine or the mess of Brex­it, it is dif­fi­cult to judge quite how the Truss admin­is­tra­tion will approach the big issues pil­ing up.  Save for a promise to ‘fix’ this or ‘deliv­er’ on that or ‘hold to account’ the oth­er, Truss has avoid­ed giv­ing any detail on what her gov­ern­ment will actu­al­ly do.  Truss has pre­sent­ed her­self as a pop­ulist, tax cut­ting Thatcherite to the par­ty faith­ful; the can­di­date of both John­son con­ti­nu­ity and (unbe­liev­ably) simul­ta­ne­ous­ly the fresh face of change.  But through­out her career, she has shift­ed effort­less­ly from one posi­tion to anoth­er as has been polit­i­cal­ly con­ve­nient, most notably an overnight con­ver­sion from Remain cam­paign­er to com­mit­ted Brexiteer. 

Where does this leave us?

Hav­ing adopt­ed a some­what irre­spon­si­ble rhetoric dur­ing the lead­er­ship cam­paign, she dis­missed accu­sa­tions from for­mer col­league Michael Gove — that she was ‘tak­ing a hol­i­day from real­i­ty’ — by sim­ply accus­ing oppo­nents of hold­ing back Britain. It helped win her the elec­tion but one has to hope that she will shift once again.  When she sits down with the Cab­i­net Sec­re­tary to run through the list of pri­or­i­ties, will Truss leave the pop­ulism behind and adopt a more prag­mat­ic approach? The like­li­hood is that she will, but her sup­port­ers still expect her to throw them the red meat that she has promised.

That means that Truss will have to cut some tax­es. The Nation­al Insur­ance rise is the obvi­ous first tar­get and the planned increase in Cor­po­ra­tion Tax sure­ly will like­ly not go ahead.  Will that be enough for Truss to adopt the ‘tax cut­ting PM’ moniker that seems to be the last remain­ing uni­fy­ing force in the mod­ern Con­ser­v­a­tive par­ty?  One must doubt it.

The biggest obsta­cle to quick tax cuts is the one put time and again by Rishi Sunak dur­ing the cam­paign. Tax cuts means reduced tax take which means that (unless pub­lic spend­ing is also slashed) the gov­ern­ment will need to bor­row more. And that will have a detri­men­tal impact on inter­est rates and inflation. 

Added to this is the ener­gy cri­sis.  Doing noth­ing is no longer seen as an option, even in the free-mar­ket Truss camp.  Were con­sumer bills allowed to rise as pre­dict­ed, it would mean a stag­ger­ing £30bn of pur­chas­ing pow­er removed from the UK econ­o­my over the next few months alone.  That would guar­an­tee a harsh reces­sion.  But it also reflects the size of addi­tion­al bor­row­ing required to cap ener­gy bills giv­en the reluc­tance of Truss to impose a wind­fall tax on the excess prof­its of ener­gy com­pa­nies.  That bor­row­ing (and reports cite £100bn extra) can mean that rather than suf­fer­ing now, con­sumers repay the hike over the next cou­ple of decades. 

It is worth remem­ber­ing, how­ev­er, that this would not only be a bail out for wor­ried con­sumers and the count­less busi­ness­es fac­ing finan­cial cat­a­stro­phe, but also the ener­gy sup­pli­ers vul­ner­a­ble to col­lapse were cus­tomers to be unable to pay up.  Here, the lessons of the 2008 finan­cial cri­sis might be instruc­tive and there it was that sup­port for indus­try must come with con­di­tions rather than cre­at­ing moral haz­ards.  It would not be too sur­pris­ing then were some sort of part­ner­ship mod­el to emerge.  It would mark out Truss as being polit­i­cal­ly inno­v­a­tive rather than sim­ply a shape shifter. Mar­kets have already strength­ened in anticipation.

Liz Truss has achieved her life­long ambi­tion of becom­ing Prime Min­is­ter.  She has done so by shift­ing posi­tions, alle­giances and adopt­ing pop­ulist slo­gans rather than worked-through pro­pos­als. Cam­paign­ing is eas­i­er than gov­ern­ing though and in office the new PM will have to make hard deci­sions. Promis­es to ‘deliv­er’ now need to be replaced by seri­ous policy.