Home » Currency Updates » Sunak vs Truss and what it could mean for sterling

When Sunak was made chancellor the pound leapt up. Will that happen again if he becomes PM? Truss is promising immediate tax cuts that will put money in the wealthy’s pockets; could that boost economic growth and support the pound? Here we check out some of the candidate’s campaigns ahead of Monday’s result.

The economic debate in the UK is heating up, as Rishi Sunak and Liz Truss battle it out to become the next British prime minister.

The current cost-of-living crisis, taxes and net zero are the main focal points of each candidate’s campaign. Liz Truss, the foreign secretary, is the current frontrunner. If she wins, her policies include a promise of immediate tax cuts.

Bloomberg reports Truss is preparing to fast-track an emergency spending package help the British public manage surging energy costs.

Truss herself is apparently, “eager to act as soon as possible” where energy bills are concerned. However, in general she is seen as the more Thatcherite, laissez-faire candidate.

Rishi Sunak is the former chancellor of the exchequer whose resignation on 5 July helped precipitate Boris Johnson’s resignation. Sunak may have started as front-runner, with 137 votes to Liz Truss’s 111 in the MPs’ final round of voting, but he is a clear underdog among members and a win for him will be a shock.

Let’s break their policies down.

Monetary Policy

Truss is also known to doubt the wisdom of the Bank of England’s independence (set by Gordon Brown as chancellor in 1997) in setting interest rates. The ability to switch economic growth on and off (at least in theory) is also a key factor in exchange rates.

She has a long-held distrust of the Treasury and may well bring in fellow Treasury-sceptics such as John Redwood to her top economic team.

Sunak is viewed as a Treasury insider, and is unlikely to be the “business as usual candidate”. While nothing is guaranteed, a Truss win is more likely to unnerve the markets and could see sterling head south. The markets feel they know where they are with the Bank of England in control of interest rates.

On the other hand, campaigning isn’t the same as governing, so who knows whether economic orthodoxy will win the day as a potential recession bites next year.


The Telegraph reports, “Truss is drawing up Thatcherite plans to give more control over the economy.” She has announced tax cuts for the top 1% of earners which has received backlash as it means those within the top 1% will gain as much as the bottom 60% from her national insurance cut.

Around 152,000 taxpayers of the UK’s highest earners will benefit from Truss’ tax cuts, and their combined savings would be up to £3,580 a year.

Stuart Adam, of the IFS, told i: “This cut in National Insurance is disproportionately of value to those who are the better off. Almost 90% of the giveaway goes to the richest half of households.”

Ms Truss has also promised to review inheritance tax as part of a general review for the country’s tax system. She’s argued scrapping the corporation tax rise and believes that reversing Sunak’s National Insurance increase will help prevent a recession.

The former chancellor of the exchequer, Rishi Sunak has promised to action the biggest tax cut in 30 years if he is named prime minister. This pledge vows to slash basic tax from 20% to 16% in just seven years. This action would save someone on the average UK salary of £32,000 about £777 annually.

Sunak has vowed to scrap VAT on energy bills to save households money throughout winter. He has also spoken about an investment tax cut that would come in Autumn, to replace the so-called “super-deduction”.

Sunak plans to only cut taxes once inflation is under control as he’s previously resisted cuts saying the nation needs “honesty and responsibility, not fairy tales.”

For sterling, money in people’s pockets is generally seen as a positive. But so is economic coherence and effective governance, so this one could go either way.

Foreign policy

Post-Brexit relationships with Europe and the war in Ukraine are the main issues that may affect sterling versus the euro.

In some ways sterling is benefiting from the war, as the risk to gas supplies to European factories this winter hits the euro. Should a peaceful end be found, however unsatisfactory to one side or the other, the pound is likely to lose out. Although a less obvious impact from the leadership contest, Truss has certainly played up her Iron Lady-like credentials which might suggest a less likely compromise option.

On post-Brexit, although Sunak was the original Brexiteer, Truss is seen as the convert who is now more dedicated to the cause than any.

Net zero

It’s fair to say a net zero policy has not been central in either of the candidates’ campaigns. In fact the pair only spent two minutes discussing the matter during their televised debate. However, both members of the Conservative party confirmed their commitment to achieving net zero.

Liz Truss is “very supportive of using gas as transition fuel,” and has suggested the removal of the fracking ban, so it could go ahead in areas with local consent. In terms of the net zero target, she backs it, but said: “we need to reach net zero in a way that doesn’t harm businesses or consumers.”

Rishi Sunak has committed to the target of making Britain carbon neutral by 2050. To achieve this goal, he told the Daily Telegraph: “I would scrap plans to relax the ban on onshore wind in England, instead focusing on building more turbines offshore. He added that the Net Zero pledge: “I am committed […] but that can’t mean neglecting our energy security.”

Green policies are seen, rightly or wrongly, as of little consequence to sterling. After all, every country is in the same boat.


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