The new prime minister’s honeymoon begins and ends today. Once Liz Truss officially enters Downing Street tomorrow, she will be under pressure to tackle the huge economic crises facing the country, with very little time to announce her political plans. Truss herself has pledged to reveal her plan to raise energy bills in the first week of her premiership, and her plans to cut taxes in the first month. Although they are at the forefront of political discussions, these are just some of the urgencies the government will have to deal with in the weeks and months to come. Below are ten charts the Truss administration cannot ignore if it and its government are to get the country back on track.
The most immediate pressure on Truss is to announce its plans to deal with soaring energy bills, now that Ofgem has announced that the next price cap will rise to £3,549 a year, an increase by 80%. After originally downplaying plans for more direct cash top-ups, the Truss campaign has acknowledged in recent weeks that the £15billion grant scheme announced by Rishi Sunak in May is set to be extended – and significantly.
But there are rumors now that Truss could be considering another U-turn on energy bills: after ruling out an official price cap freeze (which Labor is pushing for), it now looks like it will at least be discussed as a political option. The decision to “freeze” energy bills is really nothing like this: national politicians cannot control the global price of energy. Rather, it is a transfer of rising energy costs from the consumer to future taxpayers, as the government would likely borrow the many billions needed to cover the costs (it is estimated to be a year of “freezing” the cap for a year in April 2022 a level of £1,971 would cost around £60bn – about the same as the whole furlough scheme).
This could cure political headaches in the very short term, as it would be a way to reduce customer bills this winter. But it seriously undermines another promise Truss made: that there will be no mandatory energy rationing this winter. The UK is already at the mercy of countries like France and Belgium for energy imports this winter. And as France is now discovering, with so-called “capped” energy bills, this policy does nothing to encourage people to reduce their energy consumption where they can safely, and supplies are running out. . Just last week, French Prime Minister Elisabeth Borne warned that if consumption continued in France as normal, rationing would become inevitable. If the UK implements similar policies, state-mandated rationing will only become more likely.
But it’s not just energy prices that are driving up household bills. Looking at the distribution of where price increases are most acute, energy is only part of the problem. Household energy costs and gasoline, while contributing strongly to increased financial burdens for families, account for less than half of the percentage point increase in CPIH inflation right now, as things as the price of food and domestic services also skyrocket. It’s a glitch in the Liz Truss agenda to use tax cuts to help with the cost of living crisis. While allowing people to keep more of their own money will undoubtedly help over the next few months and years, plans to temporarily reduce VAT by five percentage points will do little to help the cost of food. , which is already exempt from VAT, and which increases .
All of this highlights how critical it is for the Truss government to tackle the headline inflation rate, which is now in double digits and is expected to rise further before it peaks. Forecasts are increasingly worrying, with estimates now that inflation could reach nearly 20% over the year.
Truss’s main plan to fight inflation is to create space for the Bank of England to raise interest rates faster and at longer intervals, by easing fiscal policy – which, in his view. turn, should allow for a tighter monetary policy. But this plan will still require central bankers to shake up their slow and steady attitudes and play with the Treasury – a decision that ultimately rests with the Bank, as Truss has adamantly ruled out altering its independence.
What Truss insists she can control, however, is the extent to which Britain’s economy grows in the future, centering her campaign largely on growth-boosting tax cuts and (vague) plans for supply-side reforms to revive the economy. But the new Prime Minister has his work cut out for him. Forecasts from the Office for Budget Responsibility suggest the UK economy will remain essentially flat for the next few years as the prospect of a recession still looms over Britain as the economy has contracted by 0, 1% in the second quarter, and could well post another contraction. at T3.
Yet despite all the attention to official economic data, the biggest deciding factor in making or breaking Truss’s premiership may well be what happens to the NHS waiting list, as the Tories currently face at the next election with one in six people in England waiting. for care.
Truss promised at the weekend that the waiting list would fall under his post as Prime Minister – but according to leaked internal data to The spectator in February, the waiting list is expected to increase by nearly three million more before reaching a peak, and this is the central scenario (in the pessimistic scenario, it rises to more than ten million). How Truss plans to quickly whittle down that waiting list without any serious overhaul of the current system — something she and Sunak ruled out during the campaign trail — remains a mystery.
Meanwhile, patients are suffering and the consequences of even more limited access to health care are being felt. The number of excess deaths hovered around 1,000 for 15 weeks of this year, but as Michael Simmons notes, “unlike Covid deaths”, these deaths “are met with near silence”. It reveals that deaths are particularly high among those aged 30 to 59, who clearly struggle to access immediate treatment if something goes wrong. This scandal of young and – in many cases – unnecessary deaths will only grow during the winter months, when health services will be even more stretched.
All of these emergencies will trump medium-term economic issues, but these will still require the Truss government’s attention, especially as it sees the party’s next speech to the electorate in a year or two.
Nor is the economy going to grow as Truss imagines without addressing the five million working-age people who have fallen off the grid. Especially with such a tight labor market (still nearing the all-time high of 1.3 million job vacancies), it’s hard to see how these gaps are closing (and even how inflation is being reduced in domestic services) without increasing their participation in the labor force.
And then there is the political domain dear to the heart of the new Prime Minister. Long before the pandemic hit, prices soared and the NHS waiting list reached record levels, it was universally recognized that the housing sector was broken, preventing even young adults from dreaming of the day when they could own a house. While Truss scaled back her ambitions of a planning overhaul and extensive home building during the campaign, she still hinted that it was a priority for her. But doing something about it will require much more than a policy overhaul – it will take arm wringing within one’s own party and a hefty dose of political capital to convince the conservative protectionists (of whom there are many) that the creating a new generation of owners is not just ethically correct, but politically necessary for the long-term survival of the party.
That will be the underlying challenge at the heart of every policy decision Truss makes as prime minister: figuring out how to bring her party with her. Having won the leadership race by a narrower margin than the polls suggested (57.4% to 42.6%), she will have to convince many of her colleagues, as well as the nation, that her plans to exit the countries from its sagging economic crisis are the good ones. And there are plenty of problems to solve.
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