Liz Truss will be the next PM after defeating Rishi Sunak in the Tory leadership contest – taking the helm of a country in the grip of a cost-of-living crisis.
Ms Truss saw off the former chancellor’s challenge with support from 81,326 party members, compared to Mr Sunak’s 60,399. The result – closer than some had expected – was announced by 1922 committee chair Sir Graham Brady in a ceremony at the QE2 Centre in Westminster.
Ms Truss said it was an ‘honour’ to be the new leader of the ‘greatest political party on Earth’. ‘I know that our beliefs resonate with the British people,’ she said.
‘I campaigned as a Conservative and I will govern as a Conservative… I will deliver a bold plan to cut taxes and grow our economy.’
Ms Truss also paid tribute to Boris Johnson, saying he ‘got Brexit done, crushed Jeremy Corbyn, rolled out the vaccine, and stood up to Vladimir Putin’.
But the new premier faces one of the toughest in-trays in decades, with inflation fears mounting as gas prices soar again and the Pound slides further.
Speculation is growing that Ms Truss will opt for a bold furlough-style move to freeze energy bills – possibly by loaning companies money to hold down costs.
Wholesale gas prices rocketed by around 30 per cent today, following Russia’s decision to shut down a key gas pipeline.
The Pound also briefly slipped to a 37-year low against the US dollar, heaping extra costs on many commodities and imports.
Chancellor-in-waiting Kwasi Kwarteng has already been scrambling to reassure markets that although government borrowing will be ‘looser’ it will remain ‘responsible’. Ms Truss has also promised a wave of tax cuts aimed at boosting economic growth.
Ms Truss told the BBC yesterday that she will reveal fresh supports for struggling households within a week, but refused to spell out details.
‘Before you have been elected as prime minister, you don’t have all the wherewithal to get the things done,’ she told the Sunday with Laura Kuenssberg programme.
‘This is why it will take a week to sort out the precise plans and make sure we are able to announce them. That is why I cannot go into details at this stage. It would be wrong.’
British energy producers witnessed another huge rise in wholesale prices today, with gas prices surging by 20 to 30 per cent this morning.
The increase comes after a last-minute decision by Russia’s state-backed energy firm Gazprom to block the reopening of the key Nord Stream 1 pipeline to Europe.
The UK natural gas price was at £4.96 per therm this morning, up 86p or 21 per cent. At the start of 2021 it was at just 40p per therm. The price touched £7 per therm last week.
And the leading European benchmark Dutch TTF October gas contract rose by €62 (£52.53), or 30 per cent, to €272 per megawatt hours (MWh) by about 7.30am today, reversing losses seen last week.
Nord Stream 1 is the biggest gas link from Russia to Europe, supplying around 55billion cubic metres per year.
While the UK receives only 4 per cent of its gas from Nord Stream 1, other countries such as Germany are much more reliant on the pipeline, meaning its closure is causing prices to spike on international energy markets.
The move has raised fears factories could be forced to adopt a four-day working week to conserve energy. No date has yet been set for when Nord Stream 1 will be reopened.
Liz Truss and Rishi Sunak wait for the result of the Tory leadership ballot today
Liz Truss has vowed ‘immediate’ action to ease the pressure on struggling families
Rishi Sunak (pictured leaving his London home today) is expected to be defeated by Liz Truss in the Tory leader battle
Bill Farren-Price, head of macro oil and gas research and energy consultants Enverus, told BBC Radio 4’s Today programme of the decision: ‘It’s definitely going to bump prices higher after Russia failed to restart that pipeline.
‘But it’s becoming pretty clear to anyone who’s watching these markets that Russia’s weaponization of gas exports and a complete shutdown of supply to Europe is not impossible now.
‘And I think that’s what people are worried about now – the crunch moment is going to come in the winter when, if it’s particularly cold, demand for gas across Europe and even the UK is going to exceed what can be imported, and I think that’s the worry that people have.
‘It’s going to send prices back up to highs that we saw at the end of August or even beyond.’
Meanwhile the FTSE 100 benchmark index of leading companies fell by 64 points or 0.88 per cent to 7,217.43 this morning, and sterling dipped further against the dollar.
Derek Lickorish, chairman of Utilita which supplies 800,000 homes, also told BBC Radio 4’s Today programme: ‘When the banking system failed, Gordon Brown on October 8, 2008 made a £500billion facility available to bail out the banks.
‘And it’s now time that the Government bailed out energy customers – and not just domestic customers, business customers as well.
‘And I believe the sum is going to be, if this is what we’re going to do – and we don’t know, I need to stress that – but if we were to do it, it’s going to cost somewhere around £60 to £100billion to freeze prices for all customers for about 12 months.
‘But of course we don’t know what’s going to happen to the price increase from January 1 and gas is going to peak today. That means that prices start getting baked in not only to January cap, but also to the April one as well – and that could well have a ‘6’ in front of it.’
Mr Kwarteng used an article in the Financial Times to stress that the next Government will behave in a ‘fiscally responsible’ way.
Mr Kwarteng, the current Business Secretary, said that there would be ‘some fiscal loosening’ in a Truss administration to help households through the winter, stressing that it was the ‘right thing’ to do.
He said that the UK does not need ‘excessive fiscal tightening’, pointing to the UK’s ratio of debt to GDP compared to other major economies.
‘The OECD has said that the current government policy is contractionary, which will only send us into a negative spiral when the aim should be to do the opposite. But I want to provide reassurance that this will be done in a fiscally responsible way. Liz is committed to a lean state and, as the immediate shock subsides, we will work to reduce the debt-to-GDP ratio over time,’ he wrote.
Mr Kwarteng, a close political and ideological ally of Ms Truss, offered a vision for how he would operate the Treasury as he said that the next Government would be ‘decisive and do things differently’.
‘That means focusing on how we unlock investment and growth, rather than how we tax and spend. It is about growing the size of the UK economy, not burying our heads in a redistributive fight over what is left,’ he wrote.
His comments directly echo those of Ms Truss on Sunday, as she insisted that her plan to reverse the rise in national insurance is ‘fair’ despite it directly benefitting higher earners.
She told the BBC ‘growing the economy benefits everybody’ and it is ‘wrong’ to look at everything through the ‘lens of redistribution’.
Paul Johnson, director of the Institute for Fiscal Studies think-tank, warned that the energy bailout and tax cuts could fuel inflation.
‘She’s clearly absolutely right that we’ve had dreadful growth over the last 15 years,’ the senior economist told BBC Radio 4’s Today programme.
‘The but is that simply cutting taxes, cutting National Insurance contributions, for example, is not a strategy for growth.
‘And it is clearly pumping a large amount of money into the economy on top of the £30 billion we’ve already had to support energy bills, on top of the presumably many, many 10s of billions additional that are going to come from that, and on top of what’s going to have to be more money for public services.
‘Now put all of that together and that will lead to not just extremely high borrowing in the short run, but also additional inflationary pressure.’
Labour accused the Tories of stealing their ideas.
Frontbencher Nick Thomas-Symonds told the BBC’s Westminster Hour that it was once again another example of his party ‘making the political weather’.
Both Tory candidates spent more than a month traversing the country taking part in hustings in a bid to win over the 200,000 party members.
The winner will become PM tomorrow – the third since 2016, when David Cameron quit after losing the Brexit vote.
Boris Johnson pictured in Downing Street today, where he will remain until the formal handover tomorrow