As she gets used to the new letterhead on her stationery over the next couple of days, Liz Truss will also be introduced to the art of the balancing act.
The job of Prime Minister requires different skills from that of a successful Cabinet minister, on whom it is beholden to drive forward their own agenda and make the case for it to the centre. Now she is making decisions, however, Liz Truss will need to assess just how far she can push in different directions before her administration is too unfocussed to move forward.
Chief amongst her concerns should be the reaction of the Square Mile to her economic plans. Analysts piled into the City A.M. inbox yesterday with notes on the UK economy which ranged in their verdict from ‘it’s already pretty bad’ to ‘it could well get worse’ and warned that markets would at some point lose sympathy with the government – and with the UK as an investment destination, either in bonds, equities or good old fashioned foreign direct investment.
In truth, much of the doom seems to be pegged to over-interpreted reports of Truss’ radicalism. It is unlikely that she will touch the Bank of England’s mandate or its independence, even if her allies enjoyed political gain from giving Andrew Bailey et al a kicking during the campaign.
It is further difficult to imagine that amid an ongoing energy crisis she will find time to trigger Article 16, much less that she would do it in such a way that she would start a full-blown trade war (as one analysis predicted yesterday).
Her tax cuts may well expand borrowing in the short-term, but the UK still has room on that front and we remain confident that Britain remains over the top of the Laffer Curve – and amid an ongoing energy shock, markets have surely priced in bulging balance sheets.
But should Truss want to push in any one direction with more force than we anticipate, she will need to loosen the pressure in other areas. Sceptical investors won’t want to be surprised from too many directions at once.