Despite the approach of some candidates, the Conservative party leadership contest is a serious matter. The UK’s next prime minister will inherit a series of continuing crises at home and abroad, in a country suffering more than most from inflation and slow growth.
Although only members of the ruling Conservative party have a vote in the head-to-head between Liz Truss and Rishi Sunak, other audiences matter too. UK voters, businesses, the EU and financial markets are all watching, and all have concerns of their own. The political rewards of making imprecise and unworkable promises to party members cannot be allowed to crowd out the importance of providing clarity and certainty to households, investors and businesses.
Sunak’s success in winning over more MPs than any of his rivals meant that the contest’s first stage was defined in opposition to his tax-raising Budgets. His Budgets were not without flaws: increasing taxes on workers and businesses by raising national insurance when the economy is experiencing recessionary pressures was the wrong tax, on the wrong people, at the wrong time. Increases in corporation tax should not take place without a simultaneous wider reform of UK investment incentives.
Truss is right to argue that tax rises do have consequences for economic growth. But Sunak is right, too, to say that tax cuts must be funded: they do not, in the end, “pay for themselves”. Right now, tax cuts would increase inflationary pressures, prompting additional increases in interest rates. In the long term, the government cannot spend more than it raises in tax. These trade-offs cannot and should not be ignored.
It is unhelpful and potentially damaging for candidates to use imprecise language to discuss plans for central bank regulation, for raising taxes and for funding tax cuts. Truss should use the contest’s final stage to set out costings for her proposed tax cuts. She should also, at a minimum, ensure that her apparent plan to curb Bank of England independence is clearly communicated and understood, although a complete rethink of the idea would be altogether more desirable.
Both candidates should seize the opportunity, now that the field has been whittled down to two, to speak without caveat or evasion in favour of the UK’s net zero target. It is welcome that both have signalled their commitment to the target, albeit without great conviction. They should now go further, particularly given that both have in the past appeared to be somewhere between equivocal and hostile to it.
Sunak is right to recognise that the net zero target is as important as — indeed, it is inextricably linked to — maintaining the UK’s fiscal sustainability. But it is disappointing, to say the least, that Sunak’s energy security plan contained a mystifying and damaging commitment to maintain the UK ban on onshore wind farms. When Truss speaks of the need to find “better ways to deliver net zero”, it is unclear what, exactly, she believes to be wrong with the government’s pre-existing and detailed path to the target. More detail on how she would maintain the path to net zero is required.
Now that the two candidates are no longer scrabbling for votes from parliamentary colleagues, it is to be hoped that the contest can be conducted on more sensible lines. Sunak deserves praise for sticking, thus far, to a broad position on macroeconomics that is internally coherent (though a rethink on tax details would be welcome). The challenge for him is to maintain that approach in the contest’s final phase. The task before Truss is to apply similar rigour to her position.