The Conservative Party leadership election appears to be taking place on an alien planet.
Candidates have largely competed on tax cuts, with front-runner Liz Truss proposing cuts worth up to £50 billion per year, according to her opponent Rishi Sunak.
Mr Sunak has legitimately warned that Ms Truss’ ideas risk even higher inflation and, as a result, higher interest rates, despite her promise to temporarily eliminate VAT on home energy bills.
While the Conservative candidates’ promises may make the 160,000 party members who will elect our next prime minister smile, the storm clouds are gathering in the real world.
The Resolution Foundation think tank warned this week that inflation could rise from 9.1 percent to 15% as early as next year.
However, the Tories have paid little attention to the direct assistance that the public will undoubtedly require this winter. The candidates are hesitant to address increases in state benefits, presumably because party supporters who will vote believe that claimants are lazy.
Mr Sunak did the right thing as chancellor by lowering the universal credit taper rate, allowing workers to keep more of every extra pound earned. During the campaign, however, he promised to quadruple the benefit’s “administrative earnings threshold,” which is currently set at nine hours per week. Below that threshold, claimants receive only “light touch” inquiries about whether they are looking for additional work.
Similar to this, Ms Truss has vowed to tighten the welfare system, stating: “We still have a lot of economically inactive people who are not making use of the possibilities that are available to them.
Despite the headlines, the tax cuts promised during the Tory leadership election are largely a mirage.
According to the Institute for Fiscal Studies, even if Mr Sunak achieves his goal of a 16p in the pound basic rate of income tax by 2029, the £19 billion handed back each year would amount to less than half of his net tax increases as chancellor.
Ms Truss’ tax package would be even more expansive. The only ray of hope is that the incoming prime minister will be forced by events to confront the economic crisis in the real world rather than remain in Planet Tory’s warm bubble.