State of play
After several weeks of political slanging and mud throwing, the contest for the leadership of the Conservative Party is nearing its conclusion. The UK will soon have its 4th Conservative Prime Minister in just 12 years – and one who takes on the mantle of leadership at a seismic time for the UK and global politics in general.
Liz Truss, the current Foreign Secretary, is the overwhelming favourite to succeed Boris Johnson with polls giving her a lead amongst Conservative Party members of over 20 points. The betting markets give her an over 90% chance of becoming Prime Minister. Rishi Sunak, her opponent and the former Chancellor, has consistently trailed in the polls and was expected to lose against whoever was chosen by the Conservative Parliamentary Party to run against him. This is in part down to his perceived role in bringing down Boris Johnson, and Conservative members’ hostility to the tax rises he brought in as Chancellor. Sunak has also been seen as the defender of ‘orthodoxy’ when Conservative members are possibly hankering after more radicalism.
Truss’ seemingly unassailable poll lead has meant a string of big figures in the Conservative Party have come out to support her, including many of the MPs who ran against her for the leadership such as Penny Mordaunt, Tom Tugendhat, Sajid Javid and Nadhim Zahawi. She has also secured the coveted endorsement of Ben Wallace, the Defence Secretary who, according to ConservativeHome polling, is popular amongst the grassroots membership. These endorsements clearly show that those with their future job prospects in mind are keen to support Truss. However, recent polls have shown that in a three-horse race between Boris Johnson, Truss and Sunak – Johnson would still beat both. Truss’ support may be wide, but it is also shallow which could pose problems for her when the going gets tough in the Autumn.
While Sunak won the support of the most MPs in the Parliamentary stage of the contest, he has lost momentum with few new supporters coming to his aid, and some even switching sides to Truss.
Despite the result being seen as a foregone conclusion, with all coverage focused on what a Liz Truss Government may look like, Sunak has put up a spirited display with robust attacks on Truss’ economic plans. These arguments are likely to play out regardless of the result next week, with the Conservative Party split between those who support Sunak’s cautious ‘safety-first’ approach on the economy, and those who are more in favour of the Truss tax plan.
The key issues
The leadership contest has been characterized by division and hostility between the candidates and highlighted how fragile the Conservative coalition is. The disagreements have stemmed from their divergent views on the management of the economy, the plan for getting inflation down and the form of support provided to households to help them with the cost of living.
Sunak has indicated that he would not cut taxes immediately and would not fund additional spending through ‘excessive borrowing’, in order to curb inflation. He has set out a plan to cut income tax, but this is not forecast to be fiscally viable until 2024. He has made a minor pledge to cut VAT on energy bills, however this pledge would do little to address the cost of living and went some way to undermining his stance on economic competency given his previous staunch arguments against immediate tax cuts.
By contrast, Truss has announced that she will undertake an emergency budget in which she would reveal several tax cuts. These tax cuts include a pledge to reverse the rise in National Insurance Contributions, brought in by Rishi Sunak to fund Boris Johnson’s social care policy, and also includes the reversal of Sunak’s scheduled rise in Corporation Tax. Truss wants to supplement this by scrapping green levies on energy bills. In a hostage to fortune, Truss has repeated George HW Bush’s old adage to ‘read my lips, no new taxes’, which will give her limited room for a change of direction on economic policy were she to win on Monday.
This difference in economic approach has led Sunak to label Truss’ plans a ‘moral failure’ – robust criticism for a leadership contest, and one in which has appeared to rule out the possibility for Sunak to serve in a Truss Cabinet. Truss has hit back, accusing Sunak of presiding over a ‘failed economic orthodoxy’ and clearly pinning the blame on him for the UK’s current economic predicament. Along with this, allies of Truss and those likely to serve in her Cabinet have even gone as far as to criticize Sunak for the cost of his clothes.
Such has been the rancour between the two candidates, bringing the Conservative Party together under the new Prime Minister to take on the Labour Party will be a challenge. Many of the Labour Party’s election leaflets have been written for them given the scale of the attacks on the candidates.
Beyond this, much of the policy debate throughout the leadership debate has been limited. There was a flurry of announcements at the beginning of the contest, but none of them garnered significant attention, apart from a proposal from Truss to introduce Regional Pay Boards for public sector workers, which was hastily scrapped after the Sunak campaign pointed out this could mean wage cuts for many of the aforementioned workers.
Surprisingly, beyond the economy, there has not been a great difference between the platforms of both the competitors for the Tory crown. There is consensus on many of the key issues. Both candidates are aligned on allowing the Northern Ireland Protocol Bill to progress through Parliament, maintaining the plan to relocate asylum seekers to Rwanda (in spite of extensive legal challenges) and taking a tough line on China.
However, any debate on substantive policy is a side show. The real issue to pay attention to will be the action either candidate takes to address the cost of living when entering office. With the cost of energy soaring with the rise of the energy price cap, and the Bank of England forecasting inflation to reach at least 13% (with others such as Citi Bank, predicting it to be even higher), households and businesses are likely to be hammered by escalating bills. Responding to these challenges and how they do so is likely to be the defining issue of their premiership.
At present, Liz Truss is refusing to spell out any detailed action she will take, beyond the small tax cuts she has already announced. This will be unsustainable with the tsunami of problems that inflation and energy costs will cause, and the political pressure from the Labour Party who have already announced that they would cancel October’s rise of the energy price cap for at least 6 months, a position popular even among Tory voters.
What happens next?
The result of the leadership election will be announced on Monday 5th September, by the 1922 Committee, the representative committee of Conservative backbench MPs. Most likely its Chair, Sir Graham Brady will have the honour of announcing the result. The winner will then be declared Leader of the Conservative Party and give a short speech.
The day after (Tuesday 6th September), Boris Johnson will travel to Balmoral Castle in Scotland to visit the Queen in order to formally resign. Following this, the new Leader of the Conservative Party will also visit the Queen and be invited to form a new Government and become Prime Minister. The new Prime Minister will then travel back down to No.10 to deliver the first speech on the steps of Downing Street, before starting the process of appointing a Cabinet.
Edelman Global Advisory will be providing additional briefing and analysis next week, providing informed insight into the new Prime Minister and their plan for Government and taking you through the key issues to be aware of.
