Liz Truss has somewhat reassured the markets with her retreat. By withdrawing her proposal to abolish the 45% rate for the highest incomes, the pound sterling has stabilized. But only for now.
The economic plans deployed by the new prime minister —direct aid to pay the energy bill, or tax cuts— continue to create a hole in the public debt of almost 7% of GDP. Truss must demonstrate that growth incentives are accompanied by the necessary fiscal responsibility. That means adjusting spending. Unpopular measures, such as preventing benefits and social assistance from rising at the rate of inflation — already at 9.9%. And there has arisen the next internal rebellion of the conservatives against a government that has been in command for barely a month and is already experiencing its lowest hours.
Boris Johnson, who always knew how to navigate where the current was more propitious, promised on June 30, 2020, when the United Kingdom desperately wanted to get out of the pandemic, a generous and fair economic plan: “We will not respond to this crisis with what the people have called ‘austerity’. We are not going to get out of difficulties in a miserly way”, he announced. The Conservative Party is terrified by the scars left on its image by the past decade, when the then prime minister, David Cameron, and his finance minister, George Osborne, tried to straighten out the country’s accounts by means of social cuts. The Nasty Party, the ugly, unpleasant party. That’s what they called back then Tories.
Truss understandably balks at using the word austerity whenever asked. “I speak of fiscal responsibility, of the need to reduce the proportion of public debt with respect to GDP, after an extraordinary crisis after an invasion of Ukraine that has caused, for example, the rise in gas and electricity bills. ”, he defended himself this Tuesday on the LBC station.
Truss doesn’t want to tie his hands. He refuses to clarify whether his government will increase the benefits and social assistance received by the most disadvantaged at the same level as inflation -as it has done with public pensions-, or if it will adjust them rather to the average rise in wages, notably lower. With a very powerful private pension system, the expenditure that the United Kingdom allocates to its retirees is much lower than that of other countries such as Spain or France, while the part of the budget reserved for social assistance represents a very considerable figure. The Government calculates a saving of about 5,700 million euros if it keeps them below inflation.
“When people live on a fixed income, as happens with pensioners, it is very difficult for them to adjust to the circumstances. The same does not happen with those who can work”, said Truss. A clear indication of what he intends.
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Again, however, the rebellion has arisen within his own home. “I have always supported that increase, whether it is about pensions or the welfare state and its benefits. It makes all the sense in the world to adjust it to the level of inflation”, has defended Penny Mordaunt, leader of the House of Commons (a position similar to the Spanish one of Secretary of Relations with the Courts, but with ministerial rank). Her opinion counts. Not only because she was the first member of the Government to speak out even before the decision was made, but because she Mordaunt was the clear favorite in the conservative primaries of the summer, and remained above Truss in the preferences of the parliamentary group for a time.
And not only she has shown her concern. Former conservative ministers Michael Gove, Damian Green, Esther McVey or John Glen have also been against a measure that takes away on the one hand what the Government —with energy aid— gives on the other. The same ones who managed to bend the arm this week to the prime minister and made her withdraw her tax cut for the richest, once again make it clear to her that she does not enjoy the autonomy and freedom of maneuver that could be expected from someone who has barely put a standing in Downing Street.
Even Ian Duncan-Smith, the former leader of the Conservatives sponsored by Margaret Thatcher, who in turn sponsored Truss this summer in the primary race, has warned him of the risk of screwing up again: “It makes no sense to withdraw part of the great support that we are giving to citizens, so that they can face the increase in the cost of living, and at the same time not update all these social benefits at real prices”, said Duncan-Smith this Tuesday. “I have not entered politics to make poor people even poorer. It is very surprising that on the one hand we address the terrible increase in the cost of living, and then we are not willing to maintain in real terms the value of the aid needed by the most vulnerable in our society”, the former minister has joined the protest. Conservative Andrew Mitchell.
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