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A fight for the right of the Party: Who will define Conservatism in 2022?
A fight for the right of the Party: Who will define Conservatism in 2022?

Sunak V Truss – A Defining Contest For The Modern Conservative Party

Words by:
Senior Adviser
July 21, 2022

And then there were two. In the final round of the Conservative leadership contest, Boris Johnson’s longest serving Chancellor, Rishi Sunak, faces the current Foreign Secretary, Liz Truss.

During the early phase of the Conservative leadership contest, there was a lot of talk about the need for a clean break with the past. Indeed, for one day last week at Westminster there was almost an assumption that Penny Mourdant would be the next Prime Minister. That was before her indifferent performances in the TV debates and the onslaughts from other camps, including the stridently pro-Truss Daily Mail. In the end, the MPs chose the two most experienced and best known candidates.

There is though, a significant twist. In this topsy turvy contest, Truss is running as the ‘change’ candidate even though she is the longest-serving minister in the cabinet. During a remarkable interview on the Today programme this morning, she argued that there had been a misplaced economic consensus for twenty years, thereby distancing herself from the policies of the Conservative governments since 2010. Her big pitch is for tax cuts to be implemented from “day one”. Specifically, she would reverse the National Insurance rise and the planned increases in Corporation Tax. Her belief, not widely shared amongst economists, is that such a move would trigger economic growth and avoid a recession. She also claims that the tax cuts would reduce inflation, whereas Sunak has argued repeatedly that the opposite would happen. Inflation would rise.

In fairness to Truss, she is speaking truthfully when she insists that she argued against the NI rises in cabinet last summer. She said then in private what she now declares in public, that the additional spending on the NHS or social care could be paid for by borrowing. I am told that Boris Johnson had also hoped originally to pay for his still vaguely defined social care plan without increasing taxes. In frantic meetings a year ago, Sunak insisted that if Johnson wanted the additional cash it would have to be paid for through a tax rise. Johnson agreed reluctantly. In his final Prime Minister’s Questions yesterday, Johnson could not resist a dig at ‘the Treasury’ when he told MPs that his successor should sometimes challenge that mighty department’s tight spending orthodoxies.

Johnson and his allies are out to stop Sunak. Apparently, there was talk of little else at his farewell party at Chequers on Sunday.

Yet here is another twist. In some quarters Truss is presented as the ‘Thatcherite’ candidate while Sunak is portrayed as the ‘centrist’. But Thatcher never did what Truss is pledging to do. For Thatcher tax cuts had to be paid for. It was not until 1988 that her Chancellor, Nigel Lawson, cut the top rate of income tax. She had been Prime Minister for nearly nine years by then. Truss’s approach is much closer to President Reagan’s in the 1980s. Reagan funded tax cuts from increased borrowing. In a contest largely defined by the 1980s Truss is a ‘Reaganite’.

Sunak is the Thatcherite candidate, even though some of Thatcher’s most ardent admirers in the parliamentary party are backing Truss. Like Truss he wants to implement tax cuts, but only when he has addressed inflationary pressures. This produces another oddity about the contest. Although Sunak resigned from Johnson’s government and spent a lot of his time when he was Chancellor engaged in tense disputes with Number 10, he is the one seen more widely as the ‘continuity’ candidate. This is because inevitably he is not going to disown his economic policies.

Sunak’s pitch is very different to the one that Truss is making. Already he has made clear that only he can win the next election for the Conservatives. His supporters also argue that because Truss plans to make sweeping changes she will be obliged to call an early election to secure a new mandate. Party members dread an early election. In interviews later today and in the coming days Sunak plans to argue that the Conservatives’ reputation for economic competence is the key to their appeal. If they lose that with unfunded tax cuts, they are finished for the time being.

As a result of this fundamental divide on the right of the Conservative party over when to cut taxes, there will be big consequences arising from this contest. If Truss wins, Sunak and his close supporters will struggle to support her new government’s economic plans. How can they vote for policies in the Commons when they have argued they are ‘fairytale’ tax cuts that will fuel inflation? In the longer term, I suspect Sunak would leave British politics at the next election. He would not serve in a Truss cabinet. Conversely, although throughout her career Truss has been a much more flexible politician than Sunak, it will not be easy for her and her closest allies to back Sunak’s economic policies this autumn if he wins. The leadership contest is a symptom of a division over how to achieve economic growth and there will be no resolution when a new Prime Minister is crowned in September.

There is one final twist. Both candidates seek a smaller state in theory. Yet almost certainly whoever wins will begin by spending more. To take a precise example, the hugely influential financial guru, Martin Lewis, is already calling for an emergency package this autumn when the new energy price cap is announced. The night before Sunak unveiled his most recent programme of financial assistance, he phoned Lewis to check that he was doing enough. He wanted Lewis’ backing and feared further opposition. No new Prime Minister will want to have Lewis as an enemy. There will be further help with fuel bills.

More widely the next election will be moving into view. A new Prime Minister will be in no position to cut spending on the NHS in advance, nor resist demands for increases in defence spending. There is also the thorny issue of social care. The additional spending from the NI rise is being spent largely on the NHS. How is the new Prime Minister going to find additional funds for social care or will they dump this commitment? What about ‘levelling up’, a concept that neither Sunak nor Truss is as enthusiastic about as Johnson?

The Conservatives need to retain some of those red wall seats if they are to win next time. To do so the new government will have to spend more money rather than cut departmental budgets. But for now, there is a single target audience, the party membership. Every word uttered in the next few weeks will be aimed at pleasing the members alone. They will elect the next Prime Minister.

Polls suggest Truss is well ahead. Sunak knows he has little time to sway the membership. Most are likely to vote early in the contest. He and his team plan to work around the clock for new week or so as the ballot papers are sent out. Sunak will need to be at his most persuasive. Polls on the ConservativeHome website suggest early tax cuts are the members’ top priority. Truss is pledging to give them what they want as well as delivering better public services.

When Johnson used to pledge tax cuts and higher public spending, he acknowledged he was a ‘cakeist’. He would have his cake and eat it. Such an approach was the main source of tension between Johnson and Sunak. Now Sunak must go public and put his case for what he describes as fiscal conservatism. Polls suggest he is the more popular candidate with the wider electorate. That is rarely a decisive factor in Conservative leadership contests.

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