After what seemed like months on interminable hustings and debates, the Tory leadership election finally reached a conclusion at the beginning of September.
As the bookies forecasted, frontrunner Liz Truss was eventually elected as the new Conservative leader and de facto PM, polling 81,326 votes to rival Rishi Sunak’s 60,399 ballots.
However, the eventual margin of victory was much slimmer than expected and far smaller than previous leadership contests in the party. In fact, Truss polled 57.4% of the total vote, with Sunak collecting a relatively impressive 42.6% share.
Interestingly, the markets haven’t reacted well to Lis Truss’ election, with the new incumbent’s economic policy quested by a number of economists. We’ll explore these in more detail below and consider whether they can deliver sustainable economic growth.
There’s no doubt that economic growth was the focal point of Truss’ leadership campaign, although the candidate’s vague plans and preoccupation was tax cuts did little to suggest how she would create a prosperous and self-sustaining economy.
Certainly, Truss has pledged to slash income tax rates across the board, while raising the basic rate thresholds from their current levels. This would apply to both the minimum rate threshold and the one pertaining to the highest rate of tax in the UK, although this would only have a minimal impact on low and middle earners on these shores.
In fact, this is a theme that runs throughout Truss’ economic plans, as while tax cuts have been pledged as a way of managing the current cost-of-living crisis, they won’t do much for people who already earn below the minimum threshold of £12,570.
Instead, it’s higher earners that are more likely to benefit from income tax cuts, while those below continue to struggle with the rising cost of food and energy.
It’s interesting to note that the election of Truss has been met with scepticism in the markets, which has in turn created opportunities for CFD traders to profit as prices fluctuate.
This is despite her pledge to cut corporation tax and reduced business regulations, which should in theory minimise operational costs and help firms to boost their profit margins.
This is largely because the wider economic policies being discussed won’t boost disposable income levels and consumer spending significantly, especially in any kind of sustainable way. As a result, firms will continue to experience peaks and troughs, while being further burdened with ongoing supply chain issues and their own battles with inflation.
It should also be noted that scrapping some regulations can be harmful in the long-term particularly those pertaining to minimum wage legislation and workers’ rights.
The leads us neatly onto Truss’ pledge to scrap all EU-derived laws by the end of 2023, which includes key workers’ rights and suggests that the new leadership may ultimately review and dilute such legislation over time.
This once again affects the poorest in society, as it could comprise their wages, working conditions and right to strike or engage in industrial action.
This also puts the UK on a further collision course with the EU, as the current trade cooperation deal between the two regions allows British firms to deviate from single market rules up to a point. However, too much divergence could potentially afford UK firms an unfair advantage over those on the continent, which may in turn lead to more tariffs being placed on targeted British exports.
There are 1,500 EU laws that could be removed from the UK’s statute books if Truss is true to her word, and this could cause untold havoc in the short and longer-term.