Eleven gambles that went wrong for Liz Truss | Daily News Byte

In the fall of 2022, Liz Truss bet her premiership on a so-called mini-budget that tore up decades of fiscal conservatism. It did not pay.

I spoke to those involved about the thinking behind the biggest risks she took during her seven weeks as prime minister – and why they didn’t pan out.

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 were; condemned the economic ideas of the last 30 years followed by both Conservative and Labor governments, which she called “Treasury orthodoxy”; And told me she was ready to “bulldoze” opposition to his plans.

During the campaign, his rival, former chancellor Rishi Sunak, called his ideas “fantasy economics”. His colleague Michael Gove said he was a “holiday from reality”.

And, as it became more clear that she was going to win, her circle of advisers grew smaller.

Simon Clarke, then cabinet minister and one-time Truss ally, described the mood of the Truss campaign as “revolutionary”. He says: “You can definitely feel that she was determined to do it or die.”

Days after she moved into No 10, Truce sacked Treasury permanent secretary Tom Scholer, a senior civil servant who had worked for chancellors from Gordon Brown to Rishi Sunak.

This had the effect of intimidating other officers.

Once it was clear she would win the Tory leadership election, officials met her at Chevening – her official residence as Foreign Secretary – but they did not warn her of her plans.

He believed that it was not his job to do so given that Truce was not yet Prime Minister. But one of Truce’s political allies, who asked not to be named, told me that anyone who challenged her “was hanged in that room”.

Indeed, very few of those working behind the scenes have so far been willing to talk. I have spoken to many people off the record. Asa Bennett, Liz Truce’s speechwriter both before and after she became Prime Minister, agreed to speak publicly.

“It’s safe to say that he [Scholar] Bennett says he would still be on the job if he was considered helpful.

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 make official economic forecasts.

She believed his predictions were generally wrong and did not share her belief that tax cuts could stimulate growth and, potentially, pay for themselves.

To bypass the OBR, she said her plan to spend billions on tax cuts was not a budget. It replaced what she initially called a fiscal phenomenon – language designed to ensure she could ignore the law that states the OBR must make a forecast whenever there is a budget.

This worldview echoed what Truce was hearing from those around him during the summer leadership campaign.

John Moynihan, who was Liz Truce’s chief fundraiser and spoke to her regularly throughout the campaign, says: “The whole idea that you have to get a tick of approval from the OBR has been consistently wrong in its financial forecasts. Look, democracy. adversary.”

Truss’ colleagues in the cabinet warned her that she needed to draw up a spending reduction plan to show how she intended to pay for the tax cuts.

The minister, who was previously in charge of public spending at the Treasury, was discussed by his new Leveling Up Secretary Simon Clarke with plans to cut spending by five to 10%.

And while ministers stayed back at the Treasury argued for the need to talk about spending restraint – a paragraph spelled out by No 10 from Chancellor Kwasi Kwarteng’s mini-budget speech.

Truce told them that the cuts would “distract from the messaging” about taxes and growth and that they could “worry about that later”.

Those who raised concerns were told they had become part of “Treasury orthodoxy”.

“We certainly discussed the importance of making sure that tax and spending are in alignment,” says Clarke, who was once rumored to be a candidate for Liz Truce’s chancellorship.

“The question that sits at the heart of all of this is at what moment in her mind did she decide that it wasn’t necessary… I think her appetite for radicalism just consolidated.”

Nick Robinson explores the inside story of the UK’s shortest ever Premiership

Truss had a trio of friendly economists who advised her. He was known as Truscatier.

One – Gerard Lyons – says he warned her not to go further or faster than expected by financial markets and wrote a memo to the chancellor in the week of her mini-budget to reiterate his warning.

“My view, both privately and publicly, was that any financial announcements needed to stick to what the markets expected,” he says.

“I think all three outside economists emphasized that there is a need to have a full-cost budget. The phrase I used is: you need to mark your homework.”

Truss’s closest allies inside Number 10 and in the Cabinet did not know he intended to cut the top rate of tax until the night before the mini-budget.

Although the cost was relatively small compared to other tax-cutting plans, it sent a signal to voters and markets that the new prime minister was willing to ignore concerns about unfairness — and was ideological in his approach to economics.

Rachel Reeves, the shadow chancellor, sat across from Kwasi Kwarteng as he announced the plan.

“We prepare for a lot of things because we don’t know what the big surprise will be in the budget,” he says.

“We didn’t expect that. The reason we didn’t expect it to happen is because it was bad economics and bad politics.”

In the aftermath of the mini-budget, Truss hoped her critics would be quieted by reversing her plans to cut the top rate of tax. But she encouraged them to demand more changes – and also embarrassed and alienated her colleagues who, like the Daily Telegraph, hailed her as a woman who was not about to bend.

When she backtracked – in the middle of a Conservative Party conference – even her most ardent fans were concerned.

“I thought: ‘It’s the beginning of the end,'” says John Moynihan. “Accept one, you will accept all.”

John Moynihan was right. Days after the Tory party conference, Truce sacked Quasi Kwarteng, his friend, long-term ally and implementer of his ideas.

She was replaced by Jeremy Hunt, who tore up almost every policy in Kwarteng’s mini-budget.

Sir Graham Brady, chairman of the influential backbench 1922 committee, understood the way things were going.

“I think at the time it was very hard to see how the whole thing could work,” he says.

“She could have done everything she could to restore market confidence, but to do that she was doing the opposite of what she promised to do.”

Truce fired almost everyone who disagreed with him and promoted those who supported him.

She did nothing to reach out to Rishi Sunak and his supporters despite the fact that she won the support of more MPs than him.

His colleagues accused his critics – such as Michael Gove – of treason. They still believe it to be true.

Nadine Dorries, a former culture secretary and ally of Truce, is writing a book arguing that this was a case of conspiracy rather than coke-up.

“The moment she won the leadership contest, they would never let her stay. She was always removed. I thought she would be there for six months. But I knew they wouldn’t let her live that long. Next election.”

Truss allies believe she was weakened by leaks from the Treasury and by hostility from the Bank of England and the International Monetary Fund (IMF), which criticized her policies.

Truce’s supporters – and even some of her critics – believe that the people she dismissed, ignored or humiliated were happy to see her fail.

Some allege that there was collusion between the Bank of England and the IMF in issuing critical statements that unsettled markets. Senior executives in one organization previously worked in another organization or knew their counterparts well.

Her allies blame the Treasury for news of a potential hike in corporation tax, which prompted her to make a U-turn, then forced her to sack her chancellor, and ultimately cost her her job.

John Moynihan says that the “forces against him” include “such a large part of the British establishment or blob”.

“I don’t think the Bank of England was particularly well-disposed to the Truss government.”

Asked if there were people in the Treasury and the IMF who wanted the Truce government to fail, John Moynihan says “absolutely”.

Liz Truss was nicknamed the “human hand grenade” but took 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 once he became prime minister, there was no one powerful enough to hold him back.

Her chief of staff was a political campaigner who openly admitted to having a very limited knowledge of policy. Her chancellor was an old political friend and ally who said he saw his job as carrying out the PM’s wishes. Her cabinet secretary was told she planned to fire him and, insiders believe, did not want to stand up to her, even though her position was insecure.

Truss was the choice of Conservative Party members to become PM. MPs who were not her supporters rushed to support her once they saw she was going to win. The Daily Mail and Daily Telegraph hailed him as Margaret Thatcher’s successor. His most ardent supporters attacked Rishi Sunak as a socialist.

She and they gambled. Many would say, the country paid the price.

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Additional reporting by Jack Fenwick and Stephanie Mitcalf