How grateful will people be about Thursday’s energy announcement? There will be relief, yes: the relief of finding the wrecking ball that was about to hit their home has been suspended. But it does nothing to mend the existing holes in their roof, nor warm cold rooms or fill empty fridges. People will still find themselves stricken with energy bills that have already doubled since last year, with all other bills rising with inflation, along with rents and mortgages. Pay growth has stagnated so long that the Resolution Foundation says it will be back at 2003 levels by next year.
So, political gratitude to Liz Truss for the “handout” that she was against last month may be brief, as voters confront the hard winter ahead.
Who pays the price of capping energy bills? That’s the political question now: do voters care? It seems they do, quite a lot. The polls show three-quarters of Tory voters want a windfall tax, not to pile extra on borrowing to be paid back by taxpayers later. Most voters are outraged at energy company profits and support Labour’s windfall. With her “no windfall” and “no new taxes”, Truss and her team are said to be delighted with the bright red line she has drawn. But has she marked out a territory where a majority of voters are on the other side – as if she has painted the floor, with herself stuck in a small blue corner of the room?
Her attack on Labour as high-tax sounds like the traditional Tory strategy that has won them many an election in the past. But as people examine her tax cuts and see the extent to which the rewards fall on the rich, not the poor, they may not relish them. Her cut in national insurance gifts twice as much of the money to the richest 5% of the population, as the whole bottom half of taxpayers. One prominent economist tells me he will get £4,000 that he doesn’t need.
As for growth, scrapping Sunak’s planned return of corporation tax to 25% will cost an estimated £19bn – a bonanza for big business, the likes of banks, Amazon and water companies. But will it increase inward investment and growth? LSE economists write that she cuts it “despite the evidence that such handouts to big business do little to rekindle investment and growth”.
Kate Bell, chief economist at the TUC says, “Since they cut it from 26% to 19% in 2015, growth and inward investment have flatlined.” Torsten Bell of the Resolution Foundation says: “Academic literature from around the world finds corporation tax cuts have no big overall effect.” Would a windfall on energy companies hit investment? Paul Johnson of the IFS replies pithily: “Nonsense.” Labour seizes on that dividing line as: whose side are you on? Tories are for the profiteers, Labour for households and public services in desperate need.
As if on cue, the latest NHS figures emerged on Thursday showing yet another “never-before” rise in waiting lists. Well, the new health secretary, Thérèse Coffey, has arrived, and within a day had her hand out to the Treasury for many millions to buy care home places to help shift some of the 13,000 people stuck in NHS beds. (A good idea, if only the government hadn’t shut down that scheme last March.) And that’s just day one inside the NHS, a Truss top priority. How many other new ministers will be peering into their denuded departments to emerge, white-faced, asking for more?
The sums that might be rescued in a windfall on energy companies - £44bn, the Tax Justice Network suggests – plus the £19bn squandered in a corporation tax cut, or the £13bn national insurance cut, may soon flash warning lights for Truss. These are vital funds extravagantly wasted on a dogmatic and ideological quest for unicorns instead of real growth, while enriching the richest people and big companies.
Truss’s best quality is plain speaking, enunciating her ideological commitments. But wiser recent Tory leaders have always blurred the true nature of Conservatism. Think of Cameron’s feints, voting blue to go green, “big society” and compassionate Conservativism; or Boris Johnson’s bogus levelling up, now missing from the Truss agenda. They knew Osbornite austerity and brutal redistributions towards the haves needed to be disguised. But she is honest, declaring it’s fair her tax cuts benefit those who have the most. However, Toryism is unpalatable without icing sugar, and the lack of a windfall tax will be the emblem of the choices she makes.
Polly Toynbee is a Guardian columnist
