Owen Polley: Unionists want to hear that ‘the lady’s not for turning’ on the Northern Ireland Protocol

The Conservative Party’s annual conference is currently taking place after a horrible start for Liz Truss’s new government.
Liz Truss at the Conservative Party conference in Birmingham yesterday. She should echo Margaert Thatcher’s remark about her critics, said to an earlier Tory conference: ‘U-Turn if you want to. The lady’s not for turning'
Photo: Stefan Rousseau/PA WireLiz Truss at the Conservative Party conference in Birmingham yesterday. She should echo Margaert Thatcher’s remark about her critics, said to an earlier Tory conference: ‘U-Turn if you want to. The lady’s not for turning'
Photo: Stefan Rousseau/PA Wire
Liz Truss at the Conservative Party conference in Birmingham yesterday. She should echo Margaert Thatcher’s remark about her critics, said to an earlier Tory conference: ‘U-Turn if you want to. The lady’s not for turning' Photo: Stefan Rousseau/PA Wire

Last week, Labour took a record lead over the Tories in opinion polls, as the chancellor Kwasi Kwarteng’s mini budget was blamed for turmoil in the economy.

In Northern Ireland, that means that unionists will have to be alert for any backtracking from the prime minister on her promise to sort out the protocol.

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So far, in its very short existence, the government has at least stuck to the aims that were part of Truss’s Tory leadership campaign. At her first PM’s questions, she gave a relatively straightforward commitment that any negotiated settlement would have to “deliver all the things that we set out in the Northern Ireland Protocol Bill.”

The budget that preceded last week’s financial instability also reflected her campaign promises to cut taxes and attempt to boost growth. The main point of contention is that, in the short-term at least, the government plans to pay for this programme by borrowing more money.

Ms Truss and Mr Kwarteng argue that tax cuts leave people with more money to spend on goods and services and encourage them to invest in business. This extra wealth has the potential to stimulate the economy and, in theory, means there is more overall cash to tax and the Treasury will recoup its losses. The financial markets seem unconvinced so far.

A high proportion of the money that the government borrows is raised by selling bonds, or ‘gilts’, to institutions like pension funds, banks and investment trusts. In return, these investors receive interest payments over the lifetime of the bond and eventually get back their initial payment.

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For complicated reasons, including rising interest rates and the falling value of the pound, there was a rush last week to sell gilts. At the same time, mortgage lenders became nervous, as borrowers scrambled to secure fixed rate deals on lower interest rates.

The Bank of England stepped in, buying up bonds, in order to stabilise their value and prevent any volatility from affecting the ability of householders and businesses to borrow money.

There is now a fierce row about who is to blame for this situation.

The government’s supporters claim that interest rates were going up anyway and that they were kept artificially low for too long. They reject the argument that you cannot lower taxes without increasing debt, implying that the consensus that built up around this idea since 2011 is discredited and out of date.

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Liz Truss’s fiscally conservative critics, on the other hand, say that the unfunded cuts are unsustainable and that growth cannot be achieved in the face of rising prices and energy shortages. They argue that the government should not lower taxes yet, because it needs first to pay off the debt run up during lockdown, finance its scheme to help with energy costs and prevent further inflation.

Labour politicians describe her policies, and particularly the decision to abolish the top 45% rate of tax, as ‘trickle down economics’, which is an idea that they roundly reject. While many Conservatives claim that tax cuts for high earners lead to a thriving economy that enriches everybody, Keir Starmer implies they only benefit the rich. Whichever interpretation you accept, Liz Truss’s difficulties add another element of uncertainty to the debate over the Northern Ireland Protocol.

We are told that the new government is in serious negotiations with the EU over the Irish Sea border issue, whereas previously these discussions were stalled because the two sides were too far apart.

It’s possible that a genuine breakthrough on the protocol is imminent, that will address unionists’ concerns. From past experiences, though, we know that this is an unlikely outcome. Simon Coveney, Dublin’s hawkish foreign minister, is disconcertingly positive about the talks, while the PM is under pressure to create some positive headlines, which is not a reassuring combination.

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Ms Truss insists that she will not allow the protocol impasse ‘to drift’ and that her government will act unilaterally if there is no satisfactory deal with Brussels. For any agreement with the EU to be acceptable, she says there are “fundamental principles that we have to achieve”.

From the PM’s previous statements, we know that she views free flowing trade between GB and NI, regulatory harmony, the supremacy of the UK courts and our ability to avail of the same tax breaks as the rest of the country as key tests for any solution. These are certainly the minimum requirements needed to largely restore Northern Ireland’s place in the UK internal market.

It is thought that Ms Truss sees her Tory predecessor, Margaret Thatcher, as a role model. Famously, in response to critics of her economic reforms, Mrs Thatcher told the Conservative Party conference, “U-Turn if you want to. The lady’s not for turning.”

That’s exactly the message that unionists want to hear from Liz Truss when it comes to dealing with the protocol properly and for good.