Political InsightSeptember 5, 2022

As had been widely expected, we have now had official confirmation that Liz Truss is the new leader of the Conservative Party and, from tomorrow, the new Prime Minister.

Just two months ago, Boris Johnson resigned as leader of the Conservative Party: now, after a leadership contest that rapidly became a one-sided race to the finish line for Liz Truss, the country and the Conservative Party has its fourth leader since 2010 and its second who comes into office on an immediate campaign footing.

Reports have indicated Liz Truss intends to divide her premiership into two stages: a hundred-day march to the end of the year, focusing relentlessly on the cost-of-living, and then a year's highly focused policy delivery, aimed squarely at improving the Conservative Party’s chances at the next general election.

Here’s how we expect the rest of the week to play out

Tomorrow: Boris Johnson will fly to Aberdeen and travel from there to Balmoral Castle to tender his resignation to the Queen, recommending that she summon Liz Truss as his replacement. Truss will then head to the castle, to ‘kiss hands’ with the sovereign, before a breakneck hurtle down to London and No. 10 where her core team of advisers will be waiting for her.

Truss will then give a speech from outside Downing Street around 4pm, outlining her policy and political priorities, before beginning the process of formally assembling her government.

The Advisers: Team Truss has been a long time coming: the new Prime Minister values loyalty and her team have followed her through a tumultuous career that reaches its zenith today. The core team is already in place: further appointments will be made covering ministerial advisers as the ministers themselves are put in position. Expect a slimmed-down No.10 operation with some sources even suggesting that the legislative affairs team will be cut wholesale: demonstrating how campaign-focussed Truss' office is going to be by design.

Avengers Assemble: By tomorrow evening we can expect the top team of ministers to be in place: as things stand, Kwasi Kwarteng looks a shoo-in for Chancellor, with Suella Braverman as Home Secretary, and James Cleverley as Foreign Secretary appearing likely.

Wednesday: Truss will hold her first cabinet meeting, followed by her PMQs debut. Given criticism of her style and presentation was a major part of the leadership contest, it will be intriguing to see her trade blows with Keir Starmer across the despatch box for the first time.

The Rest of the Week: With more than 150 ‘payroll’ jobs to fill, much of the week will be consumed by constituting the government. Big moments are expected to include the appointment of the first ever female Conservative Chief Whip, who will have the immediate task of gripping increasingly serious concerns regarding widespread misconduct amongst male Conservative MPs, as well as the revelation of which of Johnson’s own ministers will keep their jobs.

Then: An Emergency Budget. With dates as soon as 14^th September already being touted, this is where Truss' £100bn of economic support to get the nation through the current crisis will come into play. Hidden during the campaign, many suspect as so to not spook the economically orthodox Tory faithful, it is expected to be a much more 'pragmatic' than 'ideological' budget, with striking similarities in the way it is being briefed by Team Truss to the emergency COVID-19 budget of 2020, presided over by her vanquished rival Rishi Sunak. Whilst light on policy detail at this stage, expectations are set for a tightly focused 'fiscal event' followed by 'a budget for the whole economy' later in the year.

Given the timescales involved, it's clear business will have limited opportunities to influence this emergency budget, meaning focus will turn from a policy formulation perspective to November-December for a second full budget, giving business 10 weeks at the outside to formulate their asks, build support, and ensure their inclusion in the later budget.

The Policy Landscape

Housing
Truss’ team has said housing will be a key pillar as part of her first 100 days in office. Given the well-publicised hostility between Liz Truss and the previous Secretary of State at DLUHC Michael Gove, it will be worth watching whether the new administration will seek to overhaul his legacy policy proposals. Expect a different feel to Team Truss' approach: they say they will move away from issuing orders to consulting with industry and consensus building. An early litmus test is clearly around building remediation: developers have expressed their anger at the burden on the sector, which they argue is unworkable. The construction sector was pleased to hear announcements made by Truss on the campaign trail including the creation of low tax zones with lower business rates and fewer planning restrictions in left-behind areas. The other headline grabber is the plan to ditch the 300,000 homes a year target, which Truss described as “Stalinist”.

Sustainability and Climate Tech
Sustainability activists have been largely left wanting for more throughout the Conservative leadership contest. Whilst contenders committed to the Net Zero 2050 target early in the contest there have signs of a step away from more 'Eco-Conservatism', including the potential re-authorisation of fracking, a moratorium on the green energy levy, and criticism of the “eyesore” produced by solar panels and onshore wind farms. What will change is the approach, with a view towards pragmatism, innovation, and the wider benefits of climate tech. Businesses should be thinking about how their latest environmentally friendly project crosses over with other priorities such as energy security, investment, and innovation. It will be more important than ever for businesses to be able to justify this to influence the regulatory and political environment needed for climate tech and sustainable business initiatives to grow.

Consumer Goods & Supply Chain
Inflation continues to impact all sectors, and although retail sales and footfall saw a brief rise in the summer, consumer goods and the supply chain are battening down the hatches for the oncoming economic storm. With a new government in place, there will be opportunity to pitch new perspectives on policy for business. Though specific policy commitments in the Truss campaign have been thin on the ground in this area, a common theme is Truss’ promise to be “unashamedly pro-business”, focusing on improvements on the “supply side” of the economy to “unleash investment and boost economic growth”. A retail coalition has already sought to leverage this, driving a campaign for a cut in business rates. The door to Downing Street will be ajar for the right pitch on pro-business reforms – especially regarding investment and innovation on the supply side of the economy.

Financial Services
In an interview with City AM towards the end of her campaign, Truss called the City a “jewel in the crown of the UK economy...held back by onerous EU regulation”. Her passion for cutting red tape could mean one big theme for the City: deregulation. As such, there is likely to be some continuity from Rishi Sunak’s endeavours to create a leading role for the City after Brexit, but with radical new steps such as the suggested merger of the UK’s financial regulators (FCA, PRA and PSR) into a single body. With consultations potentially coming down the road, the FS sector must act fast to make their voice heard and shape any major changes in regulation the next few years could bring.

Foreign Policy and Defence
Having been Foreign Secretary for nearly a year now, this is one policy area where we already know what we can expect from a Liz Truss premiership. Truss is unlikely to diverge from Johnson’s stance on Ukraine and has already taken a very public, robust line on both Russia and China. Closer to home, her popularity amongst Western European states is likely to be very low, although she will find more favour in the east of the continent, and we can expect deepening relations with the likes of Japan. We can expect to hear the term ‘Global Britain’ much more regularly under Truss. On defence, Truss has already pledged to bring the target of spending 2.5% of GDP on the defence budget to 2026, as well as a commitment to 3% by 2030. This has been combined with a commitment to more support in intelligence and cyber capabilities, as well as a potential update to the Integrated Review.

Brexit / Trade
Brexit may prove to be the first Parliamentary challenge Truss faces. With the Northern Ireland Protocol Bill having passed through the House of Commons before the Summer Recess, its passage through the Lords will likely face significant opposition, and the introduction of amendments the Government are unlikely to support. Throughout the leadership campaign, Truss pledged to push the Bill forward, which will tear up the current Northern Ireland Protocol, and likely lead to frostier relations with the EU, with likely implications including the introduction of tariffs and restrictions on UK exports by the EU. The final version of the Northern Ireland Protocol Bill may prove to be the first test of Truss’s authority over her Parliamentary party, and an indication to the direction UK-EU relations will take. The implications on supply chains will be profound: ensuring business concerns are heard by the Government over potential supply chain disruptions will be crucial in the coming months.

NHS / Healthcare
Throughout the leadership contest, both candidates outlined their visions for ensuring funding for social care and the NHS, with particular focus on policies to reduce care backlogs, particularly cancer care. Firm commitments made by Truss included the diversion of the £13 billion earmarked for the NHS from the recent NI rise to local authorities to pay for older people’s care as soon as possible. Health and social care remain a key priority for Conservative members, as well as the wider electorate. Recently announced plans to crack down on NHS bureaucracy, estimated to cost taxpayers £2.8 billion a year can be expected to be continued by the next administration due to its popularity within the Conservative Party, and will have far reaching effects on NHS procurement and research and innovation. Alongside further anticipated reforms, engaging with the NHS will be vital for pharmaceutical companies and those involved in health-related supply chains.

A Premiership of Two Halves?

Team Truss come into office with a clear game plan: 100 days to ensure that the Conservatives regain initiative on cost-of-living, and 18 months to prepare for a general election after that. This most business friendly of Prime Ministers will be keen to seek third party support in policy formulation and endorsement of her plans.

There is a real opportunity for business to shape the agenda of the next 18 months with highly targeted interventions into the political debate, but the window will close quickly. With a general election so close, time for legislating will be highly sought after, and the process of turning ideas into policy, policy into bills, and bills into law will require even more skilled management than ever before.