“If Putin explodes a tactical nuclear weapon in Ukraine before Christmas, the entire domestic political conversation will change. But the facts as we know them today are that a huge blow has been struck to Liz Truss’ authority and we don’t know whether or not she can recover it.”
Paul Goodman, Editor ConHome 4th October 2022
When the chances of the Prime Minister recovering her political fortunes are predicated on a nuclear attack by Russia, you can tell that things are in a tough place for the Conservative Government.
Party conferences are supposed to be an opportunity to project a confident image to the electorate, highlight past successes and announce new policies or ideas. The past week at Conservative Party conference has achieved very little of that: a dramatic U-turn on a tax cut announced days before, polling showing a monumental Labour lead and public disagreements about everything from immigration to benefits uprating. During the leadership election, MPs and Ministers right across the party developed a taste for highly vitriolic attacks on other Conservatives. But it appears to be difficult, maybe impossible, to unlearn that ingrained behaviour with even Cabinet members contradicting each other.
The contrast with Labour could hardly be greater. The party’s Leader, Keir Starmer and, in particular, his Chancellor Rachel Reeves were serious, reassuring and gave an impression of leading a team that increasingly resembled a government in waiting. They even managed to announce some well-considered and popular policies, from doubling onshore wind to breakfast clubs for schools. Smartly, they opposed the parts of Kwasi Kwarteng’s budget that were unpopular, including the now discarded 45p top rate tax, while supporting measures, like dropping the National Insurance rise, that the public liked. The challenge now for Labour is turning a series of individual ideas into a programme for Government. One indication that the Party is serious is the quantity and intensity of Labour front bench engagement with British business – something certainly not seen under Jeremy Corbyn. With Labour leading in the polls, their announcements in the months ahead will demand far more attention.
It was indeed a tale of two conferences. The best of times for Labour and very much the worst for the new Prime Minister.
Attention will now turn to the return of Parliament next week. With the not-so-mini-Budget having committed to lowering taxes, there are two key challenges that will face the Government. First, how the Government intends to achieve the sizeable cost savings that are going to be necessary to ensure the Office for Budget Responsibility’s verdict is sufficiently reassuring for the markets whose confidence in the Government has been severely shaken in the past two weeks. The furore over whether benefits like Universal Credit will be uprated in line with inflation over recent days is an indication of how tough it is going to be to identify areas for reductions in expenditure at the scale that will be required.
The second challenge – that is of greatest interest to the wider business community – is precisely what the promised supply side reforms are going to be and, critically, will they have the Parliamentary votes to push them through. In her speech to the Conservative Party conference, the Prime Minister mentioned three specific commitments that were also in the Chancellor’s mini-Budget: making it easier to build homes, to make childcare more affordable and rolling out superfast broadband. It is easy to make promises to achieve change in these areas. Achieving it is far harder. The last attempted reform of the planning system to increase house building – earlier in this Parliament – had to be scrapped because backbench MPs (including former Prime Minister, Theresa May) would not back the new zoning system. Liz Truss has already said herself that she favours dropping central targets for house building. So it will be fascinating to see how the Government intends in practice to make it easier to build the desired housing in the places where they are most needed.
Next on the agenda
What was also interesting was what the PM did not mention as she seeks to achieve her Growth Plan. It may not have been a surprise that she did not repeat the Chancellor’s promise of an “ambitious package of regulatory reform” to unleash growth and innovation in the financial services sector. That would not usually make the cut in a Leader’s speech which is focused on what is of greatest interest to the average voter. The Government is set to bring about major changes in the financial services anyway. But Liz Truss also failed to name check three other areas that her administration has already committed to changing – reforming business regulation, improving the immigration system and helping agricultural productivity. It has been a consistent aim of many governments to alleviate the burden of regulations, especially where that can help Britain to improve its competitiveness against our European neighbours. What has turned out to be more difficult is to find regulations that can easily be scrapped.
Likewise, reforming immigration (including allowing seasonal workers for the agricultural sector for example) has been tough to achieve in a way that satisfies the need to be able to control migrant numbers but without harming the economy. To give one practical example: if there is a free trade agreement with India, it is impossible to imagine that the deal will not mean higher levels of immigration from India to the UK.
It is a truism to state that Liz Truss has had, by any measure, a poor start to her time in office. She has found that events beyond her control can very quickly throw a government off course – and that events within her control must be carefully considered, and thoughtfully executed. As the leader of a party that is both divided and fractious, and with a resurgent Labour waiting in the wings, the challenges facing Prime Minister Truss may only just be beginning.
For more discussion of what is next for this Conservative government with only 2 years before a general election join us on the 20th October for an exclusive briefing with former Tory policy advisors on what will likely happen next. For more details and to book your place click here