A comparison of the two contenders vying to lead Britain

By
Pieter Cleppe
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Rishi Sunak and Liz Truss (Copyright: Guido Fawkes blog)

On the 5th of September, we will know who will succeed Boris Johson as the new Prime Minister of the United Kingdom, after 175.000 Conservative Party members will have chosen between Liz Truss and Rishi Sunak. Hereunder, I take a closer look at their policy differences, which are greater than one would assume.

Truss, who’s 90 percent certain to win, according to bookmakers, started off as a member of the centre-left liberal democrats, and did not support Brexit, but those days are long behind us. Today, she is a solid brexiteer, and when it comes to economics, she is a solid Thatcherite. Some polls suggest she would beat Labour leader Keir Starmer in the upcoming UK election, which is an important thing for UK Conversative Party members.

Between Truss and Sunak, most differences relate to economic policy. Sure, on immigration, Truss is probably a bit more hawkish than Sunak, as she wants to extend the groundbreaking Rwanda policy to other countries than Rwanda – which involves asking people to apply for asylum in safe third countries, thereby breaking the business model of human smugglers – but also Sunak has pledged to do “whatever it takes” to get it running.

Truss also appears a bit more hardline than Sunak when it comes to the relationship with the EU, which is still not fully negotiated, but Sunak now wants to do better than Truss’ promise for a “bonfire” of EU red tape by the end of 2023. He wants to review or scrap all remaining post-Brexit EU law in his first 100 days, presenting this in a snappy campaign video depicting EU regulations being shredded:

When it comes foreign policy, both candidates are pretty hard-line towards Russia and China, with Truss summoning the Chinese ambassador over the CCP’s approach towards Taiwan.

Also on environmental and energy policy, the two have a lot in common. Yes, Rishi Sunak wants to ban the building of new homes on the – according to many people excessively – protected “green belt” around London, but both candidates are ultimately strongly in favour of freeing up more land to construct homes.

Remarkably, Truss has pledged to lift the ban on fracking, if local communities agree, a position also supported by Sunak. This would make the UK the first European country to embrace fracking, which has helped the U.S. to enjoy much lower gas prices. American LNG gas imports into Europe have been skyrocketing lately. Ironically, this is often shale gas, which is banned everywhere on the Continent. Truss also wants to move away from the EU’s habitat directive in exchange of a stronger British biodiversity target. This particular directive plays a role in the recent mass Dutch farmer protests over nitrogen restrictions. If the UK abandons this approach, people on the Continent will take note.

It’s the economy, stupid

As said, the major differences between the two revolve around domestic economic policy. Here, Truss has pledged an alleviation of the tax burden amounting to 30 billion pounds, shying away from promises to spend more, apart from a few select areas, including defense, stating that “tax cuts and supply side reforms” are her primary objective.

This includes scrapping green levies from energy bills, which she sees as a superior way than handouts to help people cope with astronomical energy prices, dismissing her opponent’s plan to promise support for households, something he did however not yet properly quantify. According to Truss, “taking money off people in tax and giving it back in handouts” is “Gordon Brown economics”, in a reference to the former British Labour PM and longtime Finance Minister who presided over a massive expansion in UK public spending.

Rishi Sunak served as UK Finance Minister – or “Chancellor of the Exchequer” from 2020 to 2022 and equally oversaw massive government spending, obviously mainly linked to the Covid crisis. In a bid to balance the budget, Sunak introduced tax hikes, which is something that is now haunting him, especially as he is planning to stick to his plan to increase UK corporation tax in 2023 from 19 to 25 percent, something which Truss wants to abandon.

Sunak does intend to cut a few taxes, but this has caused him to be accused of flipflopping – for example on whether to cut VAT on energy – as sources from within the Truss camp have been recorded as saying: “Sunak wouldn’t know how people benefit from a tax cut because he has never cut a tax in his life.”

Inflation

Sunak justifies his approach by insisting that “our number one economic priority is to tackle inflation”, not tax cuts, even if “I will get taxes down in this parliament but I’m going to do so responsibly, because I don’t cut taxes to win elections, I win elections to cut taxes.”

In a comment, Conservative MP John Redwood, who supports Truss, writes about Sunak’s approach:

“One of his main mantras is we have to put taxes up now to curb inflation. So if higher taxes stop inflation, why have the higher taxes this year coincided with higher price rises? How exactly will higher corporation tax and national Insurance bring prices down? Do they really think creating £450bn of money to buy bonds to keep interest rates very low had no part in the inflation we are now suffering?”

In line with the “hard money” philosophy, Truss has not shied away from opening the debate on the role of the Central Bank, announcing plans to hold a review of the Bank of England’s mandate, reminding of former American Congressman Ron Paul’s “End the Fed” – campaign, however not setting out exactly what the review would cover.

MP Suella Braverman, another Truss supporter, provided a bit more detail: “That’s going to be looking into detail at exactly what the Bank of England does, and see whether it’s fit for purpose in terms of its entire exclusionary independence over interest rates. (…) The last time this was done was in 1997 – it’s right and it’s ripe now to review whether that is the right settlement.”

In response, Sunak and many others have expressed concern over the proposals by Truss regarding the Bank of England, with Marc Ostwald, chief economist from brokerage ADM Investor Services International, pointing out how “any idea of interference (…) will have to be factored into UK rates, and the risk factor for the pound.”

The approach of Truss towards Central Banking is not an unimportant detail, especially, as in the past, she has been praised Japan’s failed extremely loose monetary policies, which really come down to looting the future.

The weak point of Truss clearly revolves around the question on how the tax cuts she promised will be funded. Her idea is to delay paying down Covid debt. Back in April, she proposed to put the £400 billion in debt which the UK took on to finance Covid spending into a separate debt pool, in order to pay this off much more slowly, similar to how the UK dealt with its world war debt. Unsurprisingly, this was met with a lot of skepticism.

Her plan to boost growth with tax cuts may well work to raise tax revenue to compensate for the budget deficits resulting from said tax cuts. Whatever those skeptical of the “Laffer” effect whereby lower taxes result in more growth and paradoxically greater state income say: over time, and globally, we have seen many examples of this effect, but the question is always where we are on the Laffer curve. Therefore, one must be honest. Certainly in the current volatile international climate, with recession fears and exploding energy prices, it is equally possible that tax cuts reduce the government’s budget. In that case, something is needed which Truss has shied away from: large, across-the board government spending cuts. This is what Thatcher did, and ultimately it helped the ailing UK economy recover. When Truss wants to be Thatcher, this is what she needs to do.

 

 

 

 

 

 

 

 

 

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