The economic policies of Rishi Sunak and Liz Truss, who are the two contenders to become the next Prime Minister, have been under intense scrutiny, largely due to the continuing economic crisis in the UK. Voting has been taking place for weeks to find Boris Johnson’s replacement, with an initial eight candidates being whittled down to two. The final deadline to submit votes is 2nd September.
The surviving candidates have been proposing very different economic policies in an effort to show they have workable plans to improve the economy and help voters survive their current financial hardship.
© pcruciatti / Adobe Stock.com. Simon Walker / HM Treasury, UK Government / Wikipedia / Open Government Licence v3.0
In a year that has so far seen energy prices rocket, petrol prices reach a record high of £2 a litre and the cost of food increase by more than 13% since last year, hard-hit consumers are looking for someone to lift Britain out of the mire.
Since Boris Johnson’s resignation on 7th July, following a number of scandals, an initial list of eight candidates has been whittled down to the final two. Conservative Party members, rather than the wider voting public, will be responsible for making the right choice on 2nd September, basing their informed decision on how well Sunak and Truss have presented their policies over the past few weeks.
Economic policies
Sunak has said he would ideally like to cut taxes, but this would have to wait until the country’s finances were in a better position. This led to accusations he was a “high-tax chancellor”. He claimed other candidates weren’t facing the hard economic realities and were offering “comforting fairytales”.
He is promising a return to “traditional Conservative economic values”, a stance interpreted as a wish to return to “austerity economics”. He has promised to scrap VAT for one year on household fuel bills, saving £160 for every household. He has said he will reduce the basic income tax rate to 16p if the public re-elects the Conservatives in 2024. He has also pledged to reduce taxes by 20% by the end of the decade.
Truss has pledged to introduce tax cuts to help the economy. She also says she plans to reverse the National Insurance rise, introduced by Johnson to help fund health and social care in post-Covid Britain. While not ruling out specific help to pay energy bills, she hasn’t elaborated on what this may involve, other than suspending green levies – a saving of around £150 annually on the average bill. She has intimated she doesn’t like “handouts”, preferring people to have more of their own money.
Critics say her economic policy, based on tax cuts, will help those who are better off but won’t help senior citizens or unemployed people. Truss believes her policy will help everyone in the longer term by boosting economic growth.
Neither candidate has offered a 100% clear plan to ease the energy bills crisis. Sunak has suggested he will provide more help, in addition to the plans announced while he was Chancellor. Truss appears to have softened her stance slightly, indicating she may provide further help.
Consumer borrowing
Research by Totally Money and PWC reveals that 16 million people in the UK will need to take out a loan if they have unexpected expenditure of even £300, as their budget is so tight.
New research by Citizens Advice predicts 25% of householders won’t be able to afford their energy bill when prices increase again in October, even with the £400 government refund deducted from bills.
The latest UK Bank Lending Forecast from the economic forecasting group, EY ITEM Club, predicts consumer borrowing in the UK will rocket to a five-year high of almost £16 billion by the end of 2022. The expectation is that consumers will increasingly turn to credit to cover bills and fund spending on household essentials.
Whatever the outcome of the leadership battle, it looks like we’re all in for a long, hard winter.
