As Liz Truss enters Downing Street after a bruising leadership contest for the Conservatives, she faces an in-tray bulging with pressing issues.
The leadership contest was littered with vague policy announcements and at least one U-turn from the new prime minister.
Now the hard work starts, with households and businesses all facing rising energy bills and grim forecasts about the rate of inflation.
Cost of living crisis
Ms Truss inherits a government in the middle of a crisis. Over the next few years, ministers face the prospect that they will preside over a “terrifying” drop in living standards. The pressure is on. Within weeks Ms Truss must deliver an emergency budget that will appease frantic households and businesses alike.
Experts have already warned that, with inflation soaring, ministers need to offer twice as much support as they did in May simply to stand still. After she was criticised early in the leadership campaign for expressing what seemed like distaste for “handouts”, Ms Truss has said she will ensure “support” is on its way. But will it be enough?
Tax cuts
The new prime minister has pledged to scrap rises in National Insurance and corporation tax and remove green energy levies from bills. But she has also said she wants to review much of the current tax system, including business rates, taxes for the self-employed, inheritance tax and issues such as the taxation of carers. Her focus on tax cuts is hugely controversial within her own party, with many MPs fearful it will drive up inflation, and was part of what led Michael Gove to claim she was taking a “holiday from reality”.
However, the cuts are not just a plan to get through the current crisis, but a key plank of what has been dubbed “Trussonomics”. The former chief secretary to the Treasury argues that tax cuts will not only not cause inflation to rise but will also stimulate growth in the economy. MPs who support her also believe Rishi Sunak was seen as indecisive by Tory members for promising tax cuts that were a long way in the future.
Spending
During the leadership contest, Ms Truss suggested her plans did not include widespread public spending cuts, unlike the David Cameron era. Despite wanting to scrap the National Insurance rise, she has said that she wants to increase spending on the NHS in real terms, from general taxation, and tackle the crisis in the underfunded social care sector. At the same time, she wants to increase defence spending to 3 per cent of GDP. While there are things she has suggested she would cut, including civil service jobs in Whitehall, some of her plans appear dependent on economic growth – at a time when the UK is predicted to enter a recession.
Foreign affairs
The new prime minister has taken a bullish stance on foreign affairs, stressing her time in charge of the portfolio and what she has described as her tough attitude to Vladimir Putin and Russia’s invasion of Ukraine. She also doubled down on some of Boris Johnson’s controversial foreign policy decisions, suggesting she wanted to expand the policy of sending asylum seekers to Rwanda. She has also talked tough on Brexit, memorably saying the jury was still “out” on whether or not French president Emmanuel Macron was a friend or a foe. Tory MPs believe the choice of who she puts in her cabinet will indicate whether or not she believes a deal with the EU on Northern Ireland is possible and thus if a conflict is looming.
Party management and winning the next general election
Speaking of the reshuffle, nervous Tory MPs will be watching the appointment of junior ministerial roles anxiously. With only 18 months until the next general election, many realise this is their last chance – and there are not enough jobs to go around. Those who arrived in parliament before the 2019 intake will be particularly aggrieved. More worryingly for Ms Truss, they might feel they have nothing left to lose in the run-up to an election even Tory MPs with majorities of 25,000 admit to feeling nervous about, following a series of shock by-election losses to the Liberal Democrats earlier this year. Mr Johnson found that a nominal Commons majority of 80 was not all it was cracked up to be, but initially he at least had the benefit of time and the hint of future patronage. The new prime minister will have precious little of either.
Has she made life harder for herself?
Almost from the off polls among Tory members suggested Ms Truss was the clear frontrunner to become the next prime minister. And yet at times she appeared to act like the scrappy underdog, keen to throw some red meat to the party faithful to increase her chances of success.
Even in the final hustings in London, she appeared to sign up to a number of hostages to fortune, including no energy rationing this winter during a crisis that is affecting supply across all of Europe. But Chris Hopkins, director at pollsters Savanta ComRes, said he believed the vast majority of the public would care only about the rising cost of living and much of what she has spoken about in the leadership campaign could be consigned to the “bin tray”.
Where she may encounter some difficulty, however, is when she realises that her plan for dealing with the rising cost of living “is simply not going to be enough” said Mr Hopkins. “Her ‘Conservative’ way through – tax cuts, predominantly, but very little state support, as Sunak has become known for – might win her a leadership election, but I can’t see it going down well with the public when it makes a negligible difference to their bills and living costs, particularly come October. I think she’s inheriting something of a poisoned chalice and, while I don’t think she’s made it any worse for herself during the campaign, I think she’ll struggle to stick to the principles upon which she’s won the race, because the country is simply going to need and demand her to do more to help.”
