Liz Truss at the Conservative Party Conference in Birmingham yesterday. She should echo Margaret Thatcher’s remark about her critics at an earlier Tory conference: “Turn around if you want.” A lady not for turning’ Photo: Stefan Rousseau/PA Wire

Labor took a record lead over the Tories in opinion polls last week as Chancellor Kwasi Kwarteng’s mini-budget was blamed for messing up the economy.

U Northern Irelandit means unionists must be on the alert if the prime minister reneges on her promise to deal with the protocol.

So far, in its very short existence, the government has at least stuck to the goals that were part of the Truss’ campaign for the Tory leadership. At Prime Minister’s Questions, she gave a relatively straightforward commitment that any negotiated settlement must “deliver on all that we have planned for Northern Ireland Protocol Bill.”

The budget, which preceded last week’s financial turmoil, also reflected her campaign promises to cut taxes and try to spur growth. The main point of contention is whether, at least in the short term, the government plans to pay for the program 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 businesses. This extra wealth has the potential to stimulate the economy and, in theory, means there is more money overall to tax and the Treasury will make up for its losses. Financial markets have not yet been convinced.

A large proportion of the money the government borrows is raised by selling bonds, or ‘gilts’, to institutions such as pension funds, banks and investment funds. In return, these investors receive interest payments over the life of the bond and eventually recoup their original payment.

For complex reasons, including rising interest rates and falling sterling, there was a flurry of gilt selling last week. At the same time, mortgage lenders became nervous as borrowers tried to secure fixed-rate deals at lower interest rates.

The Bank of England stepped in by buying bonds to stabilize their value and prevent any volatility from affecting the ability of households and businesses to borrow money.

Now there is a fierce debate about who is to blame for this situation.

Government supporters argue that interest rates have been rising anyway and have been kept artificially low for too long. They reject the argument that you can’t cut taxes without increasing the debt, saying that the consensus around this idea since 2011 is discredited and outdated.

Fiscal conservative critics of Liz Truss, on the other hand, say 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 cut taxes yet because it first needs to pay off the debt it built up during the lockdown, fund its scheme to help with energy costs and prevent further inflation.

Labor politicians have described her policies, and in particular the decision to scrap the top 45% tax rate, as “leaking the economy”, an idea they vehemently reject. While many Conservatives argue that cutting taxes for the high earners leads to a booming economy that enriches everyone, Keir Starmer suggests that it only benefits the rich. Whichever interpretation you take, the difficulties of Liz Truss add another element of uncertainty to the debate surrounding the Northern Ireland Protocol.

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

It is possible that a real breakthrough in the protocol is imminent, which will solve the concerns of the unions. However, we know from past experience that this is an unlikely outcome. Simon Coveney, Dublin’s hawkish foreign secretary, is very positive about the talks, while the prime minister is under pressure to generate some positive headlines, which is not an encouraging combination.

Ms Truss insists 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 deal with the EU to be acceptable, she says there are “fundamental principles we must achieve”.

We know from the Prime Minister’s previous statements that she sees free trade between the UK and North Africa, regulatory harmony, the supremacy of the UK courts and our ability to enjoy the same tax breaks as the rest of the country as key tests for any solution . Certainly these are the minimum requirements necessary to restore Northern Ireland’s place in the UK domestic market to any significant extent.

Ms Truss is believed to see her Tory predecessor Margaret Thatcher as a role model. In response to critics of her economic reforms, Mrs Thatcher is known to have told the Conservative Party conference: “Spread it if you want. A lady is not for spinning.’

This is exactly the message that trade unionists want to hear from Liz Truss when it comes to the correct and permanent application of protocol.

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