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October 14, 2022 - 5:00pm
The partnership that wanted to unchain Britannia is now itself undone. Liz Truss has sacked her Chancellor, closest political ally, friend, and die-hard Trussketeer, Kwasi Kwarteng. It is a clear and desperate attempt to steady her premiership just a few weeks after getting the job.
A new Chancellor is, however, unlikely to mark a great regeneration, but rather the start of the endgame. The only question now is whether her political demise is long and drawn out or swift and merciful.
Kwarteng will return to the backbenches in ignominy. His tenure at the Treasury is the second shortest ever, behind Iain Macleod — a great politician who suffered an untimely death just a month into the role. Kwarteng managed just a week longer, but was felled by his own policies. His legacy is destined to be little more than a tricky pub quiz question.
With Jeremy Hunt by her side, Truss faces the same problems. Britain’s growth outlook remains bleak and public services are crumbling. Measures to support energy bills will still be costly yet politically essential. The same will prove true of uplifts to benefits and pensions. Little has changed from when she took office. The difference is that now she has fired her first shot, and hit only her Chancellor.
Truss’s ideas have not survived first contact with the markets or public opinion. The abolition of the 45p tax rate has been set aside; so too has the planned cut to corporation tax. A PM who entered on a message that taxes were choking the economy has been unable to slice through the Gordian Knot. A PM who said she would challenge the status quo, no matter what the experts or the polls thought, has backtracked. Her bluff has been called.
Truss now faces a credibility problem. Her economic policy was the bedrock of her pitch to the members. Part of her perceived strength was 10 and 11 Downing Street acting in concert, following the division between Johnson and Sunak. She cannot pretend the disastrous mini-budget was a frolic of Kwarteng’s own invention. It will be hard to escape its poisonous political legacy, or to convince the markets she can bring stability.
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SubscribeAll this piece tells us, is that the Truss government is in deep trouble. Well, you don’t need a degree in political science to work that one out.
What would have been interesting to learn was what Truss and Kwarteng were trying to do. Were they addressing a real problem in the British economy, or an imaginary one? Did they prepare the public and the markets properly? Did other factors (eg quantitative tightening) get in the way? Was this just the wrong time to introduce a new set of economic policies?
Alas, we will have to get the answers to these questions elsewhere.
Truss & Kwarteng were trying to kick start a low productivity stagnant economy … rebellious Tory MP’s cavailed and she failed to face up to them.
She thinks she’s saved her own position by knifing her long time friend and political ally in the back.
Yes, by supporting consumption through debt. UK GOV was going to borrow £2 to deliver (blue sky scenario) £1 of growth!
Cut taxes financed by borrowing. The market said no!
No! Everyone (and their dog!) knows that the real problem with the British economy is low productivity. But increasing productivity is not a 1/2 year process, it is a very long term. It requires the British nation to change its economic model from “borrow and consume” to “save and invest”. That process is long term and politically/socially painful.
UK national debt as % of GDP (consumer + gov + business)
1974 – c80% (financial deregulation begins)
1979 – c.120% (Maggie comes to power)
1992/3 – c.200% (ERM crisis)
2007/8 – c.270% (financial crash)
2021/2 – c.320%
There is a belief (wrong BTW) among segments of conservatives (many comment here) that low taxes deliver growth, investment and high productivity. The fact is that high investment rates (CAPEX and R&D) deliver high productivity and wealth.
R&D Investment per capita ($) as of 2019.
UK – c.750
Netherlands/Finland – c.1100/1300
Germany/Denmark – c.1500/1400
Sweden – c1700
All Nothern European countries have higher tax burden (as % of GDP) than UK but all of them have higher productivity. Why? They invest more in R&D and CAPEX and their workforce is better educated.
If Truss wanted to do the right thing for the country (and truly be unpopular in a very good way – long term!) she would have taxed housing and use the money to invest (not consume) in vocational training, R&D and CAPEX.
P.S. My personal tax rate is actually 50%. So the cut would have been good for me but bad for the country.
Clearly the IMF refused to underwrite an increase in our national debt which was the reason for the previous Chancellor’s hasty return from New York and all that has happened since – and will happen today
Leaving aside all the details and analysis of who’s at fault here (I’ve been taking a break from news for most of the last 2 weeks), what is astonishing here is the pace of change and instability. Did anyone a year ago know that a government with a majority of 80 was quite so fragile and liable to self-destruct ?
It begins to feel like the winner of the last election was really the Boris Johnson party and that faith in him was the only glue holding the Tory party together.
Indeed. The Conservative Party in its current form is an amalgam of at least three factions and it’s hard to see how anyone can reconcile them.
Boris Johnson did of course manage it more or less. But then I do question what he would have done differently. For sure he would have had some sort of energy bill support in place. The 2019 Conservative Manifesto talked about non-trivial tax cuts, including corporation tax.
Boris (and the tories) were elected simply to “get Brexit done”. Of course Carrie soon pulled him back on that one (viz Northern Ireland, the fishing industry, EU regulations, illegal immigration, ECHR)
I’ve been avoiding the news aswell in the last 2 weeks. Reading it just makes me feel more alienated from the world than I did before and tbh I can do without that kind of negativity.
‘Measures to support energy bills will still be costly yet politically essential.’
Not that I’m disputing the article but it seems to me that the energy bills package was the original Truss error. We can argue about the rest of course. But having a very open-ended package of support (some might say middle class welfare) surely was a factor in the market reactions?
Putting at least some sort of upper limit or structure on it would, probably, have helped. Indeed it is interesting and I suspect rather telling that the media has had very little to say about the energy support package part of Truss/Kwarteng’s economic policy and its implications. For that matter Starmer hasn’t said much either.
The wider question perhaps is why things like energy bills support has become an electoral expectation.
Energy becoming unaffordable is the logical destination for the Thunburg/Attenborough environmentalists. You want less energy use? Raise the price.
I saw a news item recently saying that washing lines were making a comeback because people couldn’t afford to run their tumble dryers. Well, isn’t that what they wanted to happen?
Kwarteng is the only one to come out of this without ignominy …
he has been undone by a cohort of rebellious MP’s who Truss did not have the courage to face down …
instead she has become a person without integrity who knifed her friend in the back to (she thinks) save her own position
You forgot the bond market.
Wrong Kwarteng was the architect of this mess – under her captaining of the ship –
He is the engineer who blew up the main boilers and they both need to go down with the ship.
The real problem was begun by Gorgon Brown 2009 and his QE – but then the conservatives kept it because it was money heroin – and made every one feel good – but also is killing the economy with debt and Mal-Investment.
But the Real-Real disaster was the worst PM In all British History – by Far – Boris!
He killed UK with the covid/vax debacle, a flu easily handled by early treatment with off-label meds. Instead he destroyed the British economy – THEN He got involved in a problem which he had no business in – Ukraine. Him and Biden drove a stake into Europe’s Heart with the $80 Billion they dumped on it –
Britain and EU are Dead Man Walking – by the China Virus and the Ukraine war – 100% self inflicted harm! And Truss was for both policies – Truss is a disaster and needs to be defenestrated ASAP – but whom ever replaces her will just screw it up worse.
Wrong Kwarteng was the architect of this mess – under her captaining of the ship –
He is the engineer who blew up the main boilers and they both need to go down with the ship.
The real problem was begun by Gorgon Brown 2009 and his QE – but then the conservatives kept it because it was money heroin – and made every one feel good – but also is killing the economy with debt and Mal-Investment.
But the Real-Real disaster was the worst PM In all British History – by Far – Boris!
He killed UK with the covid/vax debacle, a flu easily handled by early treatment with off-label meds. Instead he destroyed the British economy – THEN He got involved in a problem which he had no business in – Ukraine. Him and Biden drove a stake into Europe’s Heart with the $80 Billion they dumped on it –
Britain and EU are Dead Man Walking – by the China Virus and the Ukraine war – 100% self inflicted harm! And Truss was for both policies – Truss is a disaster and needs to be defenestrated ASAP – but whom ever replaces her will just do as badly.
And the worst part is that it won’t save her.
Stupid, stupid move she has made. She’s given a blood sacrifice, and now that blood is in the water the sharks are already circling.
Hard to understand why she would do this, she’s just signed her own death warrant. She also sacrificed her friend & ally, and her dignity, for no absolutely reason. Frustrating to watch.
And now we get that wooden authoritarian Hunt, the Davos ‘place man’. Truss will be gone in weeks, and another Davos man will fill her seat… which is what this slow motion coup has been all about.
Both major parties have now seen the folly of allowing leaders to be chosen by party members rather than MPs.
Tory party members are often completely unrepresentative of even the average Tory voter, tending to believe in a much more extreme version of Thatcherism than is electorally popular, so they got stuck with Truss. Labour suffered the same fate with groups such as Momentum electing Corbyn, who was much further to the left than the country at large.
The next person that shouts “can we have a real conservative government?” needs to be marched off the stage.
We’ve had the austerity government, the Brexiteers, and the tax cutters. Next it might be a focus on the family, and maybe (eventually), immigration.
All the while, people moan “but what about a REAL conservative government?” like we’ve never had one.
Wake up, grow up. It is NOT enough to be a “real” conservative (whatever that is). Everyone has such a bitter and different view on what one is, it’s not good enough to sit back and moan for one.
The real question is, how much conservativism you can insert into a country rocked by recessions, COVID, and Eastern European wars. It is hard to do that.
I used to listen to the online commentators and journalists. The ones that never admit they’re wrong. The ones that are always bitter and declinist. They’d say “just cut taxes, that’s REAL conservativism”, and I believed them. I didn’t know about Barber, and knew nothing about inflation.
But, hey, a real tory would just cut taxes. No problem!
What a fool I was for listening and believing that.
So, call for “creating an environment for lower taxes so we can get them without fear of inflation or IMF criticism”. Not quite so snappy, but more sensible. Of course, that wouldn’t be enough, as another Sam Ashworth-Hayes would write another Critic Magazine article saying that wasn’t conservativism in any way. Not even a contribution towards “real” conservativism.
The commentators, media, and even the grassroots need to just shut up until they’ve worked out a more realistic message.
(Oh, and accept we need more infrastructure. You can’t just blame immigration. We’d have migrants dealt with by now and some people would still oppose new reservoirs and roads)
The Conservatives have messed up big time … Labour are unacceptable to many after their racism and bullying.
We need a realignment of British politics … how we achieve that ? … I have no idea
Labor is going to win the next election. But keep telling yourself that the party is unacceptable if it makes you feel better.
Lots of down votes for Jeremy yet not one good reason why labour won’t win. The trouble is that even labour are looking like the lesser of evils in comparison to gross incompetence and the inability to manage a simple balance sheet.
The forum here is all about feelings – in case of the next election is all about Tory tribal loyalty.
The problem is that the Sheep (voting population) keep voting for the same “big three” LibLabCon in the mistaken belief that things will be different. The sheep need to wake up and see that there are potentially new, different parties.
How on earth can they? A party that can’t tell the difference between a man and a woman? I don’t trust them to sit on the lavatory the correct way let alone run a country.
They may well win but they certainly do not deserve to.
Reform Party? Well Farage proved that under FPTP system you could have millions of votes but no representation in the House. PR is the alternative, a bad one at that. Perhaps it is time for Labour to enter the scene, to help reform the true Conservative party… I despair.
2015.
UKIP got 3.8 million votes.. more than double the SNP.
SNP secured 56 seats. UKIP managed just 1.
This was under the first-past-the-post voting system, same system we have now.
Sure….
What is Farage going to do about Levelling Up?
What is he going to do about elderly care? NHS? Productivity?
Or is Farage going to drink UK to 3% GDP growth.
Farage was/is a one trick pony and even when it came to Brexit UKIP had no plan.
Easy to burn things down, hard to build things up.
The outcry from journos when she only took four questions at her press conference was revealing. They (and not without some justification) have come to see themselves as pulling the levers of power, to which the government had better respond, or else.
Each of those four questions was, of course, exactly the same. If Truss had allowed forty questions, they’d all have been the same too. “Where does the sacking of your Chancellor leave you, Prime Minister?” It’s pertinent, but can only be answered usefully once. I don’t blame her for walking at that point.
So this article continues in the same vein, as if we didn’t already know. Many of us could’ve written it ourselves, with minor variations. The real question that i’d pose is: Who, if anyone, could possibly manage the government machine in the face of the combined onslaught from the MSM?
Truss has undoubtedly been wooden in her presentation of policy, but i doubt it’d have made much difference if she’d provided a musical version of it with singing, dancing and acrobats. The market forces at work won’t abate, i suspect, until she’s gone. I also think she knows that, and has to decide how much she can take before her determination is broken altogether.
MSM (DT/DM/Sun/Spectator – do they count as part of MSM?) send £ down and bond yields up?
Did traders across the world get a (secret) memo from the “globalist” to bet against UK?
It is fascinating to read people that claim to believe in responsibility always walk away from it.
One can only hope that the head-line is accurate; she threw Mr. Kwarteng under the bus, when he was only putting forward her own policies. Although I’m glad about the U-turn, I’ve no respect for such a person.
We’re all doomed. Oh well tant pis
Vote Kemi!
It all reminds me of a certain storyline in Pulp Fiction, with Jeremy Hunt in the role of Mr Wolf, the British economy as the corpse in the garage and Ms Truss as the two hapless idiots responsible for the whole sorry mess.
It’s now clear that Hunt is calling the shots and the bets are on as to how much longer the Trussbot will be around; if she’s still there on Monday I think I’ll be organising a sweepstake at work.
The only one to have a decent and correct view of all this is Peter Hitchens. For some while now he has been saying that the Conservative party needs to be dissolved (destroyed) and a new party needs to grow from it.
Why should any of us have any interest in these people any more.?
The entire Commons could sink into the Thames as far as I am concerned. Truss, Hunt, Gove and whoever mean nothing now and for good measure Starmer and the rest don’t either.
This is not just a bad soap opera it is an unwatchable soap opera that any producer would bin after episode one . Who are these awful people?
I would charge the lot of them with bringing democracy into disrepute because this is what they are doing. If the Commons does not put it’s house into order very soon then we will have to look to others to do it for us.
The Truss episode does further underline the danger of residing in an echo chamber filled with confirmatory bias. The 81k Tory members who voted for her must have been bouncing around the Golf club listening to the classic bores convincing each other she was Thatcher re-born, totally missing what just about everyone else was seeing and hearing. Half the regular comments contributors here were singing her praises only a few weeks ago too. Now they are predictably seeking others to blame.
Taking a step back all roots of this repeated chaos go back to Brexit. It’ll be denied but rest of the world can see it. In many regards perhaps what has happened now and over the last 6 years, (and for some years now to come still), is what we deserved.
What does this have to do with Brexit? How do you link a national vote to leave a supranational bloc to a domestic PM attempting to ram through unpopular and unfounded tax cuts?
Small picture (budget/taxes) nothing I would argue.
Big picture is the lack of planning and the view that the solution to every difficult thing is just belief/faith etc. No need for OBR, no need to balance the book…just have faith.
And if you question the “plan” you are accused of “talking UK down”.
So you’ll agree it has absolutely nothing to do with Brexit then, as your point can’t even link the two? An uncosted budget put forward by a PM who actually voted to Remain has no link at all to a vote taken 6 years ago about whether to leave a political bloc
Fully embraced by the ERG crowd and the Tory base. She is now a convert and has teh zeal of one.
You managed to miss my point but let me explain it again. You have a political party (and the rabid Tory base) that fundamentally has embraced radical ideas but with no plan/idea how to execute them.
The markets have noticed that the the same people who argued that Brexit would lead to sunlit uplands switched to Trussonomics when the UK stagnated, promising utopia again
The markets have noticed that the PM and ex chancellor put forward a plan that involved huge borrowing to fund unaffordable tax cuts. It had nothing to do with a vote taken 6 years previously on a topic completely unrelated to the nations income tax rates
Brexit was promulgated by an elite (and that is what they are) who wanted the UK to move in an even more americanised, neo liberal direction. Immigration concerns allowed them to slipstream their ideas behind that issue, aided by the widespread ignorance of Treaty Articles that only allowed EU citizens to live in countries if they met certain ‘conditions’ – to which the UK govt had opted largely to never fully apply.
This then also drove the desire for a ‘Hard Brexit for which there was never a strong mandate.
Then when that too doesn’t work so well the final search for Nirvana via Trusseconomics.
The whole Brexit/Neo-liberal programme was riven with contradictions that would unravel overtime, and so it’s proving.
Now none of this is to suggest the EU doesn’t need reform or that everything was/is perfect, far from it. We were incredibly well placed to drive the changes needed. But that’s another story.
No, Brexit happened because David Cameron wanted to suppress the elements in his government that were anti-EU. He thought he could do this via a referendum, falsely believing that the majority of the UK wanted to remain. He was wrong and paid the price.
Had I not had personal experience of working with EU representatives I would have been for Remain myself.
Jeremy Smith poses some pertinent points. Just down voting him is a cop out.
P.S. whenever I see a down vote I cancel it with an up vote even if I disagree with what is being said. Up votes on the other hand are fine in that they save me saying the same thing. If you disagree with the comment then be courageous enough to give your 2 cents.
Down with down votes!
I believe they would have got away with it if they’d left out the 45% income tax rate (which was actually a tiny part of the overall package) and the cap on bankers bonuses. Both of those were totally unnecessary and like feeding red meat to the press vultures, allowing them to scream “tax cuts for the rich!” without much analysis of the other measures, most of which were eminently sensible. The proposal was not to cut corporation tax, as suggested in the article, but to abandon the planned increase, which would leave businesses with more funds to invest in capex and R&D to stimulate growth.
Not providing the OBR report to show how the budget would be funded simply made the optics even worse. A textbook case of the 7Ps and tone deafness.
The bond and currency market turned on UK GOV because of press vultures?!
The markets turned on them because the absence of the OBR report provided no visibility on how the measures were to be funded.
The press feeding frenzy just amplified the hysteria.
Trump, Truss, Corbyn, Johnson, Brexit – all failed, and I thought politics was supposed to be hard to predict. I suppose people don’t change much, and when populism is in, they’ll vote for whoever best massages their unelite thoughts and feelings.
LOL, LOL, LOL
The Tory voters were warned by many different people (Sunak, Cummings, Rory Stewart) but the fools didn’t listen.
As one geriatric fool said about her “she has spirited conservatism”.
Still trolling this forum I see, Jeremy.
Indeed he is. There are places for that, but maybe he gets hammered on Twitter so thinks he’ll try his luck here.
Let’s just stick to intelligent debate where we can, and ignore those who want to turn Unherd into another playground for juveniles.
Here?
No, just a b*tchfest. That is all.
None of the comments make any sense – unless the principle is blind faith Toryism.
safe space anyone?!
I don’t believe it’s trolling just because he has a different viewpoint
Just have a look at his responses directly above yours. Nothing to do with “a different viewpoint”, just pure trollery.
Enough of this. Trolls thrive on it – do not feed!
You are being over-generous. You should have been a vicar, Billy!