In this latest IFoA blog, we look how the immediate objectives outlined by Prime Minister, Liz Truss play out against Truss’s world view and the political landscape that her Government faces – and looks at what they may mean for actuaries.
Arguably, our 56th and third female Prime Minister is the most libertarian occupant of Number 10 in living memory. Throughout her career, Truss has espoused strong social and economic liberalist beliefs, often accompanied by a tendency to question established conventions and institutions. Truss is a seasoned ministerial operator serving consistently in the governments of three previous prime ministers since 2010. She has also shown considerable political flexibility when required, most demonstrable through her dramatic transformation into an ardent Brexiteer after campaigning vigorously to remain in the European Union.
Following her appointment, Truss outlined three “early” priorities for her new Government: getting Britain “working again”; tackling the energy crisis; and ensuring that people could get doctors’ appointments. But how might these immediate objectives play out against Truss’s world view and the political landscape that her Government faces – and what do they mean for actuaries?
Throughout the leadership campaign, Truss purported a traditionally Conversative tax-cutting agenda. However, given the enormous levels of borrowing required to support businesses and individuals in the medium-term to face off the huge, unaffordable increases in energy prices, the tax-cutting spree promised by Truss to Conservative party members may not be as extensive as they had hoped for.
Indeed, much of the taxation that Truss proposes to ‘cut’ is in fact merely a reversal or suspension of planned rises – whether it be National Insurance or corporation tax – with the suspension on the green levy a temporary measure. Despite her own political instincts, there is little maneuverability at this time for Truss to implement the type of cuts she would like and ones the public would really notice.
On the wider economy, Truss has positioned herself as far less interventionist and more pro-business than her predecessor, proposing low-tax investment zones across the country and “full-fat” free ports, with further reductions in regulations and business rates. Interestingly, Truss also committed to getting “spades in the ground” in her maiden speech to the nation – which may be an indication of her support for investment in infrastructure projects to drive growth.
Furthermore, a major emphasis of Truss’s campaign was on increasing growth and competitiveness by maximising the opportunities created by the UK’s post-Brexit freedoms. One of the most important vehicles to undertake this is the Financial Services and Markets (FSM) Bill.
Truss also pushed the planned reform of Solvency II as a flagship example of a Brexit dividend that can deliver on her campaign’s vision for a stronger and more competitive economy. The implementation of this reform and resulting political dividends in time for the next election is dependent on the passage of the FSM Bill on schedule (sometime in early 2023). Aside from some potential tinkering to better reflect Truss’s economic tendencies – which might see the growth and competitiveness objective upscaled from a secondary to a primary objective within the Bill – we can expect only minor changes to the legislation by a Prime Minister keen to show results – fast.
Truss’s management of the energy crisis in the months ahead could make-or-break her premiership. Tactfully, Truss has been quick to adopt the political cover that the crisis is attributable to “Putin’s war” – and that alone. Irrespective of attributability, Truss will still have to respond to the growing unaffordability of energy. She may be forced to re-adopt the very pragmatism that landed her the top job, and at least temporarily abandon her instinctive small state principles to initiate a level of Government support to the public comparable in scale only to the Government’s interventions during the pandemic.
On the NHS, Truss has offered a back-to-basics approach by prioritising the seemingly mundane objective of ensuring the public can get a GP appointment. While ostensibly unambitious, to the contrary, the target is an honest recognition of the acute problems the public face when attempting to access front-line health services. It is entirely plausible that the Government can improve access to GPs and other NHS services, and so the low baseline enables Truss to claim a big political victory in the short term.
Of strong relevance is her pledge to divert the £13bn a year earmarked for the NHS to local authorities to pay for older people's care. It is hoped this will free up hospital capacity while financially boosting the social care sector. The proposal chimes with the type of solutions brought by the IFoA and wider profession in recent years to ensure more sustainable and accessible health and social care services.
The appointment of Therese Coffey, Truss’s “right hand woman”, as Health Secretary well as Deputy Prime Minister (DPM) demonstrates the seriousness in which Truss takes reform of health and care services. As DPM, Coffey will have a role in overall Government direction within the Cabinet Office and proximity to Truss in daily briefings – therefore influencing everyday policy moves and decisions. Individually, Coffey is a shrewd appointment, renowned as a potent operator of the vast DWP portfolio since 2019.
In all, it is not an understatement to observe that Liz Truss has one of the most fraught in-trays of any new Prime Minister in a generation. Yet, despite the multiple economic woes that the new PM faces, perhaps her biggest test will be whether she is able resist the trap of becoming entangled in a state of political reactivity to events. If she can weather the immediate storm and forge ahead proactively with bold reforms to the economy, health service and financial sector then she might just seize the opportunity against all expectations to become the most transformative leader since her hero, Margaret Thatcher. But, with a general election due before the end of 2024, time is not on her side and the list of crises is long.
