FTI Consulting Public Affairs Snapshot – Truss in No 10: Energy, Energy, Energy

Truss sits on the free-market wing of the Conservative Party and is known for her libertarian views on issues from the economy to personal freedoms. As Chief Secretary the Treasury, she frequently spoke about her desire to tackle vested interests in the utilities, transport and planning sectors, arguing for deregulation across the board.

Writing for 1828 in January 2019, Truss called for the size of government to be reduced, arguing for a state that ‘does less, better’. In a similar article for the same publication in March 2019, she branded this ‘popular free-market conservatism’ and said it is governed by three principles: ‘First of all, we should focus on people’s priorities, not the blob of vested interests. Second, for a free-market economy to succeed, everyone must have a shot. Third, the state should help people on the margins take control of their own lives, not tell capable citizens what to do’.

During the current leadership election, Truss has made tax cuts and economic growth central themes of her policy platform, telling The Sun: ‘There is a view that the British economy can’t grow any faster, that there is a ceiling and that what we have to do is just raise taxes in order to pay for all of the things we all need – like the National Health Service, roads, rail. I don’t believe that’s true. I believe that we can grow the British economy faster. But we need to back business to deliver and we need to stop putting so much red tape, so much tax on business, and we need to get on with delivering things quicker.’

To address the cost-of-living crisis head-on, Truss has consistently said that she would hit the ground running ‘from day one’ by holding an emergency budget to implement her key tax-cutting policies. That commitment has been downgraded in recent days, after the Office for Budget Responsibility said it would need 10 weeks’ notice to carry out a full economic forecast. In its place, Truss’ allies have confirmed that she will hold a ‘fiscal event’ in September instead, with a more comprehensive budget to be held later in the year. A source close to Truss told The Times: ‘Liz has been very clear that tax cuts will be immediate. She has been clear that on day one we will set about reversing the national insurance increase.’

In early August, Truss made further headlines by signalling that she would not issue ‘handouts’ as a means to support people financially, preferring tax cuts instead. Following controversy in the media and direct criticism from her opponent Rishi Sunak, she soon rowed back on her position. However, whilst she has since clarified that she will intervene to provide financial assistance ‘across the board’, she has also reaffirmed her opposition to ‘reach first for the handout’ before looking at the causes of growing energy bills.

Whilst her campaign’s ambiguity and lack of detail have attracted criticism from across the political spectrum, Truss has made several concrete pledges designed to ease the cost-of-living crisis. Chief among these is a trio of policies that look to quickly deliver short-term relief to consumers and employers alike. They are:

• a reversal of the national insurance rise.
• a reversal of the planned corporation tax rise.
• a temporary moratorium on the green energy levy.

In recent days, these plans have reportedly developed further, with speculation that Truss is considering a five per cent cut to the 20 per cent headline rate of VAT, as well as changes to income tax rates. Her team are also thought to be weighing up Covid-style relief packages for businesses, including a significant temporary reduction in VAT for the hospitality, tourism and agriculture sectors.

If Truss wins the Conservative leadership election, she is expected to appoint Kwasi Kwarteng as Chancellor of the Exchequer. A fellow free-marketeer, Kwarteng has been Secretary of State for Business, Energy and Industrial Strategy (BEIS) since January 2021 and has been a close confidant of Truss since they entered Parliament together in 2010. Following Boris Johnson’s resignation, Kwarteng was an early supporter of Truss’ candidacy and has said that Britain will enjoy a new era of tax cuts and business investment under her leadership.

Writing in The Mail on Sunday, Kwarteng has also said that he wants to ‘reassure’ people that ‘help is coming’ to alleviate the cost-of-living crisis, adding that Truss ‘will do all she can to help households’. However, he reiterated Truss’ opposition to levying windfall taxes in order to provide such support, stating: ‘I appreciate windfall taxes are sometimes popular. But popularity won’t keep the lights on’. In late August, The Telegraph reported Kwarteng’s intention to intervene in the energy market in an attempt to stabilise the ‘crazy’ profits of renewables firms. At present, he is in talks with generators about offering favourable fixed-term rates at which to sell energy to suppliers for 15 years if they agree to stop selling cheap renewables at high wholesale prices.

Throughout the leadership election, the current Chief Secretary to the Treasury, Simon Clarke, has been tipped for the role of Secretary of State for Business, Energy and Industrial Strategy (BEIS) if Truss becomes Prime Minister. However, in recent days, it has been reported that the Minister for Brexit Opportunities, Jacob Rees-Mogg, may be in line for the position, with Clarke moving to the Department for Levelling Up, Housing and Communities instead. This scenario has grown more likely in recent days, with reports that Kwarteng and Rees-Mogg have been meeting oil and gas companies to negotiate a deal to secure energy supplies this winter. The pair have reportedly concocted a ‘two-pronged’ approach that involves securing more gas from Norway whilst maximising domestic production by approving a new series of drilling licences in the North Sea.

Whilst both men sit on the free-market wing of the party and have supported Truss in the leadership election, there are notable differences in their views on environmental issues. Clarke has consistently been a strong supporter of the Government’s climate agenda and a prominent advocate for the expansion of renewables, including both onshore and offshore wind. In 2018, he was also at the forefront of the campaign to secure the legally binding commitment for net zero. Rees-Mogg, however, is markedly more sceptical on the issue, warning earlier this year that the ‘huge regulatory cost’ of net zero will hold back plans for post-Brexit deregulation. He said that keeping the costs of the net zero push as low as possible was ‘fundamental’, adding it should be driven by technological innovation rather than ‘endless regulation’.

Aligning with Truss’ views, Rees-Mogg’s scepticism in this area is more concerned with the means rather than the ends. Indeed, when arguing for Britain to think about ‘exploiting every last cubic inch of gas from the North Sea’, he stated: ‘We are not going for net zero tomorrow – 2050 is a long way off’. If Rees-Mogg does take the reins at BEIS next week, we can certainly expect a clear change in rhetoric along with a slight shift in urgency – but repealing the net zero target itself is highly unlikely.

In the eyes of many in the Conservative Party’s grassroots, Truss will mark a return to perceived core Conservative values of low taxation, deregulation and limited government intervention. Whilst she will face stiff opposition from opposition parties as well as from some of her own MPs – including Rishi Sunak, who has implied that millions of people would be ‘tipped into destitution’ under her plans – the current need for leadership in a party plagued by division, fatigue and poor discipline is incontrovertible.

With her arrival, Truss will also mark a significant shift in the ideological direction of the Conservative Party and is certain to do all in her power not only to make her presence immediately felt across Westminster, but to prove those who doubt her abilities wrong once again. Despite the myriad of obstacles she will face, Truss has history in this area. She has been underestimated many times before and, as the longest continuously serving cabinet minister, will surely take comfort in her record of surviving against poor odds.

If she fails, many of her colleagues will be waiting in the wings hoping to succeed her, including Boris Johnson himself. However, if she succeeds, she could follow in the footsteps of both Theresa May and Boris Johnson, brushing off the baggage of the previous party leader and presenting a fresh – if not entirely different – brand of the Conservative Party to the public.

It’s been done before with great success. But after 12 long years in government, can the Tory phoenix rise from the ashes for a third time? Looking ahead to what will be a winter of unprecedented difficulty for so many across Britain, it is not only Truss’ career that’s riding on her success this time, but the entire British economy.