When Liz Truss was in the running to become the leader of the Conservative Party and our next Prime Minister, some of her colleagues worried that, as Prime Minister Johnson’s anointed choice, she would be Boris Johnson’s running mate.
On the economy, they couldn’t be more wrong.
Since became prime minister two weeks agoMs Truss has drawn clearer ideological lines between her Conservative Party and Labor than we have seen since the last three Conservative Prime Ministers.
The promises of tax cuts and protections for big business that she promised during the Conservative leadership race were, after all, not politically convenient policies to win the hearts and minds of the Conservative Party, if not the general public.
This is the policy she intends to pursue as Prime Minister. She said during the leadership race that she wanted to be a candidate for change, and she’s upending the tax-and-spend consensus we’ve more or less lived with since New Labour.
No windfall tax on energy companies’ £170bn windfall energy cost guarantee will instead be paid for by public borrowing, which the taxpayer will ultimately have to pay back: scrapping planned corporation tax rises for big business and scrapping national insurance rises for the highest and lowest earners: removing the cap on bankers’ Bonuses and energy package , which benefits the very rich as well as those who really need it.
This is a paradigm shift in government approach, from economic policies aimed at redistributing wealth through the tax system from those with the deepest pockets to those most in need, to a new approach in which promoting growth is the key to fixing public services and helps everyone.
U our first interview with the new prime minister on the 102nd floor of the Empire State Building, she made it very clear that she was comfortable with a growth policy that took precedence over everything else.
When I asked the prime minister if her plans to cut taxes – a big boost for big business as well as wealthier workers – were fair, she told me this: “I don’t buy the argument that the tax cuts are unfair.
“I mean, we know that people with higher incomes generally pay more in taxes. So when you cut taxes, there’s often a disproportionate benefit because those people are paying more taxes in the first place.
“We have to build our tax policy based on what will make our country the most successful, what will bring the economy that will benefit everyone in this country.
“I don’t buy the idea that cutting business taxes doesn’t help people in general.”
And when I told Mrs Truss that she was willing to become an unpopular Prime Minister to achieve that goal, she said: “Yes, yes. It’s important to me that we grow the British economy because that will ultimately bring higher wages, more investment in cities across the country, which will ultimately put more money in people’s pockets, and it will also allow us to fund services like the National Health Service. economic growth, Britain must be competitive.”
Tax cut plans carry a lot of risk
Her plans carry a great political and economic risk. Politically, Ms Truss is prepared to cut taxes for those who need it least and pay for it through government borrowing in the pursuit of growth.
Her argument is that the public cares more about better services, better jobs, better infrastructure than about fairness and equality in how the state taxes its citizens and businesses.
It follows the principle that a rising tide lifts us all – but what if that rise fails? And what if British workers don’t really like the tax cuts, which they think are unfair when they’re already under pressure?
When I put it to the Prime Minister that voters might not think it fair that their children should ultimately pass a bill to fund tax cuts for big business backed by public debt or plans to guarantee energy prices, she sharply replied to me: “That’s a particular point of view that you’re expressing, and it’s one that people on the political left often express.
“What I’m saying is that by keeping taxes low and growing the economy, we’re going to get more tax revenue, and that’s actually going to be successful in the long run, bringing the opportunities that people want to see.”
The ideological lines of red versus blue are clearly laid out by the Prime Minister, but in reality this opinion is not necessarily partisan.
More than two in three Britons think energy companies should introduce a windfall tax. This is not so much a left-right political divide, but more about public sentiment and voter attitudes toward taxation, and in that regard, Ms. Truss is clearly willing to be on the wrong side of that popular divide.
After all, she believes voters will support her at the next general election if they can get a GP appointment, a good job and a good salary.
It’s an approach that puts the UK prime minister on the opposite economic divide with her US counterpart, President Biden, who tweeted an “economy leak” just as the prime minister was extolling the virtues of tax cuts. in our interview.
“I’m tired of the economy trickling down. She never worked,” he tweeted. “We are building the economy from the bottom and from the middle.”
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I guess it was a coincidence that the president’s speech was aimed at a domestic audience, not a criticism of the new president number 10’s handling of the economy.
But it’s also clear that the US president doesn’t agree at all with Ms Truss’s view that tax cuts for businesses and the wealthy will “trickle down” to the rest of society.
“Much more than politics”
And back home you have to wonder how the coalition of Red Wall and Tory MPs will take it too.
Ms Truss won the public support of just 142 of the 353 MPs in the leadership race, despite being tipped to win for weeks.
Her support in the party is already thin, and the policy will inevitably split the fragmented coalition of voters and voters that Mr Johnson assembled back in 2019.
But it is much more than just politics. It is also about the economic management of the country and the confidence of investors in the Trus government. And this confidence looks shaky.
Confidence in British assets is faltering, with bonds, stocks and sterling all falling to 35-year lows at the same time, and the Bank of England is now mulling its biggest interest rate hike in three decades in response to that and rising inflation.
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Markets will get a better understanding – and perhaps a verdict – on Ms Truss’s economic plan on Friday when her chancellor sets out the cost of her energy price guarantee and proposed tax cuts in a mini-budget that could prove to be a very big moment for her new government .
And as for the Prime Minister herself, she is confident about her economic plan, telling me that while the country is facing “very difficult times” this winter, she is adamant that “we will get through it.”
But from energy rationing this winter to rising interest rates and inflation, so much is beyond her control.
Ms Truss may set policy, but ultimately markets and voters will decide – and at the moment there is a lot of skepticism surrounding the new prime minister and her policies.