Liz Truss Leads New UK Government; Announces Cabinet
On September 6, Liz Truss became the UK’s 56th Prime Minister, following a narrower-than-expected victory (57%-43%) in the Conservative Party leadership contest. She enters No. 10 Downing Street faced with a toxic combination of economic, geopolitical, and social challenges, and she’ll have to move quickly in the face of significant public skepticism about her ability to deliver. She’ll also have to tread a fine line politically, given that a minority of her colleagues in Parliament supported her leadership bid.
Truss’s first call with a foreign leader was to Ukrainian President Zelensky, assuring him of the UK’s continued support. She also spoke with President Biden who reiterated the importance of the countries’ special relationship, underlined the need to collaborate on shared challenges from Russia and China, and stressed the importance of working together to secure sustainable and affordable energy resources. The White House readout of the call referenced the leaders’ “shared commitment” to reaching a negotiated solution on the Northern Ireland Protocol – though the No. 10 readout mentioned the issue without an explicit commitment to resolution.
Early Policy Priorities
Truss’ tenure will be dominated by an array of domestic challenges, including inflation, soaring energy costs, and labor unrest. In her first speech as Prime Minister, Truss outlined three priorities:
- “Get Britain Working Again” – Government action to encourage economic growth through tax cuts and regulatory reform. Truss made significant campaign pledges to increase investment in infrastructure, defense, and healthcare, all of which will have to be balanced against her commitment to lower taxes.
- Energy Crisis – Truss plans new policy actions including energy price caps for households, with the government paying the difference to energy providers. This could cost as much as 100 billion GBP. Truss has ruled out an energy windfall tax to cover these costs.
- National Health Service – Beyond the cost of energy, this is the most politically salient issue in the UK today. Fixing the NHS backlog is a significant commercial priority for companies providing medicines, medical devices, and healthcare services in the UK.
Truss’ inaugural speech notably avoided references to the European Union or the Northern Ireland Protocol. Rather than risk an immediate escalation or broader trade conflict, Truss is likely to seek unilateral extensions of the current “grace periods” covering trade between Great Britain and Northern Ireland, while giving space for continued negotiations. Indeed, in his first remarks as new Northern Ireland Secretary, Chris Heaton-Harris underlined the new government’s preference for a negotiated solution. That said, Truss is unlikely to abandon her position that the current Protocol is unworkable.
To underline the economic challenge that Truss inherits, the GBP fell to $1.14, a level last seen in 1985. Markets are understandably concerned about the government’s ability to deliver on its pending promises while also cutting taxes.
New Cabinet Named
Truss also announced her new leadership team which includes many of her staunchest supporters and close friends – a potentially risky move given the narrow support she enjoys among her parliamentary colleagues. We outline below a few of the key players, and the full list of appointments is available here.
Chancellor of the Exchequer: Kwasi Kwarteng
- A close Truss ally, moving from BEIS to Treasury.
- Charged with managing the complex mix of spending increases and tax cuts without driving the economy into further stress.
- We expect an early announcement to scrap the planned rise in corporation tax.
- The Council has met with Kwarteng on numerous occasions.
Deputy PM and Health Secretary: Thérèse Coffey
- Truss’ closest friend in government.
- Responsible for tackling one of Truss’ biggest challenge – modernizing the NHS and addressing unsustainable backlogs.
Foreign Secretary: James Cleverly
- A major promotion for the Former Education Secretary, Foreign Office minister, and Chair of the Conservative Party.
- Charged with maintaining unity on Ukraine, navigating rising tensions with China, and managing the EU relationship
- The Council has met with Cleverly on prior delegations.
Business Secretary: Jacob Rees-Mogg
- Former Brexit Opportunities minister and ardent Brexiteer.
- Responsible for the UK’s energy strategy and will be eager to reform the regulatory state.
- Rees-Mogg’s longtime skepticism of Net Zero commitments has made it tough to recruit a junior minister for energy and climate issues.
Trade Secretary: Kemi Badenoch
- A major promotion for a relative newcomer who made a surprisingly strong showing during the Tory leadership campaign.
- Inherits a long slate of ongoing negotiations, including India, Mexico, and Israel, and pursuing UK membership in the CPTPP.
- Unknown whether she will continue the recently launched US-UK Trade Dialogue or push more aggressively for resumption of the FTA talks.
Secretary of State for Digital, Culture, Media, and Sport: Michelle Donelan
- Served briefly as Boris Johnson’s Education Secretary.
- Will lead on GDPR reforms, AI strategy, and the Online Safety Bill.