23 October 2022

Weekly Briefing: A leading question


She might have been only six weeks in the job, but even her most ardent supporter would concede it was time for Liz Truss to go. The chaotic final week, culminating in a fractious vote in the House of Commons on Wednesday night, was a grimly fitting epitaph to this pub quiz question of a premiership.

Naturally, those who have always hated free market / supply-side economics will insist it has been permanently discredited, that lower taxes and deregulation are a guaranteed recipe for disaster. The real problem, however, was not ‘libertarian’ economics (whatever that means), but cutting taxes while also splurging hundreds of billions on a blank cheque of an energy policy.

That combination, combined with the sidelining of forecasters and Kwasi Kwarteng’s insouciance about further tax cuts, is what worried hard-headed investors, who don’t care a jot about ideology, but are very keen on clarity and credibility. Indeed, it’s striking that two of the economists most closely associated with ‘Trussonomics’ explicitly warned her that jittery markets would not react well to such a bout of sudden fiscal incontinence.

Given the state of the economy and public finances, there’s not much to celebrate now – but at least the latest Tory leadership contest will be brief. At the moment, there’s a decent chance it could be a coronation for Rishi Sunak, who is drawing support and endorsement from ‘big beasts’ across the party. While he’ll certainly welcome the backing of Kemi Badenoch, Tom Tugendhat and Dominic Raab, perhaps the most striking was from Lord Frost, Boris Johnson’s former Brexit negotiator. Penny Mordaunt certainly has her supporters, but looks unlikely to make the 100 backers needed to get through.

As for Johnson himself, there’s no doubt he remains a hit with the party membership and would be the likely favourite if it came to a Boris vs Rishi showdown. The fact the two men met yesterday strongly suggests they would like to avoid that scenario, one way or another.

For Boris, the issue is a) whether he wants to command a bitter, divided parliamentary party, especially when many MPs have publicly opposed his return and b) whether he wants to step into the breach at a time when his brand of ‘cakeism’ simply isn’t on the menu.

The next PM will have to work through a series of painful spending cuts, with calming the markets and looking for the next potential blow-up top of the agenda. (Relatedly, it’s worth reading this piece from Ed Conway on the debt ‘time bomb’ that still lurks under the British economy.)

Whoever emerges as the next Tory leader, they will have to offer a mixture of sobriety and apology – and resist the temptation of an agenda-setting early policy blitz, given how jumpy things already are.

For either Johnson or Sunak, saying sorry for the chaos of the last six weeks might seem strange, given that neither was involved in the Truss meltdown and, in Sunak’s case, explicitly rejected her approach. But contrition and maturity is surely what the public want to hear, and the best way to show that the Conservative Party is finally focused not on in-fighting, but voters’ very real concerns.

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John Ashmore is Editor of CapX.