Truss vs Sunak – and the choice of two very different futures for Britain

“A choice of two futures” is a slogan political parties often use in general election campaigns. Now, Conservative Party members must make such a choice, as they decide whether Rishi Sunak or Liz Truss will be our next prime minister.

The contest should finally resolve a split inside the Tories since the country’s decision to leave the EU six years ago left the party with an identity crisis. On the surface, the choice is between the fiscal responsibility offered by Sunak and the immediate tax cuts promised by Truss.

But this debate masks a more fundamental question: should Brexit Britain adopt the Truss vision to exploit its new freedoms by becoming a low-tax, low-regulation country which diverges from EU rules, with a “smaller state” – dubbed “Singapore-on-Thames” by Brexiteers? Or should it take the Sunak road: living within its means, balancing its books and recognising the growing demands on public services, not least from an ageing population?

“The party has a real choice; it’s a fork in the road moment,” one senior Tory MP told me. Another said: “This will now be a real battle of ideas.”

The post-Brexit faultline has been masked under Boris Johnson’s premiership; he talked the talk about the “opportunities of Brexit” but, surprisingly, did little to exploit them. The electoral coalition he assembled in 2019 steered his government towards higher spending, and the highest tax burden for 70 years – when Sunak as chancellor insisted on a rise in national insurance contributions to fund Johnson’s social care reforms.

That tax burden will now be hung round Sunak’s neck by Truss. The foreign secretary has promised to chart a new, go-for-growth course from “day one”, warning that Sunak has driven the country towards recession. She would replace policies which have seen low growth for two decades with “bold supply-side reform”.

She would reverse the April national insurance increase and suspend the green levy to cut £153 from energy bills to tackle the cost of living crisis. She has hinted she would scrap the rise in corporation tax from 19 per cent to 25 per cent due to take effect next April. Her package could cost as much as £40bn. Many economists warn that tax cuts would push up inflation (and therefore interest rates), dismissing the idea that they would pay for themselves by boosting growth.

Truss would allow borrowing to take the strain, arguing the nation’s pandemic debt should be regarded as a “war debt” to be repaid gradually. Her Achilles heel as prime minister might be a further squeeze on public spending, but she would deny the charge of a “return to austerity” by promising radical public sector reforms.

Sunak offers a very different vision. To his Tory critics, it amounts to more of the same from someone who became “a prisoner of Treasury orthodoxy”. Sunak insists he is a “low tax Conservative” but that tax cuts must wait until inflation is brought under control. He has a fair point when he argues that, despite Truss’s tribute act, he is the true heir to Margaret Thatcher, who raised taxes to balance the books before cutting them in the later stages of her premiership. As one Sunak supporter said: “Rishi needs to make this case more vigorously; the history of the Thatcher era has been rewritten.”

Tory MPs suspect the Truss “tax cuts now” offer will play better with party members than Sunak’s approach, even though studies suggest they are not as keen on a small state as Truss and do want to safeguard public services. But to avoid defeat, Sunak might need to tackle quickly the perception he is “opposed to tax cuts”.

Many Tory members will vote early next month when ballot papers are sent out, so we can expect a flurry of policies from Team Sunak soon. I suspect he might promise to speed up the 1p in the pound cut in income tax he had pre-announced as chancellor for 2024, so it took effect next April. When accused of a panicky U-turn, he could reply that he had planned to do this in his Budget this autumn.

Although Sunak has been painted by rivals as on the Tory left, he is right to describe himself as a fiscal conservative. Yet instinctively he would be more sympathetic to the financial demands of public services than Truss. But that would not apply in every area of spending.

Truss has pledged to raise defence spending to 3 per cent of GDP by 2030, while Sunak would keep it on its present path, rising to 2.5 per cent over the same period. Although the former chancellor gave the Ministry of Defence special treatment in his spending review, he shares the Treasury’s scepticism about getting value for money from it.

While the Truss camp suggests Sunak would be less supportive of Ukraine amid fears of the impact on the UK of sanctions against Russia, in practice they would probably adopt the same approach. However, Truss would probably be more hawkish than him towards China.

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The foreign secretary would likely adopt a tougher approach to relations with the EU. Sunak’s allies hint he would want to improve relations, which would require flexibility over the Northern Ireland protocol. Truss, having won the support of many Brexiteer Tory MPs, would want to live up to her rhetoric, and would press ahead with her controversial legislation allowing the government to override key parts of the protocol. So the UK’s standing on the world stage would probably be higher under Sunak than Truss.

Some changes under the new administration will be cosmetic. Johnson’s promise to level up might not survive as a slogan but the strategy will have to continue as the new Tory leader tries to hold on to the red-wall seats won in 2019. Both Sunak and Truss have pledged to appoint a new minister for the North and bring in more devolution and a formula to ensure left-behind areas secure government funding.

Whoever wins the Tory race will face the difficult task of renewing the party in government, while facing a daunting in-tray of immediate pressures including an economic crisis and war in Europe. That is why some Tory MPs privately think the party’s “battle of ideas” will have to be resolved during a spell in opposition.