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Truss Fends Off Sunak Attacks to Hold Her Lead: Marcus Ashworth

July 26, 2022, 6:17 AM

In Monday’s prime-time BBC television debate between the two candidates to replace Boris Johnson as Conservative party leader and UK prime minister, former Chancellor of the Exchequer Rishi Sunak started very much as the underdog against Foreign Secretary Liz Truss. He certainly came out fighting, but Truss held her ground and steadily got her points across. Post-game analysis suggests he’ll remain the second choice with the 175,000 or so Tory party members who get to make the selection.

Sunak’s hopes rest on whether a reputation for competency can overcome a perceived weakness in radical policy offerings. His popularity, derived from his economy-saving employment-furlough scheme during the pandemic, has been undermined by the cost-of-living crisis that started on his watch. He needed to gamble, but the cautious numbers guy couldn’t find the lever to reverse his fortunes.

Truss is successfully selling herself as offering a fresh start, despite having held cabinet roles for the past eight years. And she has wasted no time in projecting a new approach, albeit without much coherence, by promising to reverse some of Sunak’s thriftiness/stinginess (depending on your point of view). Her economic optimism, though, has a limited shelf life before it meets harsh reality.

The door may stay open just long enough for Truss to slip into No. 10, as Sunak has not yet done enough to trip Truss up. While the result of the vote won’t be announced until early September, mail-in ballots will arrive at Tory households in early August and, in previous leadership elections, members tended to mark their crosses straight away. It is telling that Sunak has agreed to be interviewed Friday by the formidable political interviewer Andrew Neil on Channel 4, whereas Truss has so far declined. The Aug. 4 debate on Sky TV will offer Sunak a final opportunity to outflank Truss, but he’ll need to improve his pitch.

Both Truss and Sunak are from the right of the party, so capping public spending, incentivizing companies by trimming red tape, reducing taxes and minimizing the size of the state are mutual aims. Where they differ is on the timescale and tolerance for increasing debt, offering a choice between the Truss approach of cutting taxes now and Sunak’s more austere method of keeping within fiscal boundaries.

The brutal reality of governing amid rampant inflation and potential recession may drastically limit either candidate’s ability to actually deliver much in the way of change. Nonetheless, there will be some headroom worth about 40 billion pounds ($48 billion) at the next budget, according to Bloomberg economics estimates, giving some scope to cut taxes.

Much of the framework Sunak favors would be unattractive to any electorate, let alone aging Tories. Most of the world is suffering from similar energy- and logistics-led inflation, along with fears of an imminent downturn, yet fiscal tightening is only happening in the UK. Truss was able, later in the debate, to make these points and note that Sunak espouses raising corporate taxes in the next five years to 25% from 19%. He sees little downside, given that lower levies have done little to attract investment in the past decade.

Corporation tax has always been an emotive issue for the Tory party; reductions signal the attractiveness of doing business in Britain. Truss has appealed directly to the party’s DNA by proposing to abandon the proposed hikes. If Sunak loses this contest, his refusal to backtrack on tax increases will be the principal — and, arguably, principled — reason.

The other major policy difference is on national insurance, an income tax controversially increased by Sunak for both employers and employees. This started hitting pay packets in April, but Truss is campaigning for its reversal. Scrapping the increase is costly, despite the obvious political rewards.

Truss may well look to change the fiscal rules to account for her tax proposals, perhaps by extending the timescale on which the government is supposed to deliver a balanced budget to five years, from three currently. She may even propose dropping the requirement entirely, although that may prove unacceptable to her party if a Labour win is in prospect in a couple of years.

Halfway through its five-year term, the government has drifted substantially from its manifesto and defenestrated its lodestar leader. With opinion polls currently favoring Labour, getting re-elected is the key task facing the next Conservative party leader. Who replaces Johnson will be decided largely by the gut feeling of Tory members about which candidate will deliver a fifth term. Is the party’s best bet the professionalism of Sunak, or the change of tack Truss promises? As things stand, it’s likely Liz the leader as Rishi runs out of time.

More From Bloomberg Opinion:


  • Tories Shouldn’t Write Off ‘Trussonomics’ Just Yet: Martin Ivens


  • The Case for and Against Liz Truss: Adrian Wooldridge


  • Europe’s Heat Wave Is Bad for Energy Prices, But the Drought Is Worse: Javier Blas

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To contact the author of this story:
Marcus Ashworth at mashworth4@bloomberg.net

To contact the editor responsible for this story:
Mark Gilbert at magilbert@bloomberg.net

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