Four Takeaways from Conservative Party Conference
by Alex Black, Senior Consultant, WPI Strategy
1) This was an early test of Liz Truss’ authority and of Conservative morale…
It is unusual to see a challenge to a PM’s authority so soon after their taking office. Liz Truss was appointed just a month ago, although if one bears in mind the death of the Queen and subsequent mourning period, Truss had nine full working days as Prime Minister before conference started.
However, the early weeks of her premiership has seen the death of the country’s longest-reigning monarch, market concerns over the Government’s commitment to fiscal discipline, the crashing of pound sterling, rising interest rates after a decade of cheap money, the near-collapse of pension funds, and the largest Labour polling leads in two decades. If this were not all bad enough, a green meteor was spotted in the night skies, which in previous centuries might have been seen as a disconcerting omen for a new ruler.
Even without these inauspicious conditions, it is important to remember the electoral system by which Truss came to power. While she won the final round of the leadership election (a ballot of all party members) by 57%, she only reached the final two by a very slim margin. The earlier rounds were a successive knockout format where Conservative MPs voted and the candidate with the least votes was eliminated. In the final MP round, Truss came second in a three-way split, with 31.6% of the vote. While Truss won decisively (but not overwhelmingly) in the wider membership ballot, she did so with relatively shallow backing from her fellow MPs who she is now to lead. In theory, seven in ten of her Parliamentary colleagues wanted a different leader, and her legislation now requires those colleagues’ votes in order to govern.
Combined with the fact that Truss’ growth agenda is a significant departure from the 2019 manifesto – not to mention the last two decades of fiscal and monetary orthodoxy – this meant that her authority and mandate was always going to receive additional scrutiny and friction, even without the adverse headwinds.
2) …both of which have been badly dented, perhaps terminally
The conference itself was disrupted by major railway strikes, an illustration of wider agitations for pay increases that the Government can expect in the coming months. Those attendees who made it to Birmingham were grimly amused to note the conference slogan “Getting Britain Moving” on banners outside the convention centre, and many events were rejigged or downscaled on account of the thinner-than-expected attendance.
On Sunday, former Cabinet ministers Michael Gove and Grant Shapps – both sacked by Truss last month – gave briefings articulating a wider dissent in the party, and openly hinting that key measures of her Growth Plan would struggle to pass a Commons vote. Meanwhile, Truss gave an interview affirming that she would not be making a u-turn. Right-leaning papers such as the Telegraph had editorials the next morning celebrating her resolve, only to find by the time they were delivered to the newsstands on Monday that she had, in fact, u-turned. This manoeuvre fired the starting gun on various other policy disagreements and factional feuds which would normally happen behind closed doors. The most notable disputes were on uprating benefits and whether Truss’ opponents had staged a “coup”. Much of this happened at the media level, as the combination of transport strikes and unseemly briefing meant that many ministers and MPs either laid low, or simply avoided conference entirely.
One might normally expect a conference so soon after a new leader has been elected to have an energised, celebratory atmosphere. Instead, the general mood among delegates veered between febrile and dejected, with glum mutterings and gallows humour. Councillors at evening receptions commiserated with one another and compared notes on how they might occupy their time if they were to lose their seats. One wag who had attended Labour conference the week before said that it was like going from a wedding to a wake.
An unavoidable fact of the Conservatives having been in power for so long is that there are many former ministers knocking about. A key lever for any PM is patronage, dangling potential promotions and gongs as incentives to encourage ambitious colleagues’ helpfulness. When substantial portions of a long-governing party has already “been there, done that”, there is less purchase with this lever. As a group, Conservative MPs are top-heavy by normal standards. Of the junior MPs elected in 2017 and 2019 – who might ordinarily have been tempted by promotions - their socialisation in Westminster has been either mutinous (over Brexit) or isolated (over lockdowns). This tendency towards indiscipline means that Truss finds herself in the pilot seat with an unwieldy crew, setting out in a new direction across unusually turbulent waters.
3) However, the real test will be once Parliament resumes over the coming weeks
On Wednesday morning, Truss delivered her keynote speech to close the conference. While it was light on policies – in contrast to Keir Starmer last week – politically it was seen by her MPs and the media as helping to steady the ship, and articulated Truss’s mission to take on a loosely-defined “anti-growth alliance”. The other major purpose of the message was to reassure markets of the Government’s commitment to fiscal discipline.
While Truss has scraped through conference, Parliament returns next week, and she must resume the actual business of governing. The imminent votes should not present any issues – Stamp Duty and National Insurance were not controversial – however, the much tougher battles will be around streamlining various regulations, especially the planning system.
Most elements of the fiscal statement were popular according to polls, so Kwarteng’s description of the furore over the 45p tax rate and the bankers’ bonus cap as a “distraction” is not entirely inaccurate – although it was a distraction of his own making. The vast majority of his mini-budget package is still intact, and it is only these more controversial headline elements that have been attacked. One would barely know from the media coverage and market reaction that the Plan for Growth received enthusiastic acclaim from (among others) FSB, IoD and CBI. Likewise, following the pensions crisis last week, the Bank of England did not have to make the much-reported £65 billion of emergency gilt purchases to shore up funds’ positions, but only about £4 billion. There has been a degree of catastrophising by the media, where alarmist headlines from one week are forgotten by the next.
The next election is probably two years away, and Truss’ government still has room to manoeuvre, especially if they can better communicate with markets, the Bank of England, Conservative MPs and crucially, the electorate. These early stumbles are indicative, but not yet necessarily terminal, and the real structural battles are still ahead.
For the moment, Truss has probably been saved by the fact that her stumbles have come so early, that the party’s hand has been stayed by concerns about the optics of changing leaders twice in as many months. However, if by next spring polls were to continue to indicate a 1997-style wipeout, then that may outweigh any blushes about looking silly for replacing her after less than a year.
4) The growth agenda has stumbled, and many now think it will struggle to get out of the blocks
Before conference, a supporter of the growth agenda might have worried that Conservative MPs would simply bank the tax cuts and refuse to pass any of the harder supply-side reforms necessary to deliver sustained growth over the medium to long-term. Instead, they didn't even bank the tax cuts.
That a Conservative government with a working majority of 69 can be spooked out of returning the top rate of tax to what it was under Blair, hints at a serious loss of will to govern. While the u-turn has bought Truss time, this outcome potentially represents the worst of both worlds for the Government: it has simultaneously dented its political authority and reputation for fiscal prudence, but potentially without achieving (or perhaps even properly starting) its central agenda for growth.
Tax cuts are relatively much easier to deliver than structural reforms, which will involve MPs making a coordinated and sustained case to their constituents on the necessity of short-term disruption for long-term gain. Needless to say, this early climbdown only days into the administration is not indicative of being able to deliver the much trickier elements of the growth package later. Indeed, some of Truss’s own Cabinet have privately expressed concerns that her project may already be over.
The Government was elected with the largest majority in decades. Instead of delivering sweeping changes, it has been hit with a global pandemic, the first European war in generations, the biggest energy supply shock since the 1970s, as well as being plagued by various unforced errors and chronic scandals. Superstitious observers could be forgiven for thinking that the Conservatives have lost what the ancient Chinese called the “Mandate of Heaven”.
However, if the years since 2016 have taught anything, it is that the conventional wisdom of a given moment often does not have the best predictive value. On the final night of conference, ConservativeHome editor Paul Goodman observed that “If Putin explodes a tactical nuclear weapon in Ukraine before Christmas, the entire domestic political conversation will change”. While this is undeniably true, it did not quite strike the reassuring note that delegates, markets or the public were seeking as Conservative Party Conference 2022 wrapped up.