PM Truss: Week 1 Report
Following the period of national mourning and the state funeral for Her Majesty Queen Elizabeth II on September 19th, there was a return to ‘politics as normal’. From Tuesday onwards, there was a blitz of policy and plans from the new Liz Truss government as it attempts to prevent the many acute challenges facing the UK from spiralling out of control.
Here we give a day-by-day break down for this first (almost full) week of the new Prime Minister’s government.
Tuesday — UN General Assembly, President Emmanuel Macron, and Truss’ economic vision
The week started in a relatively mild fashion for the Prime Minister as she landed in New York for the UN general assembly. Here she held a series of bilateral meetings with world leaders, including with French President Emmanuel Macron, who she recently suggested might not be a friend of the United Kingdom (which was understood to be a less than well-delivered joke).
The declared contents of the meeting included continued support for Ukraine in the war against Russia, as well as means to tackle the energy crisis, but sidestepped the ongoing dispute over the Northern Ireland protocol (1, 2). The PM also hinted at the incoming economic plan for her new government; aiming to promote growth via lower taxes and financial reregulation. It is reminiscent of the economic policies of former Prime Minister Margaret Thatcher in the 1980s, but with a wildly different social and economic context to the present day (3).
Wednesday — President Joe Biden and finanical support for business’ energy costs
This outlining of her economic plan on Tuesday then segued into her bilateral meeting with US President Joe Biden, representing, arguably, the UK’s biggest ally and partner across most measures, including on security and the economy.
Unfortunately, the context of the meeting was the news that the US had no short to medium-term intentions of signing a new trade deal with the UK — a UK-US trade deal was once held up as a potential triumph by many people who advocated for Britain the leave the EU (4). In addition, just the day before, President Biden tweeted his opposition to ‘trickle-down economics’, a term used to describe the economic model of low taxes and deregulation that the PM is planning to implement in the UK (5).
Despite this potential stormy backdrop, press releases from Number 10 and the White House outlined the scope of discussion between the two leaders, including the need to resolve the issues around the Northern Ireland protocol (6, 7).
On the domestic front, the secretary of state for Business, Energy and Industrial Strategy published the government’s Energy Bill Relief Scheme, which aims to cap energy bills paid by non-domestic users, such as businesses, schools, and hospitals (8). Government borrowing is going to be used in order to make up the difference between the price charged by energy suppliers and the price-point where the government has set the cap.
Thursday — New health and social care policy priorities
On Thursday there was a brief hiatus from economic policy, as the new Secretary of State for Health and Social Care announced the department's new ‘plan for patients’, which prioritises ambulances, backlogs, care, doctors and dentists (9). While ABCD is a nice soundbite, in practice this policy platform includes a £500 million fund to support the discharge of patients from hospitals to social care settings, as well as other less well-substantiated positions such as limiting GP appointment waiting times to 2 weeks, and a desire to see “all members of the dental team… working to the full extent of their professional qualifications”.
For perspective, the health and social care think-tank the Health Foundation recently published a report outlining their own four policy priorities for the new government (10):
- addressing workforce shortages
- tackling unmet needs in the healthcare system
- support and expansion of social care provision
- enabling people to live healthy lives by tackling drivers of economic and social inequality
Friday — Tax cuts and the mini-budget
Finally, perhaps the most significant event of the week from the new government, was the announcement of the new ‘mini-budget’ from the chancellor of the exchequer. Referred to as the Growth Plan, a raft of tax cuts were announced, including cuts to the basic rate of income tax, cancelled plans to raise corporation tax, cuts to the top rate of 45% for the highest earners, creation of local deregulated Investment Zones, cuts to Stamp Duty on Property Sales, and removing the cap on bonuses for banking executives (11).
The reaction to this announcement was sharp and largely critical, with the value of the pound falling dramatically, and the cost of government borrowing rising sharply too (12, 13). In part this is due to the government’s plan to fund their spending through long-term borrowing. This includes the domestic and non-domestic energy price caps at a cost of £60 billion for the next six months alone, as well as the tax cuts from the mini-budget at a cost of £45 billion per year, through long-term borrowing (14).
While these huge numbers and talk of the value of the pound can feel abstract, the Resolution Foundation published an analysis which showed how the mini-budget announcement will disproportionately benefit those living in London and the Southeast (15). In addition, someone earning £200,000 per year will gain £5220, compared with someone earning £20,000 who will gain just £157. More broadly, 47% of the income gains from these tax cuts will go the wealthiest 5% of earners.
What’s the outlook — more of the same or something new?
So, after just one week, what differences can we see between the Liz Truss Government and the previous Boris Johnson Government?
The biggest switch in priority appears to be from levelling-up across the whole country to economic growth largely centred in London and the Southeast, as well as a shift from ‘borrowing to invest’ to ‘borrowing to cut taxes’. There is an acknowledgement of the challenges facing the NHS, but the proposed solutions are not entirely synchronised with leading think-tanks. Bilateral meetings with world leaders showed continued alignment on global issues, but solutions to problems like the Northern Ireland protocol, the war in Ukraine, and global energy costs are still beyond reach.
TL;DR
The first week of the Liz Truss government was filled with meetings with international leaders, as well as health policy and economic policy announcements. The major announcement was Friday’s mini-budget, with tax cuts that predominantly support the most wealthy in the UK
Citations
3. https://www.reuters.com/world/uk/uk-pm-truss-we-have-look-all-tax-rates-2022-09-20/
4. https://www.bbc.co.uk/news/uk-politics-62959374
5. https://twitter.com/potus/status/1572218921347866624
7. https://www.gov.uk/government/news/pm-meeting-with-president-joe-biden-21-september-2022
14. https://ifs.org.uk/articles/mini-budget-response
15. https://www.resolutionfoundation.org/publications/blowing-the-budget/
