'Trussonomics' - tax cuts
Liz Truss has been Prime Minister for just over a week and she already has a political philosophy of her own. ‘Trussonimics’ may just be ‘Reaganomics’ for the 21st century but it appears to be catching on.
Today’s ‘mini-budget’ included cuts to National Insurance, cuts to stamp duty, cancelling the planned increase in corporation tax and scrapping the cap on banker’s bonuses. All of these cuts, all of this budget, and seemingly all of this government’s activity, is designed to facilitate economic growth which Truss believes is the only way to tackle inflation and fix the cost of living crisis.
Leaving aside whether this is the best economic strategy for growth or political strategy for reelection, Truss is sending a very clear message about what her government stands for, what its priority is and the plan for achieving it.
Being pro-tax cut is usually electorally potent and these moves could create political problems for Labour. For example, will they want to go into an election saying that they will raise National Insurance on working people during a cost of living crisis?
Truss will be judged at the next election by how she has helped people deal with the cost of living crisis and whether they feel the economy is growing. Her economic plan may or may not create growth, tackle inflation or avoid a recession, but at the very least she has already succeeded in reframing the debate onto territory that is uncomfortable for both Labour and her Tory predecessors, but which feels right at home for her.
Sam Tarry, Ilford South MP and better half of Labour’s Deputy Leader, is facing an uphill battle to hold onto his seat. A general election may still be two years away but Tarry may not get that far if Ilford CLP has much more to say about it.
Tarry has been ‘triggered’ by his local party – meaning that he was not automatically reselected as Labour’s candidate for the next election and will instead have to face a new selection process. There is much bad blood in Ilford South after Redbridge Council Leader Jas Athwal was suspended from the 2019 selection process for the seat the day before the final vote, leaving it wide open for Tarry to win.
Athwal’s suspension was lifted shortly after and he has this week been nominated by two local branches to be the candidate next time so a showdown between the two is imminent. Head to Redbridge with your popcorn if you’re in the mood for some spicy local democracy in action.
'Trussonomics' - business energy support
Truss, Kwarteng and Rees-Mogg have been liberated from the shackles of Sunakism and are now free to lead a swashbuckling, free-market, pro-enterprise, truly Conservative Government. Or not, as one of the first acts of these latter-day Reaganites was to set out one of the biggest packages of state support for British businesses since the last one.
Clearly British businesses need support to meet the huge rise in energy prices, and there is an enormous risk of lives and businesses being devastated without this much-needed intervention. But it shows yet again that when political rhetoric meets political reality, the latter usually wins out if they want to stay in office.
It remains to be seen if this also applies to the new raft of tax cuts that are due to be paid for by additional government borrowing that is getting more expensive. At a time of rising interest rates and a falling pound, the Conservatives are risking their long-held reputation for fiscal responsibility. It seems an odd quirk that much was made of Truss as the heir to Thatcher when the latter’s primary objective was always to balance the nation’s books before moving onto tax cuts.
An opportunity exists for Labour as they now have a whole rage of tried and tested potential revenue streams for any of their future spending commitments. Usually Labour have to look down the back of the fiscal sofa (e.g. increased efficiency, closing tax loopholes etc) to fund their big ticket items like green capital investment but now they can simply revert back to the government’s planned corporation tax rise and taxing banker’s bonuses. And whilst the Tories are borrowing on the never-never, Labour’s spending plans will be so well-costed that the previous Tory Chancellor even did the sums for them.
Clear dividing lines cut both ways and both major parties will be fighting on their traditional political territory.
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