After meeting the late Queen at Balmoral in her final days, one of Liz Truss’ first acts as the new Prime Minister was to announce economic intervention to tackle soaring energy bills.
Words by Ali Abdi
The Energy Price Guarantee “will ensure that a typical household in Great Britain pays an average £2,500 a year on their energy bill, for the next 2 years, from 1 October 2022.” The policy comes as part of a plan to ease the cost of living crisis for millions of households in Britain, and is estimated to cost around £150bn and will be paid for by borrowing. Critics argue that additional government borrowing will be inflationary, while the Government claims the intervention will reduce inflation by five percentage points.
Labour has called for the Government to issue a windfall tax on companies in order to partially pay for the Energy Price Guarantee, but at her first Prime Minister’s Questions, Truss doubled down on her assertion that levying a windfall tax to defray the plans would deter investment and curb growth. In response, Keir Starmer, the Labour leader, decried the “Tory fantasy of trickle-down economics” and highlighted the fact that while the Government refuses to extend the windfall tax, the Treasury’s own estimates state that energy companies could be set to make excess profits of over £170bn in the next two years. One company alone, Centrica, which owns British gas, reported a six-monthly profit of £1.34bn from January to June 2022, compared to £232 million in the same period last year.
The new Government also announced a reversal of the moratorium on fracking in order to help grow domestic energy supply. Critics say the benefits are minimal compared to the costs; indeed, just six months ago, the now Chancellor, Kwasi Karteng, wrote in The Mail that in addition to having little impact on the price of bills, fracking “would take up to a decade to extract sufficient volumes – and it would come at a high cost for communities and our precious countryside.”
Britain’s fourth Prime Minister in six years will also be tasked with revitalising an economy on the rocks. Britain is experiencing “a bout of inflation and a chronic period of slow growth,” according to The Economist. A prolonged recession and inflation surpassing 13% were the projections of the Bank of England in an August 4th report. Truss’ vision for growth is of a Thatcherite mould; in 2012, Truss, along with four fellow Tory MPs, outlined her vision for reinvigorating Britain’s sluggish economy in Britannia Unchained, a book which beamoans the poor work ethic of Britons and denounces the UK’s “bloated state, high taxes and excessive regulation” while advocating deregulatory free market principles. Policy measures to this effect include keeping corporation tax at 19% (it was due to rise to 25%), and reversing an increase in National Insurance payments.
Economic turmoil has also precipitated industrial action around the country, and Truss will have to find a way to appease workers in order to prevent more disruption. The wave of strikes which has taken hold across Britain in recent months shows no signs of letting up. While railways, courts, ports and post offices have all seen widespread industrial action in recent months, the Royal College of Nursing (RCN) and the Fire Brigades Union (FBU) are also preparing to ballot their members on whether to strike. At the heart of discontent among British workers is the fall in real wages, as wages fail to keep up with spiralling price inflation, resulting in the depression of spending power. For public sector workers, such as nurses, barristers and firefighters, Truss may seek to instigate discussions in order to reach negotiated agreements between the government and workers’ unions.
Other issues on the agenda include addressing NHS backlogs and waiting periods. A record 6.8m people are awaiting NHS treatment, while ambulance wait times continue to fall short of targets. Only 57% of ambulances are reaching people within four hours, far below the 95% target. Part of the problem is due to a worker shortage crisis; earlier this month it was revealed that job vacancies in the NHS across England reached a record-high of 132,139.
The NHS is not the only public service in freefall which Ms. Truss must try to redress; the Metropolitan Police continue to be rocked by allegations of racism, corruption and incompetency as the Independent Office for Police Conduct (IOPC) investigates the fatal shooting of Chris Kaba by a Met Officer. Earlier this year, the Met was placed into special measures after a series of ‘systemic’ failures, including tens of thousands of unrecorded crimes and errors in stop and search. Numerous high-profile scandals also led to the Met’s Commissioner, Cressida Dick, being forced to step down by the Mayor of London, Sadiq Khan.
Matters of foreign policy, not least pertaining to the ongoing war in Ukraine, will also undoubtedly be subject to scrutiny in the coming months. Truss is by no means uninitiated in such matters; as Foreign Secretary under Boris Johnson’s government, Truss helped lead Britain’s response to the Russia-Ukraine war and secured the release of Nazanin Zaghari-Ratcliffe from an Iranian jail. As Prime Minister, she wants to raise defence spending to 3% of GDP by 2030, and takes a more hawkish approach to foreign policy than her predecessor; she is reportedly considering classifying China as a ‘threat’ to national security.
Oxford-graduate Truss will also find herself having to navigate a battle of ideologies and factions as the chief of a party which has deposed its three previous leaders. Infighting and internal divisions have been a core feature of the parliamentary Conservative party in recent years, and there are already reports that senior MPs are wholly unhappy with the way Truss and Kwarteng have conducted business in their first weeks in office. The pair have already reneged on their plan to cut the 45p tax rate following a revolt from backbenchers.
Time, however, is on the Prime Minister’s side; she has the luxury of not needing to call a general election for over two years yet, and this may well be ample time to improve the Conservatives’ popularity ratings, with recent polling data from YouGov putting the Tories 33 percentage points behind Labour.