Sat. Mar 25th, 2023

Key events

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The first MPs have begun arriving at the QEII Centre in Westminster where the next prime minister is due to be announced at 12.30pm, PA Media reports. PA says Oliver Dowden, the former party co-chair, arrived around 50 minutes ahead of the announcement. Penny Mordaunt, an earlier contender in the Conservative party leadership competition, arrived shortly afterwards. Neither responded to the large media scrum assembled outside.

On his last full day in office Boris Johnson has said that he has asked officials to look again at the case for honouring veterans of the UK’s nuclear testing programme with medals. In an open letter he also said he was commissioning an oral history of their achievements.

Dear veterans, it is my firm belief that you deserve medallic recognition.

Thanks to your efforts all those years ago, more than 67 million people in the UK and across NATO live in safety that you helped to provide.

I would like to offer my profound thanks for your sacrifice.

— Boris Johnson (@BorisJohnson) September 5, 2022

From ITV’s Anushka Asthana

One backbench MP just said to me they felt the leaks of who will be in the top government jobs – IF Truss wins- looks like the “most right-wing Cabinet in 100 years”. If it goes as expected there could be some troublesome one-nation Tories on backbenches.

— Anushka Asthana (@AnushkaAsthana) September 5, 2022

Survation has released some new polling this morning suggesting that Labour has a 10-point lead over the Conservatives – but that if respondents are told Keir Starmer is the Labour leader, and Liz Truss the Tory leader, the Labour lead rises to 17 points.

NEW Westminster Voting Intention, named party leaders including Liz Truss. Change vs today’s standard voting intention. LAB lead of 17 points:
CON 29% (-5) change was -4.5, rounds to 5
LAB 46% (+3)
LD 11% (nc)
SNP 4% (nc)
GRE 3% (nc)
OTH 7% (+2):

— Survation. (@Survation) September 5, 2022

Broadcasters outside Downing Street this morning.
Broadcasters outside Downing Street this morning. Photograph: Phil Noble/Reuters

The main Tory leadership news in the papers this morning is probably the story about Liz Truss considering freezing energy prices. (See 8.10am.) But here are some of the other stories about a Truss premiership.

Treasury sources have told i that Ms Truss, who is widely expected to be confirmed as the nation’s next Prime Minister, is keen on cancelling Rishi Sunak’s freezing of the 40 per cent tax threshold at £50,270 and raising it by around £30,000.

The move would mean that those earning between £12,570 and £80,000 would pay just 20 per cent on their earnings on tax, while those earning less than £12,570 would continue to be exempt from income tax.

The tax cut will mean around three million people will no longer pay higher rate tax, saving them an average of around £3,000 a year. The saving will be around £6,000 for someone on an annual salary of £80,000 or more.

  • Oliver Wright in the Times says Samantha Jones, who was appointed permanent secretary and chief operating officer at Downing Street earlier this year after the Partygate scandal, will lose her post if Truss becomes PM. Wright says other senior officials will leave. He says:

Sir Stephen Lovegrove, the national security adviser, is also expected to be moved on to be replaced by the Russia expert Sir Tim Barrow, who Truss worked with at the Foreign Office.

Truss also intends to quickly appoint a new principal private secretary, while Simon Case, the cabinet secretary and head of the civil service, is not expected to stay on. Truss is thought to favour James Bowler, permanent secretary at the Department for International Trade, for the role.

Boris Johnson arriving at Downing Street this morning for his last full day as PM. Recently he has been commuting into his office from Chequers, where he chose to reside for his final weeks in office.
Boris Johnson arriving at Downing Street this morning for his last full day as PM. Recently he has been commuting into his office from Chequers, where he chose to reside for his final weeks in office. Photograph: Hannah McKay/Reuters

Paul Goodman, the former Tory MP who edits the ConservativeHome website, has a good summary of expectations as to what Liz Truss’s margin of victory might be.

Tory leadership result victory margin. A thread. 1) My last summary on August 17: “The sum of @OpiniumResearch, @YouGov and our survey is that @trussliz is set to win by a margin roughly between 70-30 and 60-40 – perhaps a bit higher, perhaps a bit lower.”

— Paul Goodman (@PaulGoodmanCH) September 5, 2022

2) Consensus view among MPs and activists I spoke to over the weekend is that the margin today will be nearer 60-40.

— Paul Goodman (@PaulGoodmanCH) September 5, 2022

3) No-one who spoke to me went higher on @trussliz than the 66% @YouGov found for her on August 19. Camp @RishiSunak went as low as 57% for her in @thetimes. One informed estimate elsewhere is 62% – as informed as these things allow, at any rate.

— Paul Goodman (@PaulGoodmanCH) September 5, 2022

4) 59% say would be a very comfortable win for @trussliz – pretty much three in five votes. But expectation has been so high that anything for her under 60% is bound to be read as a disappointment. Anything about 66%, which @BorisJohnson got in 2019, would be an emphatic win.

— Paul Goodman (@PaulGoodmanCH) September 5, 2022

Philip Hammond, who was chancellor when Theresa May was prime minister, has joined Rupert Harrison, another Tory Treasury alumnus (see 10.02am), in criticising the Truss camp this morning for disparaging Treasury orthodoxy. Hammond told Times Radio:

When I hear people talking about Treasury orthodoxy, I do worry that what they might sometimes be talking about are economic facts of life. And yes, the Treasury will ensure that politicians, however senior, are confronted with the realities of the economic facts of life. “Yes, Minister, you may wish to do this. But you need to understand that the consequences will be as follows.” And we can’t legislate to change the laws of economics, unfortunately. And I think Liz Truss understands that very well.

Obviously, I worked very closely with her. She was chief secretary to the Treasury when I was chancellor, she understands the laws of economics as well as anybody does. And it’s essential that the political solutions that a government crafts, go with the grain of the laws of economics, because if you try and confront the laws of economics, you will come unstuck.

Hammond also said people should recognise that high energy prices were here to stay. He explained:

I think it is right and unavoidable that the government needs to provide support to people dealing with these huge energy bills as a short term solution, but we have to be clear, and I think [Truss] will be clear, that this can only be government support to deal with the immediate emergency energy prices being sky high, largely because of the war in Ukraine.

At the same time we’ve got to be honest about the fact that energy bills in the future are going to be higher than they were, traditionally, as we move to ensure energy self sufficiency, and to decarbonise our economies. That has always been the case; decarbonisation doesn’t come free.

Philip Hammond.
Philip Hammond. Photograph: Alberto Pezzali/AP

My colleague Richard Partington, the Guardian’s economics correspondent, is also unimpressed by the case for “Trussonomics” set out by Kwasi Kwarteng (who does not use the term himself) in his FT article. (See 9.23am.)

The Kwarteng op-ed is wild. Heavy criticism of “same old economic managerialism [that] has left us with a stagnating economy and anaemic growth” – i.e. the past 12 years of Tory government. So more of the same party for a different result?

— Richard Partington (@RJPartington) September 5, 2022

Some of the ideas floated by the Truss campaign for getting growth going are the tried, tested and failed ones of earlier in the 2010s under Osborne. Eg. cutting corporation tax. Dismissed as a failure by Sunak, and not called for by business.

— Richard Partington (@RJPartington) September 5, 2022

Plus the idea of moving away from the “lens of redistribution” – not even an idea the IMF or the OECD would go for, having argued in recent years that inequality is bad for growth.

— Richard Partington (@RJPartington) September 5, 2022

Chris Giles, economics editor at the FT, is sceptical about the plan from Liz Truss to focus on growth. (See 9.23am.)

I’ve been in my job for almost 20 years and have not come across a growth plan from any government yet

Gordon Brown never assumed there would be growth before it came

This is innovative!

— Chris Giles (@ChrisGiles_) September 5, 2022

And Rupert Harrison, who was chief of staff to George Osborne when he was chancellor, does not accept her argument that previous governments did not prioritise growth too.

I was reminded of “The Plan for Growth” published by the Treasury and BIS in March 2011.

Growth in GDP per capita over the next 5 years was 7.7%, the highest in the G7. In the US it was 7.4% and in the euro area just 3.0%.

— Rupert Harrison (@rbrharrison) September 5, 2022

So economic policy can make a difference, but it requires time and consistency

— Rupert Harrison (@rbrharrison) September 5, 2022

Robert Peston, ITV’s politcal editor (and one of the few political editors with a background in business reporting), has posted an interesting Twitter thread on the news that Liz Truss is considering freezing energy prices. (See 8.10am.) Householders would still end up paying, he says, in the thread starting here.

Everyone is talking about Liz Truss’s supposed £100bn scheme to limit energy price rises as though it were a free lunch. It isn’t. Someone has to pay for it. The original scheme proposed by suppliers was for a massive government loan to them, with the cost of holding…

— Robert Peston (@Peston) September 5, 2022

Peston also says the plan (in so far as there is a plan – nothing has been confirmed on the record yet) has “much in common with Corbynomics”.

Faisal Islam, the BBC’s economics editor, says people in the energy industry think that, if Liz Truss does want to freeze energy bills (see 8.10am), she would have to end up part funding that through a windfall tax. But Truss has ruled out a further windfall tax on energy companies.

re “bill freeze” idea:

Idea worked up in Whitehall.
Suggested by industry, increasingly confident.
And some Con backbenchers, in Jan

selling points for team Truss:
– might not need formal upfront Govt borrowing (leaving space for tax cuts)
– would impact actual inflation rate

— Faisal Islam (@faisalislam) September 5, 2022

Full story:
Key point – not even discussions about windfall tax in all this, though privately industry figures think this is inevitable at some point, given scale of profits arising out of the war

— Faisal Islam (@faisalislam) September 5, 2022

obviously this would be a bold and simple message limiting price rises to some level. Challenge is that without extra funding from eg windfall tax, it relies on keeping bills not far off current levels into the 2030s, which will be attacked by Opposition

— Faisal Islam (@faisalislam) September 5, 2022

Simon Coveney, the Irish foreign minister, told RTE’s Morning Ireland this morning that Liz Truss was a “talented, very energetic politician” but that her support for the Northern Ireland protocol bill had “created a lot of tension and undermined trust” with Ireland. He went on:

She is going to be the next prime minister, and we will work with her and her team, but I hope we can change the direction of travel for British-Irish relations that we’ve seen over the last couple of years, which really has been one of tension and standoff on very important issues – predominantly related to Northern Ireland.

Truss would prioritise stimulating growth over redistributing wealth, says leading ally Kwasi Kwarteng

Kwasi Kwarteng, the business secretary, is already pencilled in as the next chancellor if Liz Truss becomes prime minister. The pair have been friends and allies for years – they were among the authors of the Thatcherite polemic Britannia Unchained written jointly by five Tory backbenchers in 2012 – and they are near neighbours in Greenwich. In an article for the Financial Times, Kwarteng has defended her approach to the economy, and addressed some of the concerns raised by the Institute for Fiscal Studies. (See 8.48am.) Here are the key points.

As prime minister, Liz will take immediate action if elected that will help people with the challenges we face in the coming months, and lay the groundwork for the change we need in the long term. This means cutting taxes, putting money back into people’s pockets and unshackling our businesses from burdensome taxes and unsuitable regulations. Given the severity of the crisis we face, there will need to be some fiscal loosening to help people through the winter. That is absolutely the right thing to do in these exceptionally difficult times.

The UK’s ratio of debt to gross domestic product is lower than any other G7 country except Germany, so we do not need excessive fiscal tightening. The OECD has said that the current government policy is contractionary, which will only send us into a negative spiral when the aim should be to do the opposite. But I want to provide reassurance that this will be done in a fiscally responsible way. Liz is committed to a lean state and, as the immediate shock subsides, we will work to reduce the debt-to-GDP ratio over time.

In this passage Kwarteng seems to be seeking to counter the claim from Rishi Sunak, in an interview with the FT last week, that Truss’s policies could led to international investors losing confidence in the UK economy.

Economic growth is the key to delivering for the British people and unlocking opportunity across the country. And it will be Liz’s top priority. She will make it her aim to get us to 2.5% trend growth, which will deliver higher wages, more vibrant high streets and exciting opportunities here in the UK for our children and grandchildren. And ultimately, higher tax revenues.

For much of the postwar period the trend rate of growth was at this level or above, but growth has been more sluggish recently, particularly in the last decade.

We do not have to appease the voices of decline. The same old economic managerialism has left us with a stagnating economy and anaemic growth, with labour productivity growing at just 0.4% a year since the financial crisis. Taxes are now at their highest in 70 years. This toxic combination needs to be urgently addressed.

We need to be decisive and do things differently. That is what Liz plans. Instead of managing one short-term shock after another, ducking or delaying the difficult reforms needed for lasting economic growth, as prime minister she will take bold action to change things for good.

That means focusing on how we unlock investment and growth, rather than how we tax and spend. It is about growing the size of the UK economy, not burying our heads in a redistributive fight over what is left.

This confirms what Truss herself signalled in her BBC interview with Laura Kuenssberg yesterday. When it was put to her that the rich would gain most from her plan to reverse the national insurance increase, Truss insisted her proposal was “fair”. She also said:

To look at everything through the lens of redistribution, I believe is wrong because what I’m about is about growing the economy. And growing the economy benefits everybody.

Kwasi Kwarteng with Liz Truss, when they met in a crowd of MPs at the Commons earlier this summer.
Kwasi Kwarteng with Liz Truss, when they met in a crowd of MPs at the Commons earlier this summer. Photograph: Toby Melville/Reuters

Paul Johnson, director of the Institute for Fiscal Studies thinktank, told the Today programme that Liz Truss’s economic policies would increase inflation.

Referring to her argument that a new economic approach is needed because growth has been so weak over the last decade or more, he said:

She’s clearly absolutely right that we’ve had dreadful growth over the last 15 years. But the truth is that simply cutting taxes, cutting national insurance contributions, for example, is not a strategy for growth.

And it is clearly pumping a large amount of money into the economy on top of the £30bn we’ve already had to support energy bills, on top of the presumably many, many tens of billions additional that are going to come [on top of] that, and on top of what’s going to have to be more money for public services.

Now put all of that together and that will lead to not just extremely high borrowing in the short run, but also additional inflationary pressure.

Leadership contest went on ‘too long’, says treasurer of 1922 Committee

Many of us felt that the Conservative party leadership contest went on for too long and Sir Geoffrey Clifton-Brown, a senior figure in the party machinery, told the Today programme this morning that he agreed. Clifton-Brown, treasurer of the backbench 1922 Committee, said there should be a “rethink” of the timetable before the next contest. He explained:

I would shorten the process of members in the country.

There was no reason why it couldn’t have been shortened. We could have had more than one hustings a day.

I think it’s just been too long.

Clifton-Brown also said that, despite being a member of the 1922 Committee’s executive, he did not yet know the result, which is being publicly announced at 12.30pm. He said:

I suspect Sir Graham [Brady, chairman of the 1922 Committee) knows, but as always he is completely inscrutable on these matters.

Liz Truss reportedly planning energy bill freeze after her expected election as new Tory leader and next PM

Good morning. Parties hold leadership contests so that candidates can set out their policies and members can choose which they like best. But the Conservative party ballot, which will end today with Liz Truss all but certain to be chosen as the new leader, to replace Boris Johnson as prime minister after an audience with the Queen tomorrow, has seen that process inverted. The cost of energy will pose the biggest crisis for the next PM, but Truss and her rival, Rishi Sunak, only spoke in general terms about how they would handle it and yesterday Truss, in her interview for the BBC’s Sunday with Laura Kuenssberg, even suggested it would be improper for her to say what she would do. Sounding like a chancellor before budget day, Truss said:

What I want to reassure people is I will act, if elected as prime minister, within one week. Now, what I can’t do, Laura, on this show, is tell you exactly what that announcement would be … It would be completely wrong.

Truss argued that her reticence was justified because she had not been confirmed as leader yet, and she suggested that she needed a briefing from No 10 before she could take final decisions.

Well, maybe. But perhaps Truss is also nervous about confirming that her first act as PM will be to announce a freeze on energy bills – a policy proposed by Labour and the Lib Dems last month, and also championed by Gordon Brown (who was regularly cited by Truss during the campaign as representing the sort of economic policy she rejected). Truss has not confirmed that she will introduce some sort of energy price freeze. But she did not deny that she was considering this in her BBC interview yesterday, and in the papers this morning there are multiple reports saying that this is what she is planning.

In their splash for the Daily Telegraph, Ben Riley-Smith and Tony Diver say “campaign sources familiar with discussions, and energy company insiders who have been consulted, have said that a freeze of some form is now expected”. They go on:

Scottish Power has proposed a £100 billion plan for a two-year energy bill freeze, financed by loans underwritten by the Treasury. The proposal is backed by other energy firms.

One energy company source said the idea has been “extremely actively explored” by Truss campaign figures and that Kwasi Kwarteng, the Business Secretary tipped to become chancellor if Ms Truss wins, appeared “very open” to options for a freeze.

A second industry source confirmed the proposal was being scrutinised by the Truss campaign.

Truss team insiders have told The Telegraph the same. One said: “I’m confident there will be a mechanism introduced that freezes bills.” Another said the idea had been discussed “quite a lot in the last fortnight”.

The specifics of such an energy bills freeze – exactly who would benefit, how long for, at what price level and the degree to which the taxpayer would cover the cost – remains a point of debate, according to sources.

And in the Times Geraldine Scott, Oliver Wright and Henry Zeffman report the same. They say:

Senior Tories lined up for appointments in Truss’s cabinet have been told “in no uncertain terms” not to scorn the idea that energy bills could be frozen.

Industry sources said that a price freeze for consumers was “the only conversation that anyone was having with the government”, including discussions involving Kwasi Kwarteng, who is expected to be Truss’s chancellor.

“The plan is to introduce some kind of artificial price cap for consumers combined with a mechanism for reimbursing suppliers,” one source said. “Plans are reasonably well advanced and involve not just civil servants but also ministers lined up for jobs by Truss.”

The Conservative party will announce the results of the leadership contest at 12.30pm at the QEII Centre in London. The winner will then deliver a short speech, but will not formally become prime minister until after Johnson tenders his resignation to the Queen at Balmoral tomorrow.

My colleague Archie Bland has used his First Edition briefing to explain how the first week, the first 100 days and the first year for Truss may unfold if, as expected, she is the victor.

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