Liz Truss’s plans for a two-year energy bill freeze, estimated to cost £100 billion, underscore three points. One, the incoming Prime Minister expects the energy crisis to be with us for more than one winter. Two, she grasps how lethal it will be to the Tories’ hopes of re-election if the Treasury doesn’t intervene in a big way. Three, she is prepared to run up government debt even further in order to mitigate a crisis that threatens people’s quality of life. This third point is the crucial one.
When a neo-Thatcherite like Truss concedes the merits of transformative interventions funded by borrowing, it opens up a broader conversation. If the Treasury can burn through a few more national credit cards to buy the Tories a fighting chance in 2024, why can’t it do the same in areas where there is at least as much need but not the same chance of political reward?
What’s the point in making this case? Liz Truss is never going to go for it, is she?
Take poverty. Absolute child poverty currently stands at 23 per cent but the Resolution Foundation forecasts an increase to 31 per cent by 2023-24, which works out at 1.3 million more children living in poverty. Bear in mind, under the terms of the 2010 Child Poverty Act, we are supposed to have less than five per cent of children living in absolute poverty by this point. Overall absolute poverty is heading from 17 per cent to 22 per cent in the same timeframe. That means an additional three million Britons living in poverty between last year and next year, when the headline figure will hit 14 million. Again, these figures don’t describe relative poverty, poverty measured against median incomes today, but absolute poverty, where families are living on less than 60 per cent of the median income more than a decade ago, adjusted for inflation.
Poverty is a moral evil but it is also a social evil. Given what we know about the ripple effects of poverty on health and education outcomes, on family and community cohesion, and on crime and drug and alcohol dependency, no conservative worth his or her salt can tolerate these levels of deprivation. Funnel as much cash as you want into the health service, schools and policing, but unless you tackle poverty, you’re just pouring water into a bucket with a hole in the bottom.
Naturally, Tories want to emphasise wealth generation, job creation and lower taxes, and, deployed correctly, these can be useful anti-poverty tools. But applied in isolation, they merely alter the size of the bucket without reducing the size of the hole. Fiscal interventions are essential if you want to reduce the proportion of the population living in poverty. Truss needn’t abandon her economic instincts; she can complement them with a different kind of fiscal tool. She has already committed to scrapping the outgoing government’s hike in National Insurance Contributions, which is expected to cost £13 billion, but this would have no impact on the incomes of Britain’s poorest families. The Prime Minister could buttress an NI tax cut with a cash transfer that gives some relief to those doing it tough.
What might such an intervention look like? We have a recent example thanks to the Treasury’s Universal Credit uplift, a pandemic-era policy that put an extra £20 a week in the pockets of the worst-off. The impact? Some 400,000 children were lifted out of relative poverty. Instead of consolidating these gains, the government withdrew the uplift. Restoring it would cost £6 billion, a significant outlay but roughly five per cent of what Truss is prepared to spend freezing energy bills and half the cost of giving less deprived people a tax cut. Inflation means a new uplift would probably not lift the same number of children out of poverty, but that is an argument for supplementing it with proposals like those from the Resolution Foundation for twice-annual uprating of Universal Credit, lifting the benefit cap in line with consumer price inflation and boosting local housing allowances by rental price growth.
This would mark only the beginning of the interventions needed, and a modest beginning at that, but it would numb some of the current and coming financial pain for the poor, and especially children in poverty. Built upon with enough political will and fiscal ambition, it could bring about a substantial reversal in poverty trends.
What’s the point in making this case? Liz Truss is never going to go for it, is she? Maybe not, but the case should be made all the same. Conservatives, particularly since the Thatcher years, have consistently espoused (though less consistently delivered) fiscal continence. Yet a conservative philosophy of life and government should be at least as concerned with social continence, given the correlations between inequality and crime, family breakdown, and drug misuse. It is in the interests of the Conservative government, and the sort of society conservatives wish to see, to reduce the economic circumstances that lead to unconservative outcomes.
In her victory speech yesterday, Liz Truss said she ‘campaigned as a Conservative’ and would ‘govern as a Conservative’. In her first major policy measure, she has signalled that her conservatism is capable of being pragmatic. The question is whether Truss’s pragmatism only extends to the electoral needs of the Conservative party or whether it can be put in service of a conservative conception of the common good.
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