The honeymoon is over for Liz Truss

At 12.37 today, the worst-kept secret in British politics was revealed.  Liz Truss is the new leader of the Conservative Party.  Tomorrow, she will officially be appointed Prime Minister by the Queen.  Her premiership begins in crisis and the honeymoon is already over.

Liz Truss is an experienced Minister, the longest standing in the current cabinet.  She has previously headed a number of government departments including Environment, Justice and Trade.  Since September 2021, she has served as Foreign Secretary.  Before entering politics, Truss worked in business and qualified as a Chartered Management Accountant. 

As a political figure Truss has always sharply divided opinion, and all the signs suggest that she will continue to do so.  But there’s one thing that all commentators agree on: few Prime Ministers have taken up their post under such challenging circumstances. 

The incoming Prime Minister faces rising inflation, global instability and unprecedented energy costs. 

And it is far from clear that her plans to tackle these challenges have the support of her party.  In the first round of the contest, she secured the support of just 14% of Conservative MPs.  Even now, less than half of Conservative MPs have pledged their support.  Following the final round, which consisted of a poll of Conservative party members, she became the first victor in the party’s (relatively short) history of electing its leaders to secure less than 60% of the vote. 

Over the next week, we will gain our first concrete insights into how the new Prime Minister intends to govern and the team she will choose to support her.  However, thanks to the extended ten-week campaign over the summer, we have gained some early indications of how she will tackle the pressing challenges facing the country.

In her speech accepting the leadership of the Conservative Party, the basis on which she will become PM, she set out two broad clues to her premiership.  She said she will “govern as a Conservative” and that she will “deliver, deliver, deliver”.

Energy crisis and the cost of living

But straight away, the rise in energy bills and the corresponding cost of living crisis is the most pressing issue facing the new Prime Minister. 

It is also a major source of concern for small businesses.   Many anticipate their energy costs quickly becoming unaffordable and fear that spiralling bills will put them out of business. 

Truss has committed to unveiling her plan for tackling energy costs this week and many commentators expect an announcement on Thursday.  Some have reported that the new chancellor will commit to a £100bn support package.  There has also been talk of a freeze on energy bills, presumably funded through such a package.

Either alongside or incorporated into this package, a cut on the green levy and VAT on energy could be on the table.  Longer term, we can expect a debate on the role of fossil fuels, in particular fracking to bring down energy prices.

Support for small businesses

Truss plans to cancel the recent increase in National Insurance.  This has been hailed by the Federation of Small Businesses as a positive move for smaller employers.  She is also reported to be considering raising the business rates relief for premises with a rateable value of £15,000 to those valued at £25,000.   Truss has also stated that she will scrap planned corporation tax rises that Rishi Sunak had set up when Chancellor.

Economic policy and budget

Truss has consistently stressed her commitment to low taxation in general and to immediate tax cuts specifically.  She reiterated this commitment during her short acceptance speech. 

It is not yet clear when the next budget will be.  It is possible that some kind of emergency economic statement, introducing some immediate changes will be announced quickly, with a full budget to follow.

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