Regardless they are the 3rd largest party in the UK by membership and by number of current seats. They'll lose significant ground to Labour imo but they'll still be 3rd in the commons.
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It's ostensibly a deterrent like you describe, but imo it started as a 'red meat' policy in other words signalling to the further right elements of the tory party so as to keep them from voting for a more extreme party.
Unfortunately for Sunak he needs those votes so badly that he's having to double down on a patently absurd (expensive also) idea and publically defend it. He's inherited the populist mess left in the wake of Johnson and Truss and he doesn't have the charisma required to fix it.
It goes to show how little actual power party leaders and prime ministers really have (which is a good thing imo)
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@U Picciriddu how are things looking after the PVV win?