When it comes to the economy, they couldn’t be more wrong. Since becoming prime minister two weeks ago, Ms Truss has drawn clearer ideological lines between her Conservative Party and Labor than we have seen under the previous three Conservative prime ministers. The promises of tax cuts and protections for big business he promised during the Conservative leadership race were not, after all, politically expedient policies to win the hearts and minds of the Conservative Party, if not the wider public. These are policies he intends to pursue as prime minister. He said during the leadership race that he wanted to be the candidate for change and reverse the tax-and-spend consensus we’ve been living with, to a greater or lesser extent, since New Labour. Without a windfall tax on energy companies’ £170bn surplus profits, the energy price guarantee will be paid for through government borrowing, which the taxpayer will eventually have to repay: reversing the planned corporation tax rise for big business and scrapping the rise in national insurance for the highest earners as well as the lowest: lifting the cap on bankers’ bonuses and an energy package that benefits the very rich as well as those who really need it. It is a paradigm shift in government approach, away from economic policy geared towards redistributing wealth through the tax system from those with the deepest pockets to those in greatest need, to a new approach in which promoting growth is key to defining public services and helping everyone. In our first interview with the new prime minister on the 102nd floor of the Empire State Building, she made it abundantly clear that she was comfortable with pro-growth policies taking precedence above all else. When I asked the prime minister whether her plans to cut taxes – a big boost for big business as well as wealthier workers – were fair, she said: “I don’t buy this argument that cutting taxes is somehow unfair. “I mean, what we know is that people with higher incomes generally pay more in taxes. So when you cut taxes, there’s often a disproportionate benefit because those people pay more taxes in the first place. “We should set our tax policy based on what will make our country more successful, what will deliver that economy that benefits everyone in this country. “And what I don’t buy is the idea that business tax cuts don’t help people in general.” And when I told Mrs Truss that she was prepared to become an unpopular Prime Minister to pursue that goal, she said: “Yes, yes I am. What is important to me is that we grow the British economy, because that is what will ultimately deliver higher wages, more investment in towns and cities across the country, that’s what will ultimately put more money in people’s pockets and also allow us to fund services like the National Health Service. And to achieve that economic growth, Britain must be competitive.” Use Chrome browser for more accessible video player 9:31 Liz Truss has said she is prepared to be unpopular with her tax policy as she believes it will ultimately benefit the UK economy. Tax cut plans carry enormous risk Her plans carry enormous political and economic risk. Politically, Ms. Truss is prepared to cut taxes for those who need it least and pay for it through government borrowing in pursuit of growth. Her argument is that the public cares more about better services, better jobs, better infrastructure than about fair equality in how the state taxes its citizens and businesses. It follows the principle that a rising tide lifts us all – but what if that growth fails? And what if British workers don’t really like what they see as unfair tax cuts when they’re already feeling the pinch? When I told the Prime Minister that voters might not think it fair that their children should end up picking up the bill to fund debt-backed tax cuts for big business or energy price guarantee schemes, he asked me curtly: “That’s a particular point of view you’re expressing, one often expressed by people on the left of politics. “What I’m saying is that by keeping taxes low and growing the economy, we’re going to get more tax revenue, and actually, that’s going to work in the long run, bringing the opportunities that people want to see.” Image: Liz Truss speaks to the media at the Empire State Building in New York. Photo: Reuters The ideological lines of red versus blue are clearly spelled out by the Prime Minister, but in reality this view is not necessarily partisan. More than two in three Britons think there should be a windfall tax on energy companies. This isn’t so much between left vs. right political divides, it’s more about public sentiment and voter approach to taxation, and in that Ms. Truss is clearly ready to be on the wrong side of that popular divide. In the end, she believes voters will support her in the next general election if she can get a doctor’s appointment, a good job and a good salary. It’s an approach that puts the UK prime minister on the opposite economic divide from her US counterpart, President Biden, who hit out at “the economy gradually” on Twitter just as my Prime Minister was extolling the virtues of tax cuts. in our interview. “I’m sick and tired of the financial crisis. It never worked,” he tweeted. “We are building the economy from the bottom up and from the inside out.” Subscribe to the Daily Podcast on Apple Podcasts, Google Podcasts, Spotify, Spreaker It was, I suppose, a coincidence, the president’s remarks intended for his domestic audience and not a criticism of No 10’s stance on the finances of the new establishment. But it is also clear that the US president does not share Mrs Truss’ view at all that cutting taxes for businesses and the wealthy will lead to a “trickle down” for the rest of society. “Much more than politics” And back home, you have to wonder how the coalition of red wall and Tory MPs will take this too. Ms Truss only won the public support of 142 of the 353 MPs in the leadership race, despite having been aiming to win for weeks. Her support for the party is already shallow and these policies will inevitably divide the disparate coalition of constituencies and voters that Mr Johnson assembled in 2019. But this is much, much more than just politics. It also concerns the country’s economic governance and investor confidence in the Truss government. And that confidence seems shaken. There is a weakening of confidence in British assets, with bonds, shares and sterling – falling to a 35-year low – all at the same time, and the Bank of England is now considering its biggest rate hike in three decades in response to this and rising inflation. Read more: Who is Liz Truss? Prime Minister who sees herself as the leader of the disruption, Liz Truss, sets out three key priorities in her first speech as PMTrussonomics: The five key points – and will they work? On Friday, markets will be able to better understand – and perhaps offer a verdict on – Mrs Truss’ economic plans, when her chancellor sets out the costing of the energy price guarantee and proposes tax cuts in a mini budget that could prove to be a very big moment for her new government. And as for the prime minister herself, she is resolutely confident about her economic plan, telling me that while the country is facing “very difficult times” this winter, she is adamant “we will get through it”. But from the energy bill this winter, to rising interest rates and inflation, so much is out of her control. Mrs Truss may set the policies, but ultimately it is the markets and the voters who will decide – and for now, there is a great deal of skepticism surrounding the new prime minister and her policies.
