What will our new Prime Minister do for us?
We have a new prime minister. It was announced on Monday that Liz Truss has been voted the new leader of the Conservative party by its members and therefore as our Prime Minister. In the end the contest was won with 81,326 votes compared to Rishi Sunak’s count of 60,399 with a turnout of over 80% of the eligible voters.
6th September 2022
Gavin Jones See profile
After Boris Johnson resigned at the beginning of July, the prospective candidates were reduced from eight to two contenders – Liz Truss and Rishi Sunak after a series of votes by Tory MPs.
The former chancellor Rishi Sunak had been in the lead in every round of voting by MPs and ended with 137 votes in the fifth and final ballot, but Liz Truss overtook Penny Mordaunt in the final round to secure second place with 113 votes.
While Rishi Sunak was favourite among MPs, Liz Truss quickly emerged as the front runner with backing by a number of high-profile MPs and party members.
She started her political career as President of Oxford University Liberal Democrats but joined the Conservatives in 1996 and was elected in 2010 as MP for Southwest Norfolk. She was the more experienced candidate having served in cabinet posts under David Cameron, Theresa May and Boris Johnson and is only the second woman to lead the Foreign Office, taking credit for securing the release of Nazanin Zaghari-Ratcliffe from Iran.
Through the campaign, key issues becoming focal points were the cost of living crisis, taxes and net zero.
It is thought that there may be an emergency budget or fiscal event held as early as this month and we will consider any changes announced once details are known. We do know that the Office of Budget Responsibility have been put on notice to provide forecasts of how the proposed policy changes will impact on the economy for September.
During Liz Truss’ candidacy there were a number of policy proposals made and below we look at how some of these may affect your finances.
In her campaign Liz Truss announced £30 billion worth of tax cuts and would start to implement them ‘from day one’. In a very different style to her challenger, she has stated she will tackle the crisis by putting money back into people’s pockets through these cuts, such as by immediately reversing the National Insurance rise that was introduced in April and scrapping the planned rise in corporation tax – set to increase from 19% to 25% in 2023.
She has also discussed a 5% cut in the rate of VAT. We will have to wait and see if this is implemented. Throughout the leadership campaign, her opponent Rishi Sunak has warned that action such as this could be highly inflationary.
She has also said she would review Inheritance tax as part of a general review of Britain’s tax system. While there is little detail of what this may mean, she has been quoted as saying she would ‘axe Inheritance Tax for good’.
She has suggested she will suspend what is known as the ‘green levy’ – part of your energy bill that pays for social and green projects to help reduce your bills.
Otherwise, she intends to avert crisis and recession through the tax cuts and the investment she has proposed.
In the week before the result was announced, she had not ruled out additional direct support for those struggling to pay bills.
She has also been vocal over the role of the Bank of England and intends to review its remit. As we discussed in the last edition, the main remit of the Bank is to target inflation and it has been criticised in the campaign for failing to do this effectively.
Liz Truss says she would end ‘Labour’ housing targets – but instead plans to create ‘opportunity zones’ with tax cuts and deregulation, making it easier and quicker to build on brownfield sites.
She has also stated she wants to help first-time buyers get onto the housing market by incorporating rental payments into mortgage assessments.
She said she will honour the goal of reaching net zero by 2050 and spoke of ‘accelerating our transition to net zero’ at the COP26 climate summit. To do this, she says the UK needs to build more nuclear power stations and small modular nuclear reactors. She has also stated there could be a review of the ban on fracking which will be unpopular with climate groups.
There has been criticism of her plans to cut taxes suggesting that they will add fuel to the inflationary fire. She has suggested that we will pay for these cuts by not repaying the UK’s ‘Covid debt’ so quickly and holding this debt for longer.
We expect a raft of announcements in the coming days with details of any policy changes and will look at the impact of these in due course.