Rishi Sunak vs Liz Truss: the leadership contest goes on despite the war

The gleeful response from some of Boris Johnson’s supporters to Rishi Sunak’s drubbing after his spring statement was as unwise as it was premature. One anonymous cabinet minister, described as an ally of the prime minister, told The Times that the gloss is coming off the chancellor, who looks increasingly like a “privileged billionaire”.

Sunak’s supporters responded in kind, saying that he viewed the prime minister as “totally unreliable and unpredictable”. The leakiness of this government is a sign of weakness, and clear evidence that the Conservative leadership election is running full tilt, despite the war in Ukraine.

It was ever thus, but it is worse now. Governments always leak, and allies always speak to journalists, but it is unusual to have ministers treating cabinet meetings as an open mic session for criticism of their own government’s fiscal policy. The addiction to open government is so serious that Sunak took the precaution of leaving out the actual measures when he told the cabinet on Wednesday morning about his plans for the statement that afternoon. He briefed them about the economic forecast and the “broad principles” instead.

Even so, Kit Malthouse, the policing minister who attends cabinet, said the chancellor should be cutting public spending, and was supported by Jacob Rees-Mogg, the Brexit opportunities minister, two contributions that were relayed to the public within hours. This was the sort of thing that went on in the dying days of the Theresa May administration – when she would joke that she would read James Forsyth in The Spectator to remind herself what the cabinet had just discussed.

Then, too, questions of policy became embedded in calculations of advantage in the struggle for the succession.

The key to understanding Sunak’s mini-Budget is that it was designed to defend his position in the leadership contest against Liz Truss, the foreign secretary. She advertised her opposition to the rise in national insurance in September, by speaking out in the public forum known as a cabinet meeting, and has been sitting in the “low tax” lane ever since as events have pushed more and more Conservative MPs in her direction.

MPs are the electorate for the first two stages of a Tory leadership election. First they have to oust the existing leader, then they have to choose two candidates to put to the party members. They have been agitating to “spike the hike” in national insurance ever since Sunak won the argument for fiscal restraint with the “unreliable and unpredictable” Johnson last year. If the people’s priority was to spend more on clearing the NHS backlog, the people would have to pay for it, he said.

Since then, energy prices have gone up, war has broken out in Europe, and tax revenues have come in higher than expected. That allowed Sunak to “spike most of the hike” by putting up national insurance thresholds. The screeching U-turn came too late to change payroll software next month, but from July 70 per cent of workers will pay lower national insurance contributions than they do now.

In a further attempt to cut into Truss’s low-tax lane, Sunak pre-announced a cut in the basic rate of income tax in two years’ time.

This mini-Budget, though, was like a wet paper sack of potatoes: Sunak stopped the potatoes falling out of one hole, only to find the bag ripped somewhere else. Any credit he might have gained for turning the corner on raising taxes was obscured by the outrage at his failure to protect the poorest from rising prices. He responded with the second refuge of the scoundrel, which is to blame the BBC for reporting on poverty, but there are plenty of Tory MPs who think it is wrong to uprate benefits and the state pension by 3 per cent when prices have gone up 6 per cent and the inflation rate is expected to rise to 8 per cent in the next few months.

Brutally, though, that is not the flank Sunak needs to defend against Truss. It is all very well Ed Balls lecturing him on TV that good economics is good politics: that is not always the case when the politics is the internal politics of the Tory party. In any case, Sunak thinks that he can always come back to the issue in the autumn Budget, by which time he will know more about the energy price crisis.

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The backlash against Sunak’s spring statement may, in any case, be overdone. He knew there would be tough times ahead for him after his furlough-induced popularity. He was uncomfortable being asked about his family’s wealth and fumbled his show of empathy with people’s worries about the price of bread and petrol. Yet he remains the best qualified candidate to replace Johnson if Tory MPs decide that is what they need to do.

The question is whether they will make that decision. I have my doubts. The voters are said to be still angry about lockdown parties, and for some who felt they were asked to make great sacrifices I am sure that is true. But for the majority I wonder if their vote next time is going to be decided by a cake.

It is also true that Tory MPs have an astonishing lack of loyalty to the leader who delivered Brexit, but remember that Tony Blair broke his base of support in his parliamentary party over Iraq in 2003 and yet carried on as prime minister for another four years. So Sunak may have to wait until 2026. Still, perhaps the Metropolitan Police will have finished its investigation by then.