in 2022 In the fall, Liz Truss bet her premiership on a so-called mini-budget that overturned decades of economic orthodoxy. It didn’t pay off.
I spoke to those involved about the biggest risks she took in her seven weeks as Prime Minister, and why they failed.
1. Ignore the Warnings About the “Fantastic Economy”
At the start of Liz Truss’s leadership campaign, when I interviewed her on Radio 4’s Today programme, I told her she was gambling with the British economy by preparing to borrow as much as Jeremy Corbyn, whose policies she condemned.
She replied that the real gamble was to continue as we did; condemned the economic ideas pursued by both Conservative and Labor governments over the past 30 years, which she called “Treasury orthodoxy”; and told me that she was ready to “crush out” opposition to her plans.
During the campaign, her rival, former chancellor Rishi Sunak, called her ideas “fantasy economics”. His ally Michael Gove said it was a “holiday from reality”.
And as it became increasingly clear that she would win, her circle of advisers dwindled.
Simon Clarke, then cabinet minister and former Truss ally, describes the mood of the Truss campaign as “revolutionary”. He says, “You could really sense that she was on her own to do it or die.”
2. Dismissal of the highest treasury officer
Many have seen [Tom Scholar] in the Tory party as the personification of Treasury orthodoxy
Days after she moved to 10, Truss sacked Permanent Secretary to the Treasury Tom Scholar, a senior civil servant who has worked for chancellors from Gordon Brown to Rishi Sunak.
This had the effect of intimidating other officers.
When it became clear she would win the Tory leadership election, officials met her at Chevening, her official residence as foreign secretary, but did not warn her of her plans.
They felt it wasn’t their job because Truss wasn’t Prime Minister yet. But one political ally of Truss, who asked not to be named, told me that anyone who challenged her was “executed in that room”.
Indeed, very few of those working behind the scenes have been willing to speak up until now. I have spoken to many unregistered. Asa Bennett, Liz Truss’ speechwriter both before and after she became Prime Minister, agreed to speak publicly.
“You can say that he is [Scholar] would still have done the job if it had been deemed useful, Bennett says. – Of course, many in the Tory party saw him as the personification of Treasury orthodoxy.
3. Bypassing the budget guard
This whole idea that you have to get the OBR’s approval is… undemocratic in my opinion
Truss did not trust the Office for Budget Responsibility (OBR), the body set up by former Conservative chancellor George Osborne to ensure politicians could not sway official economic forecasts.
She believed that her predictions were mostly wrong and that she disagreed with her belief that tax cuts could spur growth and possibly pay off.
In a bid to sidestep the OBR, she said her plans to spend billions in tax cuts were not a budget. It was what she initially called a fiscal event, language designed to ensure she could ignore the law that requires the OBR to publish forecasts whenever there is a budget.
That outlook echoed what Truss heard from those around him during the summer leadership campaign.
Jon Moynihan, who was a key fundraiser for Liz Truss and spoke to her regularly throughout the campaign, says: “The whole idea that you have to get the approval of the OBR, which has been consistently wrong in its financial projections, is my opinion. attitude, anti-democratic’.
4. Not following certain tax and expense advice
We have certainly discussed the importance of ensuring that fees and costs are aligned. The question is…at what moment in her mind did she decide that it wasn’t necessary
Truss’s cabinet allies have warned her that she needs to come up with spending-cutting plans to show how she intends to pay for the tax cuts.
The minister, who was previously in charge of public spending at the Treasury, has been discussed with her by her new promotion secretary, Simon Clarke, over plans to cut spending by between five and 10%.
And while the Treasury Department has left ministers arguing over the need to talk about spending restraint, a paragraph indicating that 10 of Chancellor Kwasi Kwarteng’s mini-budget speech has been removed.
Truss told them the cuts would “disconnect from the message” about taxes and growth and they could “worry about that later”.
Concerned people were told they had become part of “Treasury orthodoxy”.
“We’ve certainly discussed the importance of making sure taxes and spending are aligned,” says Clarke, who was at one point rumored to be running for Chancellor Liz Truss.
“The question that goes to the heart of it all is at what moment in her mind she decided she didn’t need it. . . . I think her appetite for radicalism just got stronger.”
Nick Robinson discovers the inside story of the UK’s shortest premier
5. Not marking homework
Truss had a trio of friendly economists to give her advice. They were known as Trussketeers.
One – Gerard Lyons – says he warned her not to go further or faster than the financial markets expected, and that he wrote a memo to the chancellor during his mini-budget week to reiterate his warning.
“My view, both privately and publicly, has been that any fiscal announcement has to be in line with what the markets expected,” he says.
“I think all three outside economists have emphasized the need to have a fully paid-for budget. My phrase is: you need to mark your homework.”
6. Reduction of the maximum tax rate
There are many things we are preparing for… [But] we didn’t expect this to happen… it was bad economics and bad politics
Truss’ closest allies no. 10 and the cabinet didn’t know she was going to cut the top tax rate until the night before the budget.
While the spending was relatively modest compared to other tax-cut plans, it signaled to voters and markets that the new prime minister was willing to ignore concerns about unfairness and was ideological in her approach to the economy.
Rachel Reeves, the shadow chancellor, sat opposite Kwasi Kwarteng when he announced the plan.
“We’re preparing for a lot of things because we don’t know what big surprise will be in the budget,” she says.
“We didn’t expect this to happen. The reason we didn’t anticipate it is because it was bad economics and bad politics.”
7. Enabling the 45p fee
With the fallout from the low budget, Truss hoped the withdrawal of her plan to cut the top tax rate would silence her critics. But she encouraged them to demand further change – and embarrassed and alienated her allies, who, like the Daily Telegraph, praised her as a lady not to be trifled with.
When she stepped down – in the middle of the Conservative Party conference – even her most ardent fans were concerned.
“I thought, ‘This is the beginning of the end,'” says Jon Moynihan. “Confess to one, you would eventually yield to all.”
8. Dismissal of Chancellor
At the time it was very difficult to understand how things could work…she ended up doing the opposite of what she promised.
Jon Moynihan was right. A few days after the Tory party conference, Truss fired Kwasi Kwarteng, her friend, long-time ally and the man who implemented her ideas.
She replaced him with Jeremy Hunt, who demolished almost all of Kwarteng’s mini-budget policies.
Sir Graham Brady, the influential 1922 chairman of the back committee, could sense how things were moving.
“I think at the time it was very difficult to see how it could all just work,” he says.
“She could have done everything possible to restore market confidence, but in doing so she has done the opposite of what she promised to do.”
9. Making enemies in the party
It was always removed. I thought she might be there for six months. But I knew they wouldn’t let her survive until the next election
Truss fired almost everyone who disagreed with her and promoted those who supported her.
She did nothing to reach out to Rishi Sunak and his supporters, despite the fact that he had more support from MPs than her.
Her allies have accused her critics, such as Michael Gove, of orchestrating the coup. They still believe it to be true.
Nadine Dorries, a former culture secretary and Truss ally, is writing a book claiming it was a case of conspiracy, not persecution.
“When she won the leadership contest, they would never let her stay. She was always removed. I thought she might be there for six months. But I knew they wouldn’t let her live until the next election.”
10. Fighting with a financial institution
Truss’s allies believe she has been hurt by leaks from the Treasury and hostility from the Bank of England and the International Monetary Fund (IMF), which have criticized her policies.
Truss’s supporters – and some of her critics – believe that the people she has fired, ignored or belittled are happy to see her fail.
Some say the Bank of England and the IMF coordinated the critical statements that rattled the markets. Senior officials of one organization had previously worked in another or knew their colleagues well.
Her allies blame the Treasury for tipping off news of a potential corporate tax cut that caused her to U-turn, later forced her to sack the chancellor and ultimately cost her her job.
“The Powers Against Her” formed “such a huge part of the institution or stain of Britain,” says Jon Moynihan.
“I don’t think the Bank of England has been particularly kind to the Truss government.
Asked if there were people in the Treasury and the IMF who wanted the Truss government to fall, Jon Moynihan says “absolutely”.
11. Truss always believed in himself
Liz Truss has been called a “human hand grenade” but has taken it as a compliment rather than a criticism.
Officials say she always wanted to be the most radical person in any room — which was fine when she wasn’t the final decision maker and could be overruled. But when she was prime minister, no one had the power to arrest her.
Her chief of staff was a political campaigner who openly admitted to having very little knowledge of politics. Her chancellor was an old political friend and ally who said he saw his job as carrying out the prime minister’s wishes. Her cabinet secretary had been told she planned to fire him and was believed to have been reluctant to oppose her while his position was precarious.
Truss was the Conservative Party’s choice to be Prime Minister. MPs who were not her supporters rushed to support her when they saw she was going to win. The Daily Mail and Daily Telegraph hailed her as Margaret Thatcher’s successor. Her most ardent supporters attacked Rishi Sunak as a socialist.
She and they gambled. Many would say the country has paid the price.
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Additional reporting by Jack Fenwick and Stephanie Mitcalf