The Perfect Enemy | Tory leadership race: Liz Truss and Rishi Sunak set out campaigns as economic policies come under spotlight – live
August 17, 2022

Tory leadership race: Liz Truss and Rishi Sunak set out campaigns as economic policies come under spotlight – live

Tory leadership race: Liz Truss and Rishi Sunak set out campaigns as economic policies come under spotlight – live  The Guardian

Read Time:19 Minute

Back to Liz Truss, and here is a summary of the main points from her interview with Nick Robinson on the Today programme.

  • Truss claimed that “economic orthodoxy” followed by governments over the past 20 years has failed to deliver proper economic growth. (See 9.38am.) The Labour party is also saying that the big problem over the past 12 years has been the UK’s relatively poor performance on growth, although its analysis of why growth has been so weak is not the same as Truss’s. She blamed ideas backed by the Treasury and the Financial Times. Chris Giles, the FT’s economics editor, says he was surprised to learn he’s been running the country – not Truss and her colleagues.
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According to @trussliz, the @FinancialTimes has been running UK economic policy over the past 20 years and tax cuts are deflationary

…. both were news to me

&mdash; Chris Giles (@ChrisGiles_) July 21, 2022

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According to @trussliz, the @FinancialTimes has been running UK economic policy over the past 20 years and tax cuts are deflationary

…. both were news to me

— Chris Giles (@ChrisGiles_) July 21, 2022

  • Truss claimed her tax cuts would bring down inflation. She said: “My tax cuts will decrease inflation.” When it was put to her that most leading economists think they would be inflationary, she cited Patrick Minford as an economist who supports her view.
  • She claimed that the tax increases introduced by Rishi Sunak as chancellor made the UK an international outlier, because no other countries were raising taxes in the current international climate.
  • She rejected claims that her plan to cut taxes was a gamble, because there was a risk tax cuts could leave the government without the income it would need for public services. She said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}What is a gamble is what we’re doing at the moment. What is the gamble is what we’re doing at the moment because, currently, the United Kingdom is projected to head for a recession. So we need to do something different in order to get growth going, in order to put money in people’s pockets.

  • She said she was committed to the extra spending for the NHS promised by Boris Johnson, even though she was also planning to get rid of the health and social care levy that would have funded some of it.

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}I wanted Boris to carry on as prime minister. I think he did a fantastic job with the 2019 election, winning us a massive majority. He delivered Brexit, he delivered the vaccines.

Regrettably, we got to a position where he didn’t command the support of our parliamentary party.

My judgment was that he admitted that he had made a mistake, or several mistakes, over the course of the last year, but the positive side of the balance sheet was extremely positive.

  • She denied that she was modelling herself on Margaret Thatcher. Asked about claims she copies Thatcher’s photo opportunities, she said: “I am my own person.”
  • She ruled out sending British troops to defend Ukraine. She said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}We are doing all we can to support Ukraine. We’ve led the international coalition on sending weapons, we’re putting the sanctions in place. But I do not support the direct involvement of UK troops.

  • She said she was “wrong” to vote for remain in 2016. She said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}I fully embraced the choice that the people of Britain have made. I was wrong and I am prepared to admit I was wrong. Some of the portents of doom didn’t happen and instead we have actually unleashed new opportunities.

  • She claimed she was someone with “the toughness, the grit” to take on the Whitehall machine and drive through change.

Yvette Cooper, the shadow home secretary, has described the report published earlier today from the borders watchdog (see 11.05am) as “damning”. She said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}This report is a truly damning indictment of a Conservative government which has badly lost control of border security.

It is flabbergasting that ministers haven’t made sure basic fingerprints and biometrics are being taken from everyone who arrives. When people can arrive and disappear without any biometric checks that puts national security at risk and encourages criminal trafficking gangs.

The inspector has said the Home Office response to small boat crossings is ‘ineffective and inefficient, exposing gaps in security procedures and leaving vulnerable migrants at risk’.

This is the third highly critical report on the chaos in the government’s border operations in a week following yesterday’s independent review and the cross party committee report on Monday. Where is the home secretary? It’s a total disgrace that she has refused to meet the inspector, tried to bury his report, and is now in hiding. The Conservatives are clearly completely unable to govern and failing to function.

The Labour MP Stella Creasy has accused Liz Truss of wanting to take women “back to the 1950s” with her transferable tax allowance plan. (See 4.26pm.) Creasy told PA Media:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}Families across this country are crying out for affordable childcare so that they don’t have to choose between their career and their kids – instead of helping them and investing in provision, Liz Truss seems to think taxes should be used to make women stay home instead.

It shows you this Tory party wants to take Britain back to the 1950s, not help everyone thrive in the 2020s.

Liz Truss, the foreign secretary and Tory leadership candidate, has said that if she becomes prime minister she will order an immediate review into treating households as single tax entities.

She says she would like to change the rules in time for next year’s budget to allow couples with young children, or other caring responsibilties, to transfer in full their personal tax allowances to the non-working partner.

According to one estimate, this could be worth up to around £2,500 for some families. The proposal would amount to an extensive of a much more modest transferable tax allowance plan introduced by David Cameron’s government worth only one tenth as much.

Truss said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}Hardworking families are the bedrock of a stable society, and one of my top priorities as prime minister would be easing the tax burden on families. They don’t just look after themselves but also build communities, charities and even businesses

I want to make sure that our tax system works for them. We will review the taxation of families to ensure people aren’t penalised for taking time out to care for their children or elderly relatives.

According to Truss’s campaign, the plan would bring the UK into line with the approach used in Germany and the US. In a briefing the campaign said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}In the UK, there is estimated to be £1 trillion worth of behind the scenes caring contributions, which lessen the burden on the public purse. Truss believes that it is only right to support these individuals.

With a view of implementing the reform through an “opt in’’ system in next year’s budget, Truss would look to treat households as a single tax entity and consider the transfer of personal allowances within the households.

This approach would reflect models used in Germany and the United States, and ensure Britain no longer imposes the highest tax burden on families among OECD countries.

Liz Truss meeting staff and children during a visit to the charity Little Miracles in Peterborough this afternoon.

Rishi Sunak and Liz Truss have been urged to make ratification of associate membership of the EU’s flagship Horizon Europe science and research programme a priority if they become prime minister.

The ratification has been put on ice because of the UK’s failure to implement the withdrawal agreement in Northern Ireland and is in jeopardy if Truss is selected to lead the Conservative party as she is the author of new laws to tear up the Northern Ireland protocol.

In a letter to both candidates, the Royal Society, which represents science and engineering academia in the UK, said the “next leader of the Conservative party should commit to ensuring the UK remains a world leader in research, development and innovation”. It has also asked the government to push investment to 3% of GDP in R&D.

This morning Boris Johnson attended a roundtable meeting with business leaders to promote an initiative under which some retailers are offering new or extended discount offers. It is part of the Help for Households scheme. “This won’t solve the issue overnight but it’s yet another weapon in our arsenal as we fight back against scourge of rising prices and inflation,” Johnson said.

As Mark Sweney and Kalyeena Makortoff report, poverty campaigners argue that families struggling with the cost of living need a lot more help than this.

Boris Johnson holding a roundtable meeting this morning with senior business leaders as part of the Help for Households campaign.

Shailesh Vara, the new Northern Ireland secretary, has been visiting Lisburn in Northern Ireland today. Asked who he was backing for the Tory leadership, he refused to say, but he added: “Whoever is the ultimate winner will, I’m sure, serve the United Kingdom very well.”

Shailesh Vara meeting four-year-old Conall McCrudden Flanagan at a creche during a visit to Atlas Women’s Centre in Lisburn, Country Antrim, today.

The Institute for Fiscal Studies thinktank has published an assessment of the tax and spending policies of Liz Truss and Rishi Sunak. It says we know a lot about Sunak’s plans, because he was chancellor until very recently, but that Truss’s intentions are quite different, and less clear.

It says that Truss’s plans ultimately imply public spending would be cut. It says:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}[Truss’s plans] will mean higher borrowing or less public spending, or some combination. Without spending reductions, the tax promises would likely lead to the current fiscal rules being broken, and Ms Truss has hinted that the fiscal rules may change. In this context it is always important to remember that, whatever a chosen set of self-imposed fiscal rules might allow in the short term, in the end lower taxes do mean lower spending. A fresh spending review has indeed been promised, but without clarity on whether current plans will be adjusted up or down – apart from on defence, where Ms Truss has promised a £23bn budget increase by the end of the decade.

Truss has said she would hold a new spending review if she became PM, but she has not explicitly called for overall public spending to be cut. However Simon Clarke, the chief secretary to the Treasury and one of her main supporters, hinted yesterday that overall spending would fall when he said that under a new leader existing spending commitments should not be regarded as “set in stone”.

The IFS also suggests that Truss’s proposed tax cuts could be inflationary. She claimed the opposite on the Today programme this morning. (See 10.38am.) But the IFS says:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}While tax cuts can promote economic growth, none of the tax cuts proposed by any of the candidates during the Conservative leadership contest would do this enough to pay for themselves.

To the extent that tax cuts were indeed financed by additional government borrowing, rather than spending reductions, they would inject additional demand into the economy and further increase inflationary pressures. It is difficult, though, to say by how much, and this would vary depending on the specific package of tax cuts. Such a fiscal loosening might be met by a tightening of monetary policy, ie the Bank of England increasing interest rates further and/or more quickly than they otherwise would. Were that to happen, the net effect would involve some redistribution away from those exposed to interest rate rises to those benefiting from the package of tax cuts.

All prime ministers are obsessed with their legacy, and as they step down they like to think that they leave behind a substantial set of achievements, which they hope might be recognised by posterity even if contemporary critics, naysayers and doomsters are too foolish to see how much good they have done for the country.

Boris Johnson is no exception. But, in what may be a first, he has today released a written ministerial statement, under the heading “Government Delivery”, boasting about everything that he has done.

Among other things, Johnson claims that he has left the streets “safer”, put the NHS “on a surer footing” and made schools “better”. He also claims that the broken social care system is now “finally being fixed”.

There is plenty more – the whole statement runs to 2,555 words. But it is, of course, highly partial, and it wouldn’t be hard to match it with a far less flattering assessment.

Liam Fox, the former international trade secretary who is supporting Rishi Sunak for the Tory leadership, has accused Liz Truss of “promising things that are too good to be true” in an interview with GB News.

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As Margaret Thatcher said, tax cuts must be earnt. Instead of promising things that are too good to be true, @RishiSunak has outlined a sound economic plan, being honest about the challenges we face. That is another trait of strong leadership. @GBNews #ReadyforRishi #Ready4Rishi pic.twitter.com/oBqckj3HnE

&mdash; Dr Liam Fox MP (@LiamFox) July 21, 2022

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As Margaret Thatcher said, tax cuts must be earnt. Instead of promising things that are too good to be true, @RishiSunak has outlined a sound economic plan, being honest about the challenges we face. That is another trait of strong leadership. @GBNews #ReadyforRishi #Ready4Rishi pic.twitter.com/oBqckj3HnE

— Dr Liam Fox MP (@LiamFox) July 21, 2022

Rishi Sunak arriving at the private hustings with Conservative councillors earlier.

Nicky Morgan, the former culture secretary, has been appointed to head the UK Commission on Covid Commemoration, the Cabinet Office has announced.

The commission will “recommend ways in which the nation can remember the loved ones who perished, honour the heroism of those who have saved lives and the courage of frontline workers who have kept our country going, celebrate the genius of those who created the vaccines, and commemorate the small acts of kindness and the daily sacrifice of millions who stayed at home”.

The role of elected mayor is to be scrapped in Liverpool – despite coming out as the favourite option in a consultation of city residents, PA Media reports. PA says:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}At a meeting on Wednesday, the council voted to remove the role of city mayor and replace it with a council leader and cabinet executive.

The change will come in next May when an all-out election is held.

The role of elected city mayor was created in 2012 and held by Joe Anderson until he decided not to stand for re-election last year after his arrest as part of a fraud investigation.

It is currently held by Labour’s Joanne Anderson, no relation to her predecessor, who became the first black female mayor last May.

As well as having an elected city mayor, Liverpool also has a lord mayor and metro-mayor of the Liverpool city region, Steve Rotheram.

The council held a consultation with residents to ask whether they would prefer the city to be run by an elected mayor, a committee or a council leader with cabinet.

The consultation was responded to by 11,519 people, which the meeting heard is about 4% of the electorate.

Of those who responded, 40.9% wanted to keep the role of mayor, 32.9% preferred a committee model and 23.6% opted for council leader.

Sir Iain Duncan Smith, the former Tory leader who is supporting Liz Truss for the leadership, took a swipe at Rishi Sunak’s record in the Treasury when he was on ITV’s Good Morning Britain earlier. Referrring to the Covid bailout packages, he said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}There we were, chucking money out of the Treasury, and some of it was spent rather badly, actually.

The government will send hundreds of drones and anti-tank weapons and scores of artillery guns to Ukraine over the coming weeks to help fend off the Russian invasion, PA Media reports. PA says:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}Ben Wallace, the defence secretary, announced that counter-battery radar systems and more than 50,000 rounds of ammunition for Ukraine’s existing Soviet-era artillery will follow.

The Ministry of Defence said the weaponry will help bolster Ukraine’s ability to defend against Vladimir Putin’s “indiscriminate” use of artillery.

More than 20 M109 155mm self-propelled guns and 36 L119 105mm artillery guns will be arriving shortly, the MoD added.

In excess of 1,600 anti-tank weapons and hundreds of loitering aerial munitions will also be sent.

The Commons privileges committee has already asked Downing Street to provide a large tranche of evidence relevant to its inquiry into whether Boris Johnson lied to MPs about Partygate. At the lobby briefing this morning the PM’s spokeperson was unable to say when No 10 would respond. He told reporters:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}As with previous letters from the committee, we will need to consider them and then set our response, this is a formal parliamentary process.

Asked if Johnson intended to cooperate with the inquiry, the spokesperson said:

.css-knbk2a{height:1em;width:1.5em;margin-right:3px;vertical-align:baseline;fill:#C70000;}We have said we will assist the committee in their work but beyond that I will have to repeat again it will need to wait for the formal response.

Liz Truss arrives for a private hustings with Conservative councillors in Westminster this morning.

Chris Giles, the Financial Times’ economics editor, has posted a good thread on Twitter exploring the economic argument set out by Liz Truss in her Today interview this morning. (See 10.38am.) It starts here.

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TRUSSONOMICS: a thread

In her interview on @BBCr4today, Liz Truss made 3 economic propositions

1) Her tax cuts will decrease inflation

2) Tax cuts boost growth and prevent recession

3) Tax cuts increase government revenues

It would be great if these were true

1/

&mdash; Chris Giles (@ChrisGiles_) July 21, 2022

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TRUSSONOMICS: a thread

In her interview on @BBCr4today, Liz Truss made 3 economic propositions

1) Her tax cuts will decrease inflation

2) Tax cuts boost growth and prevent recession

3) Tax cuts increase government revenues

It would be great if these were true

1/

— Chris Giles (@ChrisGiles_) July 21, 2022

And here are his conclusions.

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To sum up.

For Trussonomics to work, there needs to be lots of spare capacity at a time of low unemployment and record job vacancies….and for the supply effects of tax changes to outweigh the demand effects

Highly unlikely (but anything is possible)

11/

&mdash; Chris Giles (@ChrisGiles_) July 21, 2022

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To sum up.

For Trussonomics to work, there needs to be lots of spare capacity at a time of low unemployment and record job vacancies….and for the supply effects of tax changes to outweigh the demand effects

Highly unlikely (but anything is possible)

11/

— Chris Giles (@ChrisGiles_) July 21, 2022

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What is definite is that the UK's economic institutions do not believe the conditions exist for these three propositions to be true

So Trussonomics is radical. It would involve changing the economic institutions for the experiment to be tried

12/

&mdash; Chris Giles (@ChrisGiles_) July 21, 2022

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What is definite is that the UK’s economic institutions do not believe the conditions exist for these three propositions to be true

So Trussonomics is radical. It would involve changing the economic institutions for the experiment to be tried

12/

— Chris Giles (@ChrisGiles_) July 21, 2022