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My most recent post discussed Liz Truss’s commitment to libertarianism and the part she played in her own downfall.

At the end, I mused whether she would still be in office were she a man. Having thought about it some more, I do believe that would have been the case. Truss has better morals than Boris Johnson and more integrity than Rishi Sunak. Furthermore, she is far more trustworthy than our de facto Prime Minister, Chancellor Jeremy Hunt. She has flaws. They have flaws.

It is curious that all of them, men, are given a pass. Truss, an honest woman, was not afforded that opportunity.

Let us look at who was out to finish Liz Truss’s premiership.

The media

During the summer Conservative Party leadership campaign, most papers — right and left — came out in favour of Rishi Sunak.

Only the Daily Mail and The Telegraph consistently supported Truss. Truss also saw The Sun as a friendly paper, particularly its political editor Harry Cole.

Broadcast media also largely favoured Sunak. Only GB News supported Truss for the most part.

Why that was is unclear.

One could point to Truss’s U-turns, evident as soon as the leadership campaign for Party members’ votes started, but most of the media — print and broadcast — were already in the tank for Sunak when Conservative MPs were still voting in July.

On November 16, veteran columnist Andrew Gimson wrote about the media outlets covering Parliament, known as the ‘lobby’: ‘Lobby journalism holds power to account. But it’s often cruel, trivial — and unfair’.

Guido Fawkes liked what he had to say:

Gimson’s article for ConservativeHome discussed the attacks on other Conservative ministers in Rishi Sunak’s Cabinet. Suella Braverman, Home Secretary once again, is one of them and Justice Secretary/Deputy Prime Minister Dominic Raab is another.

Gimson says that journalists find their witch hunts as exhiliarating as blood sports (emphases mine):

Hunting is reckoned to improve the health of the fox population.

That is not, however, why people want to hunt them. They yearn to do so because it is a wonderful, exhilarating sport.

Forget for a moment any impulse to moralise. High-minded theories are all very well. Politics as actually practised is a blood sport.

Dominic Raab, Gavin Williamson and Suella Braverman are or were the most recent quarry, closely preceded by Liz Truss and Kwasi Kwarteng, before which a blond beast rampaged across the political landscape for three years with excited members of the Westminster lobby in close pursuit.

Four of the six were hunted down, while Raab and Braverman have so far (with intermissions) survived, but might at any moment find themselves once more in mortal danger.

The lobby is trained and ready at a moment’s notice to follow any scent, no matter how faint, rival correspondents for different newspapers acting as a pack of hounds, each leaping at whichever politician is the hunted animal, drawing blood and emboldening the others to fresh frenzies of aggression …

It is impossible, if one is a lobby correspondent at Westminster, to stand aside from the full-blown crisis which rages, and any case, few experiences are more exhilarating than to be in at the death of a Prime Minister.

Every journalist, indeed everyone in the slightest bit interested in politics, will remember the first time he or she witnessed such a drama: in my case I was lucky enough in November 1990 to be in the Press Gallery to watch the fatal resignation speech delivered by Sir Geoffrey Howe, and 19 days later was in the crammed Committee Corridor on the evening it was announced amid almost unbearable excitement that Margaret Thatcher had fallen four votes – four votes! – short of beating Michael Heseltine by the necessary margin in the first round.

Such crises becomes all-consuming. You surrender yourself to the experience, and nothing else seems to matter. If you are a reporter, your news editor and editor demand constant reports from the front, and you want to distinguish yourself by revealing dramatic new charges, whether solid or flimsy, against the embattled minister, rather than just repeating what your rivals have said.

Such work requires the ruthless expertise to spot in an instant the two or three words in some dreary speech or answer which can be held to constitute a new development. The lobby are brilliant at this: they see the new angle, the incriminating admission, where a normal person would notice nothing.

News becomes an artificial commodity, an esoteric language only comprehensible to highly intelligent and practised correspondents, who translate it into the latest thrilling episode of a story which is intelligible to the dimmest of us, for it is as old as history: will the ruler live or die?

This question of life and death simplifies everything, and lends it a personal flavour. Does one like the look of whichever minister is just then being hunted, and hope he or she will get away? Or would one much rather see him or her bumped off?

The tyranny of the story extends to the comment pages. Leading articles and columns are written for or against the hunted person, most likely against, for it is much easier to write a vivid piece denouncing a politician for being disreputable than to compose a vivid defence.

In order to purify public life, the offending minister must be drummed out of it. Nothing which might serve this noble end is too cruel to be said; too piffling to be taken down and repeated.

Let the victim and his or her family cope as best they can. It would be wrong to spare them the full blast of public disgust. We find ourselves in a primitive world where human sacrifice is demanded; not in a rational one where events can be weighed and assigned their due importance, or unimportance

There is a deep satisfaction to be derived from getting rid of a Prime Minister, so deep that we have in recent years got rid of three. For a short time, very short in the case of Liz Truss, we allow them to triumph, before restoring equality, for which all democracies have a deep yearning, by dragging them down with brutal abruptness to our own level …

What the lobby does, or helps Conservative politicians to do, is the modern version of an ancient and savage tradition. All else is forgotten while the tribe slays its chief.

And no tribe is better at slaying its chiefs than the Conservative Party.

Afterwards, some enemies of the prey express their empathy for the slain, such as Jenny Murray did for Truss on October 27 in The Mail. Murray’s headline read ‘I never expected to feel sorry for Liz Truss’ and, upon closer inspection, she doesn’t really feel sorry at all. She uses the piece to lick her own wounds after retiring from the BBC at the age of 70:

I was not sorry to see her go. Her short time in power was a disaster.

I’d known her professionally for a good few years and had often found her a bit weird with her oddly truncated speech patterns, bizarre facial expressions and apparent lack of emotional intelligence. She was no public speaker and I certainly never saw her as Prime Ministerial material.

In that I was right, but despite her self-serving, unapologetic final speech and her typically arrogant and selfish, ‘Well at least I’ve been Prime Minister!’ goodbye, I can’t help sympathising with what she has to face next.

As an ordinary constituency MP, she’ll join what I have dubbed, from bitter personal experience, the ‘Once I Was Hot, But Now I’m Not,’ club. I know she’ll be asking herself, ‘Who am I now?’

It’s two years since I left the job that defined me for 33 years. I was Jenni Murray, presenter of Radio 4’s Woman’s Hour.

It had been my greatest ambition since childhood. I’d presented Newsnight and Today, but the moment I heard the announcer first say on Monday, September 14, 1987, ‘And now Woman’s Hour, with Jenni Murray’ remains the most thrilling of my life.

I loved every minute of those 33 years and, unlike Liz Truss, I was not forced out of my position (though even when you leave a top job of your own volition, it doesn’t stop others speculating). I made the choice to leave as my 70th birthday came and went.

So, nothing like Liz Truss after all. The rest of Murray’s lengthy column is all about herself. Sickening.

On a positive note, I was surprised to read that Andrew Neil, normally a supporter of the status quo, supported Truss and Kwarteng’s mini-budget just after it was announced in Parliament:

After 12 years of Tory government we finally get a Tory budget. Yesterday’s not-so-mini-budget was a watershed event, taking the country in a new economic direction and creating clear blue water between government and opposition.

The Tory faithful couldn’t quite believe it. Labour struggled to grapple with its implications. The political dividing lines will now be starker and fiercer than they’ve been for a generation.

No more tax rises by stealth (or, more recently, in plain sight). Or endless, futile tinkering with the minutiae of spending and taxation to give voters a false impression of constructive activity. Or the relentless doling out of taxpayers’ dosh to whatever fashionable vested interests managed to catch ministers’ attention.

Instead, Prime Minister Liz Truss and her Chancellor, Kwasi Kwarteng, junked all of that in favour of one overriding economic priority: higher economic growth. Many of the verities of Britain’s economic establishment have been slaughtered in the process

Scrapping next April’s planned rise in corporation tax (on businesses’ profits) won’t win any popularity contests outside company boardrooms. But an essential part of Britain’s post-Brexit future is surely to be a magnet for foreign investment. Whacking up the country’s key business tax was a strange way of going about it

New ways require new justifications. The Treasury estimates that abolishing the 45 per cent top rate of income tax will cost £2 billion a year.

This is a typically static official calculation. If it results in more top earners declaring their income in Britain, then it could soon more than pay for itself.

Ditto bankers’ bonuses. The cap is a relic of EU regulation. Banks simply increased pay to compensate for reduced bonuses, thereby making their compensation costs more fixed and less flexible.

Frankfurt, Paris and Amsterdam have tried hard to lure our financial services away from the City since Brexit, with only limited success. Bonuses in those centres are still capped. London now has the advantage.

And, remember, with the new top rate of tax at an internationally competitive 40 per cent, every £1 million banker’s bonus is £400,000 more for schools and hospitals

for more than a decade now I’ve watched chancellors take tough, painful decisions on tax and spending based on OBR borrowing forecasts that turned out to be huge over-estimates, so much so that in retrospect neither the tax rises nor spending cuts were necessary.

Indeed, as Truss attempts to take the country in a new, less orthodox direction, I’d argue that it’s a blessing that she’s been able to do so unencumbered by the OBR’s dubious forecasting.

We’ll get the OBR’s latest workings in two months anyway, when it might have a better idea of what 2023 will look like. Nor are we entirely in the dark. The Treasury says the tax cuts and energy price cap measures will increase borrowing this year from £162 billion to £234 billion — an extra £72 billion.

The IFS thinks we’ll still be borrowing £100 billion a year through the middle years of the decade.

These figures have spooked the markets. The pound continued its decline against the dollar after Kwarteng’s statement and the yield (or interest rate) on short-term government debt rose to close to 4 per cent, making it a lot more expensive to borrow than only two years ago, when it was 0.4 per cent.

These are real constraints on the Government’s ability to borrow even more. A falling pound merely fuels inflation, especially when it comes to imported energy, which is priced in dollars.

Interest rates are already rising. If excessive government borrowing forces them even higher, that will merely choke off the economic growth the Government so desperately seeks.

There’s another factor at work here. The global currency and debt markets have had a ‘down’ on Britain for some time. It’s not clear why. Britain’s debt-to-GDP ratio is among the lowest in the G7 club of big economies. Our budget deficit is on a par with many other major economies. Economic growth is anaemic — as it is everywhere, from the Eurozone to America to China.

I suspect it’s a Brexit hangover. The publications global market players read most closely include the New York Times, the Economist, the Financial Times and leading European papers such as Le Monde and the Frankfurter Allgemeine Zeitung. All — and others like them — have been relentlessly negative about Britain since the 2016 referendum

It is said she’s taking a great gamble. That’s true. But sticking with the failed policies of the recent past was probably an even a bigger gamble. The stakes are certainly high.

If by this time next year the economy is still in the doldrums, then it’s not just Truss who will be finished. So will any prospect of the Tories winning the next election.

Read it and weep. We are back to square one.

There is much that the media didn’t tell us about the global picture of economic pandemonium.

Early in the week following Kwarteng’s mini-budget, US mortgage rates went up to 7%:

The EU’s average deficit is worse than the UK’s:

https://image.vuukle.com/9b30bb2c-838f-44c2-bf35-a8380d75711b-80a8ed1b-f697-4bc1-bc25-d18521aa563f

At the end of October, by which time Truss had gone, inflation in the Euro zone increased to 10.7% as growth slowed:

At the beginning of November, a Fed hike caused sterling to trade below £1.13 against the dollar:

And, finally, within three weeks of becoming Prime Minister, Rishi Sunak made new spending commitments, pledging billions to the world. This graphic appeared on November 7:

https://image.vuukle.com/afdabdfb-de55-452b-b000-43e4d45f1094-6f3d3b31-5e82-478e-b97c-3802370621e8

Objection from the media came none.

Conservative MPs

On October 20, in the immediate aftermath of Truss’s stoic resignation, The Sun gave us the reaction from three Conservative MPs:

Responding to today’s bombshell announcement, former minister and Red Wall poster boy Neil O’Brien tweeted: “The next PM must return to the national conservatism represented by our election winning 2019 manifesto and put us back on the side of normal working people.”

If anyone was going to have done that, it would have been Truss, for whom Party members voted in the majority. Sunak and Hunt certainly aren’t on the side of ‘normal working people’: tax ’em until the pips squeak.

Next up was Steve Baker, now an apologetic Northern Ireland Minister:

Brexit hardman Steve Baker urged colleagues that whatever the result, “we must accept and back the new Prime Minister”.

Millions of us wish he had shown the same allegiance towards Truss.

The only one to say anything complimentary was Greg Hands, who served as an International Trade Minister:

He said:

A dignified exit as Prime Minister from Liz Truss. A difficult day for the country, the Party and for Liz personally.

She wasn’t long as PM, but served at the Cabinet table longer than any of her three predecessors. She has long served the country – and I wish her very well.

At least Truss wasn’t removed from the top table Chinese-style:

On October 27, one week after Truss’s resignation, The Telegraph‘s Matthew Lynn said that backbench Conservatives just could not bring themselves to support Truss’s economic plan, which Kwasi Kwarteng fronted.

In other words, Conservative MPs shy away from libertarianism, even though I think it would do the UK a lot of good:

The timing, to put it mildly, was unfortunate. It was a difficult transformation to pull off at the best of times, but against the backdrop of rising inflation and an out-of-control dollar, it was doubly difficult. 

Truss’s programme did not have the necessary support within the Parliamentary Conservative Party either. Massive opposition from Labour, the Scottish Nationalists, and the Twitter mob was to be expected. 

But very few MPs were willing to support the plan, and without that backing it was always going to be hard to push through. Even before it got on to the genuinely difficult stuff – investment zones, planning reform, the green belt – the opposition was overwhelming. 

The Bank of England

Matthew Lynn points the finger of blame at the Bank of England (BoE):

the real failure of Trussonmics may well have been the fault of the Bank of England. As Narayana Kocherlakota, a former President of the Minneapolis Fed, and now Professor of Economics at New York’s Rochester University, argued in an opinion piece for Bloomberg this week, it was the Bank’s failure to support the gilt market that killed the plan

“The way the Truss government collapsed should concern all who support democracy,” he warned. 

In his Bloomberg article of October 26, Narayana Kocherlakota defended Truss and criticised the BoE:

Markets didn’t oust Truss, the Bank of England did — through poor financial regulation and highly subjective crisis management.

Truss won the leadership of the Conservative Party, which the UK electorate had voted into power, by promising a range of deep tax cuts and government spending increases. Whatever one might think of her policies, they were her mandate. I agree with the many observers who expected them to lead to higher inflation, higher interest rates and quite possibly higher unemployment. But such adverse outcomes take months and years to play out. Her government fell in a matter of weeks. How could this happen?

The common wisdom is that financial markets “punished” Truss’s government for its fiscal profligacy. But the chastisement was far from universal. Over the three days starting Sept. 23, when the Truss government announced its mini-budget, the pound fell by 2.2% relative to the euro, and the FTSE 100 stock index declined by 2.2% — notable movements, but hardly enough to bring a government to its knees.

The big change came in the price of 30-year UK government bonds, also known as gilts, which experienced a shocking 23% drop. Most of this decline had nothing to do with rational investors revising their beliefs about the UK’s long-run prospects. Rather, it stemmed from financial regulators’ failure to limit leverage in UK pension funds. These funds had bought long-term gilts with borrowed money and entered derivative contracts to the same effect — positions that generated huge collateral demands when prices fell and yields rose. To raise the necessary cash, they had to sell more gilts, creating a doom loop in which declining prices and forced selling compounded one another.

The Bank of England, as the entity responsible for overseeing the financial system, bears at least part of the blame for this catastrophe. As a result of its regulatory failure, it was forced into an emergency intervention, buying gilts to put a floor on prices. But it refused to extend its support beyond Oct. 14 — even though its purchases of long-term government bonds were fully indemnified by the Treasury. It’s hard to see how that decision aligned with the central bank’s financial-stability mandate, and easy to see how it contributed to the government’s demise.

The way the Truss government collapsed should concern all who support democracy. The prime minister was seeking to fulfill her campaign promises. She was thwarted not by markets, but by a hole in financial regulation — a hole that the Bank of England proved strangely unwilling to plug.

Two days before Truss resigned, Daniel Lacalle wrote an article for Mises Wire: ‘The Bank of England Made Liz Truss a Scapegoat’.

Lacalle points out that economic turmoil was worldwide, something not reported widely in the British media. No surprise there:

I find it astonishing that not one of the so-called experts that have immediately placed the cause of the British market volatility on Liz Truss’s budget have said anything about the collapse of the yen and the need for Bank of Japan intervention, which has been ongoing for two weeks.

Why did so many people assume the Truss minibudget was the cause of volatility when the euro, the yen, the Norwegian krone, and most emerging market currencies have suffered a similar or worse depreciation versus the US dollar this year? What about the bond market? This is the worst year since 1931 for bonds all over the world, and the collapse in prices of sovereign and private bonds in developed and emerging market economies is strikingly similar as those of the UK fixed income peers.

He blames British pension funds’ liability-driven investing (LDI) strategies on the abuse of quantitative easing (QE) over the years. Who was in charge of that? The BoE.

Lacalle wrote while Truss was still Prime Minister:

British pension funds are not selling sovereign bonds because of lack of trust in this or another government’s budget. They are selling negative-yielding sovereign bonds because they jumped wholeheartedly into the debt bubble created by artificially cheap money believing that central banks would keep fixed income prices elevated with constant repurchases.

British pension funds’ unfunded liabilities are not a problem caused by the mini budget nor solely a UK problem. It was an enormous problem in 2019–20 disguised by insane currency printing. Unfunded global liabilities for state pension funds in the US were already $783 billion in 2021 and rose to $1.3 trillion in 2022 according to Reason Foundation. The funded ratio of state pensions was just 85 percent in 2021 and has fallen below 75 percent in 2022.

What happened in the years of negative rates and massive currency printing? Pension funds used liability-driven investing (LDI) strategies. Most LDI mandates used derivatives to hedge inflation and interest rate risk. And what happens when inflation kicks in and rates rise? “As interest rates have risen, the notional value of some of the derivatives held in LDI portfolios has fallen. The result: increased collateral calls. The speed at which rates have risen means some pension plans have had to liquidate portfolios to meet collateral calls” according to the Investment Association’s latest report in September and Brian Croce at Pensions and Investment.

The total assets in LDI strategies almost quadrupled to £1.6 trillion ($1.8 trillion) in the ten years through 2021. Nearly two-thirds of Britain’s defined benefit pension schemes use LDI funds, according to TPR and Reuters. Liz Truss and Kwasi Kwarteng are not to blame for this insanity. The policy of negative real rates and massive liquidity injection of the Bank of England is. Kwarteng and Truss are only to blame for believing that the party of policies of spending and printing defended by almost all mainstream Keynesian economists should work even when the music stopped

Liz Truss and Kwasi Kwarteng are not to blame for the insanity of the past years or Rishi Sunak’s ultra-Keynesian budgets. They are only to blame for believing that another dose of Keynesian deficit insanity would not harm.

Mr. Kwarteng’s demise is just a casualty delivered by the modern monetary theory crowd and the monetary laughing gas city to justify that the problem was a ludicrous tax cut not years of currency printing and deficit increases.

What has happened in the UK or Japan is likely to happen soon in the eurozone, which accumulated more than twelve billion euro of negative-yielding bonds in the years of cheap money and reckless stimulus plans.

Liz Truss is not to blame for twenty years of monetary insanity and fiscal irresponsibility. She is to blame for a budget that increases spending without cutting unnecessary expenses.

The irony of it all is that the defenders of monster deficits and borrowing if it comes from bloating the size of government feel vindicated. It was the evil tax cuts!

The political analysis of the mini budget is astonishing. No one in the UK parliament sees any need to cut spending it seems, yet those expenses are consolidated and annualized, which means that any change in the economic cycle leads to larger fiscal imbalances as receipts are cyclical and, with it, more currency printing. The assumption that raising taxes will generate perennial annual increases in receipts no matter what happens to the economic cycle can only be defended by a bureaucrat.

Well, Rishi Sunak and Jeremy Hunt are those bureaucrats.

There are global players in pension fund management, BlackRock being one of them, as The Conservative Woman revealed on October 27:

BlackRock is heavily involved in the charity sector, managing over £4.5billion for more than 3,000 UK charities alone. ‘Sustainability’, food security and renewable energy rank very highly in their priorities in that sector.

The role of BlackRock in the recent selling off of derivatives by UK pension funds, said to be behind the triggering of a fall in sterling following the ill-fated Kwasi Kwarteng mini-Budget, is an intriguing one. BlackRock executives would defend their actions by stating they were merely protecting clients who were financially overcommitted in that sector and that pension fund managers ought to have known the risks involved in leveraged investment strategies in the first place, and that there is far more to that type of riskier investment than just following trends. Either way the political fallout was profound, triggering a chain of events which led to the fall of Prime Minister Liz Truss. BlackRock executive defends pensions strategy that fuelled UK crisis

Interestingly, Jeremy Hunt has appointed a BlackRock executive who is pro-Net Zero and anti-Brexit as one of his chief advisers:

A business with the financial resources of BlackRock will naturally attract well-connected people to its payroll. People such as Rupert Harrison, chief of staff to Chancellor George Osborne from 2006 to 2015. An opponent of Brexit, he tweeted in July 2017 that ‘the rest of Europe is booming and we’re not’.

Intriguingly, Harrison is now one of new Chancellor Jeremy Hunt’s most senior advisers. On the surface, Hunt seemed to have been parachuted in from nowhere, having failed in two leadership elections and spending more than two years on the back benches, yet from the moment he was appointed he already had a highly expert team, including Harrison, ready to start at once and acting promptly with great self-assurance as though he knew he already had the backing of those who really matter.

However, Conservative Party members are unhappy with Hunt and Sunak’s economic policy based on higher taxes, which are, in reality, much higher than they read on paper. This poll is from November 29:

Guido Fawkes wrote (emphases his):

The Tory membership doesn’t support their own government’s economic policy, according to the latest Conservative Home panel poll. Opposition stands at 48.78% and support at 41.87%. 9.35% don’t know. 

It can’t come as much surprise. As Rishi’s supporters point out, he was warning of the consequences of Liz Truss’s policies during the summer contest, and the membership still voted for Liz’s low tax package. Support at 41.87 is actually 0.8% lower than Rishi received from the members during the summer…

Let us return to the BoE.

In the December 2022/January 2023 issue of The Critic, Jon Moynihan published ‘How the Bank broke the Government’, which refers to Narayana Kocherlakota’s aforementioned article for Bloomberg and expands on the use of LDIs in pension fund management:

Kocherlakota’s view was that the Bank of England was responsible for the crisis, through “poor financial regulation and highly subjective crisis management”. Outside the UK chatterati, this view is widely supported.

The beef against the mini-budget was that it spooked the market. But virtually all of the policy announcements made by Kwasi Kwarteng on the day were not new; they had been pledged during the Truss campaign or — in the case of the energy price guarantee — confirmed shortly after her arrival in Downing Street

Sure, the mini-budget stated that clarifying how all the spending/lowered tax revenue would be paid for was to be put off until the later financial statement, due some weeks later. But the only new thing was the change to the top rate of income tax from 45 per cent to 40 per cent

Given the well-known dynamic impact of lowered tax rates, this change would arguably have been revenue neutral or even beneficial; even without any dynamic benefit, it could have cost at most £2 billion in tax revenue. That is a rounding error compared to the amounts already absorbed by the market and a fraction of the costs Rishi Sunak has accepted at COP 27 — to which the markets have reacted entirely complacently. It is just not credible to blame the mini-budget for the market turmoil.

Moynihan explains more about how LDIs work:

The prime obligation of a pension fund is to match its assets (the money it uses to make payments) to its liabilities (the payments it expects make to its pensioners over the years). For a fund to be as sure as it can that it will be able to pay its future pension liabilities, it buys assets whose coupons and maturity match its (actuarially expected) future pension payments.

So far, all well and good. The problem is with LDI funds. These, like so many pension funds these days, use gilts to accomplish that matching (in a popular meme of the past couple of decades, “gentlemen prefer bonds”). However, in addition the idea has been sold that they can goose up their returns a bit, to compensate for the low yields they are getting on their gilts

This little bit of extra profit is accomplished by borrowing some further money, short-term, and with it buying long, higher-yielding assets — either real assets, or derivatives. It’s a well-known and always risky bet on interest rate movements; in some markets it’s known as the “Carry Trade”; in the Japanese markets it’s known as the “Widow Maker”. It’s entirely inappropriate for “safe” pension funds. 

If rates move against the bet, the bet sours. To cover the risk they are taking, the funds are required to give over their other assets (the gilts) as collateral to the bank that lent them the money. 

When the bet sours, the bank that lent them the money “calls the collateral”, selling off the gilts in order to repay the borrowing a wave of such sales can destabilise the gilts market and create a disorderly environment, as happened in late September 2022.

Some would say that the Bank of England should have known all of this and not allowed such risk to be taken by this huge market in LDI funds. Some would raise an eyebrow at the news that until the middle of 2022, the Bank of England itself held 100 per cent of its £5 billion pension fund in just one single LDI Fund, and therefore blithely seemed to believe it was OK for such risks to be taken (their 100 per cent recently was reduced to a scarcely less concerning 82 per cent).

For whatever reason, the Bank and other regulators did allow LDI funds to become more and more the fashionThe total value of liabilities hedged with LDI strategies was $1.8 trillion in 2021, around half of the total of LDI funds in the world, a sure sign that the Bank Of England had been far too lenient in allowing LDIs to flourish in the UK. That is Strike One.

Why then did the LDI funds start collapsing specifically in late September? It starts with the rapid appearance this year of inflation, caused in no small part — as the Bank has finally admitted — by the bank’s excessive growth of the money supply in recent years. As inflation consequently shot up, so, all year, did gilt yields rise, putting increasing pressure on those rickety LDI funds. That is Strike Two against the BoE for its role in worsening inflation in the UK, leading to this instability.

Two days before Kwarteng delivered his mini-budget, Saxo Bank and Deutsche Bank correctly predicted a fall in sterling.

Saxo predicted:

“If the BoE fails to hike 75 basis points, let’s shield our eyes for what is going to happen to the pound here.” (They were predicting a fall in sterling, which duly happened. Low sterling leads to higher inflation leads to higher gilt yields.) 

Deutsche Bank said that the BoE needed a ‘hawkish response’. It never materialised.

In the end:

Both Deutsche and Saxo were right. Only days after the Bank failed to step up to the 75 basis points mark, sterling momentarily dropped to $1.04, just as Deutsche had predictedyet for reasons that remain to be explained, the drop was blamed on the mini-budget, not on the Bank’s failure to sufficiently raise rates. The failure to raise rates enough, two days before the mini-budget, is Strike Three.

In addition, the BoE announced a fortnight-long programme of selling £40 billion of gilts, which ended in mid-October.

In other words, it moved from QE to QT, quantitative tightening.

Reuters noted the BoE was the first central bank to do that, at least in recent years. Bloomberg called the move ‘historic’ for the same reason:

In 2013, all it had taken was the Fed to announce it was doing less QE — not stopping, just doing less — for the markets to go into a “Taper Tantrum”.

Ever since, most central banks have been cautious not to move too fast in shutting down their QE. But not the BoE. Why did it see itself as in a position to be the first in the world to take this very risky step, aware as they were that the mini-budget was about to be announced?

Not surprisingly, the markets responded:

market participants move fast to get ahead: they quickly sell their own bonds before their value is hammered by the BoE sales. Yields immediately go up and the price of bonds immediately falls. Which is why it was — Strike Fourstupid for the central bank to announce its moves ahead of time: it’s like the time that Gordon Brown announced he was selling all our gold, and the price collapsed so he made much less from the sale. But now the LDI pension funds started to get really hammered: as the market moved to dump gilts, the price of gilts fell and fell — this is still before the mini-budget — and collateral calls began to come thick and fast on the LDI funds.

The doom loop began:

And even more collateral calls then came in, and we were in an accelerating doom loop. All this was happening as the mini-budget was announced, and the lazy financial press, not seeing what had happened earlier, blamed the rout in the gilts market on the mini-budget. But it was started by the Bank of England’s earlier decision to go full tonto QT. Strike Five.

Cue the headlines that Liz Truss ‘crashed the economy’, to borrow Labour’s words, which they are still using in Parliament:

The Prime Minister is accused the following day of destroying the economy.

The BoE backtracked immediately, announcing it would move from QT back to QE:

The Bank of England, of course, immediately announces that it is not after all going to sell £40 billion of gilts — it is going to buy £60 billion of them — back from QT to QE in a blink of the eye. 

Of course, by then, it was too late for Truss and Kwarteng. Their collective goose was well and truly cooked:

… by now the gods of havoc have been unleashed. Truss’s enemies in the Conservative party get to work, using the mini-budget narrative to undo the mini-budget, to oust the Chancellor, and finally to oust the Prime Minister herself. Job Done

The BoE defended its actions:

The post-mortem speech by the Bank’s director for financial stability, entitled “Risks from leverage: how did a small corner of the financial industry threaten financial stability?” makes for interesting reading; in this telling, the Bank staved off a crisis from what, for anyone, would have been an unexpected direction, dealing more than adequately with the non-bank sector. If anything, the director claims, the UK was ahead of the curve!

As for the current Sunak-Hunt government, Jon Moynihan has also noted the presence of David Cameron’s Chancellor and the former BlackRock executive:

George Osborne and Rupert Harrison, late of BlackRock, the UK’s second largest provider of LDI funds, are now advising the new government.

Moynihan ends his article by pointing out that the BoE’s governor, Andrew Bailey, has the nickname of ‘Lullaby’ because he tended to doze off during meetings in a prior position:

As head of the Financial Conduct Authority from 2016 to 2020, he saw first-hand the sort of shenanigans firms and funds will get up to if, pressed by smooth talking salesmen, they are given the freedom to act as they will.

It has been alleged that while in that role, Bailey “dozed off” during meetings over a pensions scandal. Now, the organisation he runs is accused of being asleep at the wheel on LDI pension funds, not to mention on inflation, the currency, the stability of markets.

It looks like the BoE’s laxity led to the fall of a government:

All that led to the end of a government, in a way that will continue to reverberate, to the detriment of many people’s view of democracy in this country, for decades to come.

What the British think

Only last week, on November 23, IPSOS published a poll saying that politicians are the least trustworthy of working Britons. Pictured alongside Rishi is a very young Piers Morgan when he edited The Mirror. Journalists have a trustworthiness rating of 29%, compared to politicians in general at 12%:

Guido has the full chart of occupations participants were asked to rank in order of trustworthiness:

Hardly unsurprisingly, public trust in politicians to tell the truth has fallen to its lowest level ever, according to the latest Ipsos poll. Just 12% of the public now trusts politicians to tell the truth, lower than advertising executives (14%) and government ministers (16%).

Unfortunately for journalists they don’t fare much better, at just 29% – one percent above estate agents…

Nurses and doctors ranked the highest at 89% and 85%, respectively.

Television news readers ranked at 58%, above clergy/priests and the man in the street, both of which tied on 55%.

Conclusion

On November 22, roughly one month after Truss resigned, Dan Wootton did a follow up on GB News.

Nigel Farage told him:

Hunt was the coup. Sunak is little more than a puppet.

Wootton also interviewed Ranil Jayawardena, who served as Secretary of State for DEFRA, the Department of Environment, Food and Rural Affairs. He was very gracious and didn’t want to get into any controversies. Wootton, who was a big Truss supporter, wanted to know how both of them were faring. He said that they were fine.

I’m including the nine-minute interview here just so you can hear Ranil Jayawardena’s voice. He should record audio books in his retirement. Someone in the comments to the video said that he sounds like Boris. He sounds a thousand times better than Boris. This is received pronunciation, rarely heard today in such mellifluous tones:

The Liz Truss saga ends here.

I fear the worst, for the Conservative Party and for the British.

End of series

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My most recent post on Liz Truss explored the background to her final week in office as Conservative Party leader for 44 days.

She remained Prime Minister until Rishi Sunak took over and was in post for 50 days.

The book

On Thursday, November 24, 2022, Out of the Blue, the biography of Liz Truss by The Sun‘s Harry Cole (right) and The Spectator‘s James Heale (left), went on sale:

They had to frantically rewrite parts of it and add the sad denouement:

The Guardian‘s Gaby Hinsliff gave it a good review, considering that The Sun and The Spectator are not aligned with the paper’s politics:

More excerpts from Hinsliff’s review follow (emphases mine):

Liz Truss was also the first [Prime Minister] to unravel almost faster than a biographer can type. She quit eight days before the Sun’s political editor Harry Cole and Spectator diarist James Heale were due to deliver a portrait already being written at breakneck speed, and for a book to emerge at all in the circumstances arguably represents something of a heroic technical achievement. True, the writing is clunky in places. But nobody is going to be buying this book for its literary elegance; the point is to rubberneck at what remains of the crash site, and if that isn’t what Cole, Heale or most of their interviewees originally intended to deliver – well, life comes at you fast in British politics nowadays.

Then comes the bit in the tweet about the book being of two parts.

The review introduces tantalizing details into Liz’s life, past and present, that are in the book:

Most of the clues as to what went wrong however lie in the first part, a very readable gallop through Truss’s childhood as the daughter of Guardian-reading, mildly eccentric leftwing parents, via her political awakening at university – first as a free market Lib Dem, then as libertarian Conservativeright the way through to her stint as foreign secretary, careering round the world in pursuit of the perfect Instagram shot. (It was during this stage that her ministerial “rider” was said to include multiple espressos in a flat white-sized cup and a bottle of sauvignon blanc chilling at every overnight stay.)

I was intrigued by Truss’s mother, Priscilla, who briefly moved to eastern Europe in the 1970s to “try out life under the communists”, took her children on Greenham Common protests and made herself a bright yellow banana costume in which to promote fair trade back home in Leeds. When Truss recalls schoolmates shouting “saw your mum in Tesco’s dressed as a banana again”, other 70s children of free-thinking parents may understand her seeming obliviousness to criticism a little better. You don’t grow up with a banana-clad mother, I suspect, without developing a certain sturdiness.

The book shows Truss’s self-belief from the time she entered Parliament in 2010, when David Cameron became Prime Minister:

Obliviousness isn’t always a blessing in politics however, as becomes clear in her first job as early years minister under David Cameron. Truss had hatched a plan to cut childcare costs by slashing the number of adults required to supervise children, which unsurprisingly proved controversial. Instead of patiently trying to build public and political support for it, she simply put her head down and charged – much as she would a decade later with her mini-budget, and about as successfully. All young politicians make mistakes. What’s unusual about Truss is that the lesson she seemingly took from hers was to believe in herself even more, and listen to others even less

But it’s perhaps significant too that she had got away with so much in the past, leading to an overconfidence about her ability to wing it – as she did even in the early days of her leadership campaign.

Interestingly, a Conservative plan to expand the number of adults who can care for children was debated earlier this month. It would allow people to mind children in their own homes rather than at a day care centre.

As with anyone else, there are darker sides to Truss, most of which will never be fully known. Cole and Heale were unable to interview her a third time for the book:

The authors recount sympathetically the well-trodden story of how an earlier extramarital affair with the married former Tory MP Mark Field nearly wrecked Truss’s search for a parliamentary seat, rightly noting the double standard that it never seemed to damage Field. But they also touch on some of the more explosive smears circulated about her during the leadership contest – including claims of an affair with an aide, allegations of predatory behaviour towards staff, and even one wild suggestion that there might be a sex tape of her in circulation. The authors interviewed her twice but their planned third session was canned when she resigned, so perhaps they simply never got to put these to her.

As to how things went wrong, perhaps she should have listened a bit more to others:

Despite his professional closeness to Truss, Cole and his co-author strive to put some distance between them in their final reflections on where it all went wrong. Putting aside her own fear, reportedly expressed to a visitor to the Foreign Office, that “I am weird and I don’t have any friends”, plausible theories for her implosion include that vaulting self-belief (even in her post-resignation speech to staff, she was still insisting she’d been on the right track) and determination to put the wrong people in cabinet.

How to read the books on Boris and Liz

In addition to a book on Truss, there is also one about Boris Johnson, by the Financial Times‘s Sebastian Payne.

How can one read both in chronological order?

Harry Cole says to read the first ten chapters of Out of the Blue, then Payne’s biography of Boris, then end with the final four chapters of Liz’s biography:

An MP writes

Recently, Simon Clarke, the Conservative MP for Middlesbrough South and East Cleveland who served as Secretary of State for Levelling Up, Housing and Communities in Liz Truss’s Government, and before that as Chief Secretary to the Treasury under Boris Johnson, wrote an article for the December 2022/January 2023 edition of The Critic on Truss’s premiership: ‘How did it all go so wrong for Liz Truss?’

Simon Clarke is one of the better Conservatives, in my estimation. He is diligent, good at the despatch box and is self-effacing. He is also very tall and, as such, when pictured with Rishi Sunak, walked some distance behind him so as not to accentuate the difference in height between the two of them.

Clarke begins his article with a weekend at Chevening, the Foreign Secretary’s country residence, and concludes with Truss’s last one at Chequers, as she closed out her premiership:

From Chevening to Chequers. For me, two weekends, eight weeks apart, will forever bookend my friend Liz Truss’s time as prime minister. The first, a wash of August Bank Holiday sunshine over the Kent countryside. Walking the grounds of the Foreign Secretary’s home with her on one of the last days of a leadership contest she had already won, listening as she outlined her vision for government, stalking ahead impatiently through the yellowing grass.

The second, an October Sunday in Buckinghamshire, an afternoon of bruised clouds and close heat foreshadowing the storm which broke as we dispersed. A small circle of family, ministers and aides, gathered in the Great Hall to say goodbye. A day defined by the quiet dignity and absence of self-pity of its principal protagonist, entirely typical of our host.

These memories are appropriate, because so much of what happened in between was decided at Chevening in the dog days of August.

Clarke has read Out of the Blue, which he liked, calling it:

a brisk and insightful canter through Liz’s career and the forces that shaped her …

In four breathless chapters at the close of their book, Heale and Cole do a good job of unpicking what went wrong, and why.

However, Clarke is disappointed they did not reach the conclusion he did — that Truss was right all along:

they largely decline to address an inconvenient truth — a truth perceived by those much-maligned Tory members all summer. Namely that in her diagnosis of the situation at home and abroad and what should be done about it, Liz Truss was fundamentally and importantly right

He goes through the failed mini-budget from September but points out that some of the fallout would have happened anyway:

In the eyes of millions of British voters, the fallout from the mini-budget meant the Government alone took responsibility for sharp spikes in both interest and mortgage rates, even though the majority of those increases were already in motion independently

He admits his error in the mini-budget but adds that Truss had a different economic plan during the summer:

The whole package was an exercise in Reaganomics without, fatally, the support of a reserve currency. Indeed, it was launched at the very moment when the strength of the dollar left sterling desperately exposed. As one of her Cabinet ministers, I take my share of the responsibility. But it is important to note that for much of the summer, there was a different plan. 

In July, in the days following Boris Johnson’s resignation, I spoke with Liz about how best to implement her vision for a higher growth, lower tax economy. The role of Chief Secretary to the Treasury is to be a voice of caution, and speaking as the incumbent to a predecessor, I highlighted the need for credible savings options to accompany her tax cuts, warning that without these we would be monstered. She agreed.

We settled on a new spending review, the exercise by which departmental budgets and priorities are determined in conjunction with Number 10 and the Treasury. Events in Ukraine meant the review conducted in September 2021 now strays close to being a fiction: the world has changed. It was time for a reassessment.

We discussed the relative merits of requiring five and ten per cent reductions in expenditure, achievable given how far spending has soared in recent years, and capable of being cushioned by the size of so many Whitehall departments’ Covid-driven underspends. 

Her only caveat, quite reasonably, was that it would be better to identify specific saving plans in the run-up to a budget once safely in office, as opposed to in the heat of a brutal campaign. But the overall approach of securing those savings was not, I believed, in any doubt. 

There was, therefore, a conscious and spectacular change in her policy from mid-July to the end of August. The latter two weeks of August seem to have been pivotal. With an unassailable polling lead and most votes already safely cast by party members, Liz settled in at Chevening for a blizzard of meetings. Here her distaste for “abacus economics”, always present, won out over caution. 

She was well within her rights to point out that the guardians of Treasury orthodoxy are bad at conducting dynamic modelling of the positive impact of both lower taxes and supply side reforms. But this was not the time to try to test that weakness.

Clarke thinks that Truss should have brought on board some of Sunak’s people. Personally, I do not think they would have helped. Perhaps they would have if she were a man:

As the storm broke from the mini- budget, so a second fundamental error of the Chevening days was laid bare: Liz’s choice of personnel. It was a mistake to have excluded from government so many of those who had backed Rishi Sunak. Her administration had too few allies when its momentum faltered, while a pared-back Downing Street operation found itself fighting on too many fronts.

The opposition was real and it was destructive:

What Heale and Cole could acknowledge more clearly is that there was a sizeable group of MPs who were unpersuadable from the beginning. From those who shivered at the thought of making the case for lowering the top rate of income tax back to the level at which it had stood at for all but the last six weeks of New Labour’s 13 years in office, even if it would raise more revenue, to those who did little to hide their desire for revenge for the summer’s reversal, the kindling was dry

Clarke says it is now important for Conservatives to look ahead to the next general election or face a Labour government:

And so we return to the fundamental point: that for all the brickbats, the platform on which Liz was elected PM remains important and urgent, and still needs to be delivered

Who can dispute the need for a plan for growth, at a time of flagging living standards when the Bank of England is forecasting a two-year recession? Taxes are at a 70-year high, and she was right to ease the burden by cutting National Insurance.

The opportunity for further tax cuts may have passed with the mini-budget, but supply-side reform is now more important, not less. Growth since the 2008 crash has been sluggish, and some of the principal reasons for this are the result of policy challenges that a Conservative government with a majority of 70 ought to confront.

I disagree with his plan to build more houses on the green belt but agree that the Conservatives need to maximise Brexit opportunities:

Productivity matters. We need to curb the culture of judicial review that ensures major infrastructure projects take years longer to deliver than they should. We also need to grasp the opportunities of Brexit, rather than just talk about them. Reform of EU rules such as Solvency II, proceeding with painful slowness, desperately needs to be accelerated if the City is to succeed

Liz saw this with total clarity and planned a series of interventions this autumn. If we are to get our economy moving, it is essential that we should act. None of these problems will resolve themselves of their own accord.

If her instinct for action on the home front was sound, it was doubly so abroad. The Northern Ireland Protocol legislation, so vital to ensuring that all parts of our country get to leave the EU, is very much Liz’s legacy from her time as Foreign Secretary. She understood better than almost anyone in the senior ranks of Government that Brexit cannot be a partial or half-hearted endeavour. Delivering this will be a central test for the new Government. 

And then there’s China:

With regard to China, Liz again rose to the level of events. Too many in British and European politics still cling to the German dream of Wandel durch Handel, or inspiring change through trade. Liz did indeed aim to deliver change through trade, but of a different kind. In one of the boldest policies of recent years, she had set out plans to build a democratic alternative to the Chinese “Belt and Road” initiative, not least by championing UK membership of the CPTPP trading bloc.

When she fell, she was poised to designate China officially as a threat to the UK. From the suppression of democracy in Hong Kong to the genocide being perpetrated against the Uighurs, we should be in no doubt as to the true nature of Xi’s regime. The West will only be able to resist this challenge if we readopt the Cold War trinity of moral confidence, economic dynamism and military strength, and Liz instinctively recognised this.

He concludes:

It was precisely because Liz’s sense of the kind of country we ought to be was so compelling that the Conservative party gave her their decisive backing this summer. It is her tragedy that the mistakes made at Chevening risk diminishing the vision she set out of a more successful Britain, walking tall abroad and better able to offer opportunity and dignity to her citizens at home …

In words which could be the epitaph for her short, extraordinary time as our prime minister, she reflected: “I think I could have gone out and done a better defence, and got on the front foot. On the other hand there is no point in doing these jobs unless you stand up for what you believe in.” 

Rishi laughs, but should he?

At last week’s Spectator Awards, everyone was there except Liz Truss.

The notional great and the good, politicians and journalists, gathered together. Pictured on the left is Grant Shapps MP and ex-BBC presenter Emily Maitlis:

Those who received awards and/or gave speeches, included witticisms:

Defence Secretary Ben Wallace won Minister of the Year:

As we had four Chancellors this year, it must have been hard for the magazine to choose, so they opted for Labour’s Rachel Reeves for Chancellor of the Year:

Labour leader Sir Keir Starmer won Politician of the Year:

Ukraine’s Volodymyr Zelenskyy won Parliamentarian of the Year. It looks like Transport Secretary Mark Harper gave the speech on his behalf:

During this annual starry schmoozefest, Prime Minister Rishi Sunak felt free to get a dig or two in about Liz Truss and the book:

Sunak quipped that the BBC turned down a request to make a television series about Cole and Heale’s book, because ‘it is hard to work with just one episode’. How they laughed:

Except things aren’t so funny for Rishi.

He had no honeymoon as Prime Minister and, within a month, Conservative backbenchers began rebelling.

On Wednesday, November 23, the aforementioned MP, Simon Clarke, tabled an amendment to relax the ban on onshore wind farms in England:

Late on Thursday, November 24, The Telegraph reported that Clarke’s proposed amendment was gaining traction. Furthermore, it had support from none other than Boris Johnson and Liz Truss:

Boris Johnson and Liz Truss have launched a challenge to Rishi Sunak’s authority by joining a Tory rebellion backing wind farms to tackle the energy crisis.

In their first major interventions since leaving Downing Street, the two former prime ministers have demanded an end to the ban on new onshore wind farms.

They both signed an amendment to the Government’s Levelling Up and Regeneration Bill, just days after Mr Sunak’s government was derailed by a separate Tory revolt on the same legislation.

The bill is designed to speed up housebuilding, which is crucial to Mr Sunak’s growth agenda.

The two former prime ministers have had tense relationships with Mr Sunak.

Mr Johnson’s supporters view Mr Sunak as having dealt the fatal blow to his premiership by resigning as chancellor.

Ms Truss and Mr Sunak clashed repeatedly during the leadership race.

It is unusual for former leaders to oppose their successors, with Theresa May choosing the issue of partygate to make a rare criticism of Mr Johnson

Mr Johnson signed the pro-onshore wind amendment, tabled by Simon Clarke, who was levelling up secretary under Ms Truss – even though he supported the ban, which has been in place since 2015, during his three years in office.

Ms Truss said she wanted to end the ban when she was in Number 10, because she believes the energy crisis means Britain needs more energy independence

The onshore wind revolt is the second blow to Mr Sunak’s bill. 

On Tuesday night, more than 50 Conservative MPs rebelled against his plans to impose centrally-dictated housebuilding targets – forcing the Prime Minister to delay the votes until December.

That revolt risked the prospect of Mr Sunak only being able to get the measure through with Labour support.

The latest rebellion looks set to be even more serious – not only because it has attracted the support of two former prime ministers, but because it is considered more likely that Labour would back measures to promote onshore wind.

By Thursday night, a total of 18 Conservative MPs had signed the amendment.

It demands that Michael Gove, the present Levelling Up Secretary, revises the National Planning Policy Framework to allow councils to grant new onshore wind applications.

The amendment would also force the Town and Country Planning Act to be amended to allow the installation of “new onshore wind sites not previously used for generating wind energy or for repowering existing onshore wind applications”.

On Monday, November 28, The Guardian reported that Sunak was likely to give in to Clarke, Boris, Liz and the other Conservative rebels:

Good morning. Rishi Sunak has only been prime minister for about a month, but already he is learning that a large part of his job consists of playing Whac-a-Mole with Tory party rebellions.

All party leaders face backbench rebellions from time to time but, with its poll ratings still in landslide defeat territory and MPs rushing for the post-parliament lifeboats, the Conservative party is more ungovernable than usual.

Sunak has had to postpone votes on the levelling up and regeneration bill (originally scheduled for today) because of two rebellions on it. One group of Tory MPs (the anti-growth coalition, as Liz Truss would call them), want to amend the bill to ban mandatory housebuilding targets, while another group of Tories (from the pro-growth coalition) are backing an amendment tabled by Simon Clarke, the former levelling up secretary, that would lift the ban on onshore windfarms. Although only 25 Tories have signed the Clarke amendment (less than half the number backing the one on housebuilding targets), Clarke’s is more dangerous because it has Labour backing.

This morning Grant Shapps, the business secretary, was doing the morning interview round and he signalled that the Whac-a-Mole mallet is coming down on the Clarke rebellion. As my colleague Peter Walker reports, Shapps hinted that the government will avert the onshore windfarm rebellion by giving in.

In immigration news that morning, Conservative backbencher David Davis told Sky News that the easiest way to stop the influx of Albanians via the English Channel is to send them back home. Albania is classified as a safe country, therefore, claiming asylum should be discounted. Davis has the backing of 50 other Conservative MPs. He said:

[Legislation] would go through and basically we would say to the Albanian population, anybody else who comes across the Channel will be sent back. When that starts to happen, there is no bigger deterrent … than if somebody in your village pays thousands of pounds to a human trafficker and then ends up back in the village three weeks later.

We shall see what happens on both wind farms and immigration.

For now, the Conservatives will have to make the best of Sunak’s premiership, as they cannot reasonably have any more Prime Ministers before the general election, which, all being well, is some time away, either near the end of 2024 or early in 2025.

Returning to Liz Truss, there was no question that she had insurmountable enemies, a subject I will explore later this week. In some respects, if she were a man, she would have been allowed to remain in office. Perhaps men deal with contrarian men better than contrarian women.

Tomorrow’s post looks at Liz Truss’s life.

My most recent post on Liz Truss examined her first two weeks in office as Conservative Party leader and Prime Minister, from September 6th through the 16th.

Things had started out so well. Ironically, Jeremy Hunt, who is now Chancellor, told ITV’s political editor Robert Peston on September 7 that Truss would be ‘formidable’. An amazing endorsement from someone who was her natural ally:

Hmm. Did he know anything at that point? We’ll probably never know.

On September 20, The Sun‘s political editor Harry Cole was delighted to announce his and James Heale’s book on Truss, Out of the Blue, which later had to have hastily written chapters added to it:

Yes, it is still coming out by Christmas — November 24, to be precise:

King Charles and COP27

Liz saw King Charles on Sunday, September 18, the day before the Queen’s funeral. It was not their usual day to meet, but the Royal Family went into private mourning until the end of September:

On Saturday, October 1, The Times reported that Liz had asked the King not to attend COP27, which ran between November 6 and 18, despite an invitation from the organisers.

This was a good move, in my opinion, as climate change, or whatever it’s being called this week, has turned highly political.

The article said (emphases mine):

The King, a passionate environmental campaigner, has abandoned plans to attend next month’s Cop27 climate change summit after Liz Truss told him to stay away.

He had intended to deliver a speech at the meeting of world leaders in Egypt.

Had she remained PM, Liz would not have attended, either:

Truss, who is also unlikely to attend the Sharm el-Sheikh gathering, objected to the King’s plans during a personal audience at Buckingham Palace last month.

There were no hard feelings between the Palace and No. 10:

… a Downing Street source claimed the audience had been cordial and there had “not been a row”.

No doubt he was expecting it:

A senior royal source said: “It is no mystery that the King was invited to go there. He had to think very carefully about what steps to take for his first overseas tour, and he is not going to be attending Cop.”

They said the decision was made on the government’s advice and was “entirely in the spirit of being ever-mindful as King that he acts on government advice”.

In the end, the King held a reception at Buckingham Palace for world leaders before they flew to the summit. In light of that, this was rather interesting:

Charles is still determined to make his presence felt there, and how he will do that is “under active discussion”. A senior royal source said: “Just because he is not in physical attendance, that doesn’t mean His Majesty won’t find other ways to support it.”

A source who knows Charles said he would be “personally disappointed” to miss it and was “all lined up to go”, with several engagements planned around his Sustainable Markets Initiative (SMI) which aims to persuade businesses to invest in environmentally friendly initiatives.

Public v parliamentary opinion

In late September, a poll showed that Truss was ahead of Labour’s Keir Starmer in Red Wall seats, boosting the Conservatives by eight points:

Admittedly, that was before Kwasi Kwarteng’s fiscal event, or mini-budget, of Friday, September 23.

That said, I will go out on a limb and say that most conservative voters thought that Kwarteng’s — Truss’s — plan was the right one. My better half and I thought it was refreshingly libertarian.

However, Conservative MPs vehemently disagreed with the public and started writing in to Sir Graham Brady, the chairman of the 1922 Committee, the all-powerful group that Margaret Thatcher dubbed ‘the men in grey suits’.

On September 26, the Northern Echo reported:

A former Tory minister MP has told Sky News the new Prime Minister is “f*****” and the party are already looking to bring her down following Friday’s mini-budget.

The MP said: “They are already putting letters in as they think she will crash the economy. The tax cuts don’t matter as all noise anyway – mainly reversing back to the status quo this year …

Another Tory MP told the broadcaster that Friday’s announcement – which included reversing a 1.25% hike in National Insurance – had been a “s***show”.

Note that MPs were siding with the Bank of England. Very establishmentarian of them:

“The issue is government fiscal policy is opposite to Bank of England monetary policy – so they are fighting each other. What Kwasi [Kwarteng] gives, the Bank takes away.”

The mood among Conservative ‘wets’, to borrow Thatcher’s name for such weaklings, only escalated.

At Liz’s one — and only — appearance before the 1922 Committee on Thursday, October 13, Robert Halfon, a wet, told Truss she had ‘trashed the past ten years’.

The Times had the story:

Liz Truss was accused by a senior MP of trashing “the last ten years” of Conservative government as her party turned on its new leader over the mini-budget.

Robert Halfon, a former minister who chairs the education select committee, unleashed a furious attack on her financial measures, saying they disproportionately benefited the wealthy and meant she had abandoned “workers’ conservatism”.

Anything but, however:

According to an MP present, Halfon told Truss in a meeting of the 1922 Committee of backbenchers — her first as prime minister — that “in the last ten years we had the living wage, a focus on apprenticeships and skills”, contrasting that with “bankers’ bonuses, benefits cuts and now cuts to affordable housing targets”.

His intervention came after Truss tried to assuage Conservative MPs by saying she had “shielded families and businesses from bills of up to £6,000 this winter and for the winter ahead, while Labour has no plan beyond the next six months”.

The meeting did not go well. Halfon seemed to voice other MPs’ concerns:

a Tory MP who has been in the Commons for more than a decade said: “It was the worst 1922 I’ve ever been to.” They added: “With each tough question she looked like she’d had the wind knocked out of herthe 31st of October could finish her off on the basis of the reception she got in that room.”

Halloween — who schedules these things? — was supposed to be the day Kwasi was going to set out more detail behind his fiscal event. Liz’s friend and neighbour in Greenwich was on hand to support her:

Thérèse Coffey, the deputy prime minister, told reporters outside the 1922 meeting that the chancellor would meet MPs before presenting his medium-term plan on Halloween, stressing that engagement was key.

In the event, Truss had to sack Kwarteng and appoint (ahem) the aforementioned Jeremy Hunt as Chancellor. He delivered his shocking budget on Thursday, November 17, to Prime Minister Rishi Sunak’s approval. Sunak nodded several times during the presentation.

Returning to The Times‘s article of October 13, what other wets said presaged the future:

Even those who back the prime minister expect some sort of climbdown. One MP said: “She will have to unwind everything fiscal in the statement. They have to backtrack. There is no alternative. They’ve done it on the 45p and they’ll have to do it on the rest.

“Then if we are still 20 points behind in the polls we will have to change leader. We are cold-blooded like that.”

Another admitted there was “definitely still a big split between her and the Rishi [Sunak] side of the party”. Asked if Truss would have to perform another U-turn, they said: “Ultimately, I suppose it depends if she’s leveraged into that position by our own party, but it’s all by those with 20,000 majorities.”

Hmm … Hmm.

However, one Rishi Sunak supporter — Esther McVey — is deeply unhappy over his Chancellor’s budget:

On Tuesday, November 22, McVey rightly tore the budget apart in ConservativeHome, saying that Hunt’s tax rises are ‘socialist measures’ that are ‘punishing Conservative voters’:

… It wasn’t helped by the Chancellor’s statement being such a pendulum swing from the Liz Truss / Kwasi Kwarteng mini budget. People went from thinking they were getting their taxes cut to seeing them hiked.

The Autumn Statement was clearly an over-correction to that mini-budget. Going from one extreme to the other is hardly reassuring for people. A middle ground was needed: an acceptance of Conservative principles, with a costed plan and the accompanying narrative to reassure the markets.

Instead, Hunt delivered his statement with a doom and gloom that would have appropriate were the country on the brink of financial collapse. However, despite some serious challenges, things are not so dire that we had to have such excessive medicine.

For instance, the ten-year gilt yield – the interest rate the Government must pay on a new decade-long loan – was 3.14 per cent, whereas, even before the notorious mini-Budget in late September, that same yield was much higher at 3.49 per cent.

Britain is no more indebted than other comparable countries. Our national debt (albeit too high) stands at 97 per cent of GDP,  whereas France, Canada and the US stands at 115 per cent, 116 per cent and 132 per cent respectively. Across the G7, only Germany has lower levels of government debt than the UK.

So when I stood up in the House of Commons at PMQs the day before the budget and said –

Given that we have the highest burden of taxation in living memory, it is clear that the Government’s financial difficulties are caused by overspending and not due to undertakings. Does the Deputy Prime Minster therefore agree, if the government has got enough money to proceed with HS2 at any cost then it has sufficient money not to increase taxes, if however, it has so little money it has to increase taxes (which is the last thing for a conservative government to do) then it doesn’t have sufficient money for HS2 [High Speed Rail 2]?

So can I gently urge the Deputy Prime Minister not to ask Conservative MPs to support any tax rises, unless and until, this unnecessary vanity project is scrapped, because I for one won’t support them.

– it was to remind everyone there are better choices for our Conservative government than hiking up taxes.

In fact, given that unprecedented tax burden, any self-respecting Conservative would instinctively know that the answer is to spend less. Dropping HS2  – an out-of-date white elephant, costing north of £150 billion which (as Andrew Gilligan revealed on my show on GB News) the Ministers themselves know will deliver less economic benefit than the cost of it – would have been an ideal place to start.  That would certainly have been more desirable than increasing taxes on hard-working families who are already feeling the severe pain of higher energy prices and increased mortgage payments.

If a Conservative government with a sizeable majority – in a time of financial pressure – won’t cut public expenditure to start living within our means, then when on earth will that ever happen?

Parliament is debating Jeremy Hunt’s budget this week. In Monday’s proceedings, a number of Conservative MPs spoke out against it.

Liz’s U-turn on windfall tax

On October 12, two days before she sacked her friend and neighbour Kwasi Kwarteng, she appeared to do a U-turn on ‘no new taxes’ by allowing an announcement for a new levy on green energy firms.

Her ally, then-Business (BEIS) Secretary Jacob Rees-Mogg, defended the move and claimed it was not a windfall tax:

Guido Fawkes reported (emphases his):

The government has announced a new plan to impose a multi-billion pound levy on green energy firms to fund support to consumers. Renewable and nuclear electricity generators in England and Wales will now have their revenues capped after windfall tax-hating Liz Truss seemingly bowed to pressure to limit profits. The announcement came from BEIS last night, which is calling the new policy a “Cost-Plus-Revenue Limit” and spinning that it isn’t in any way a windfall tax “as it will be applied to ‘excess revenues’ as opposed to profits”. If it walks like a tax, swims like a tax and quacks like a tax…

The latest backtracking on free market values by the government comes just 41 days after Liz Truss told party members at the London husting that they could read her lips, and there would be no new taxes under her leadership …

On Today this morning, Rees-Mogg tried performing a Jedi mind trick, saying “this is not a windfall tax…this is rationalising the market”…

Despite the government’s denial that the new revenue limit is a tax, the boss of RWE – the third biggest renewable power generator in Britain – has told The Times the move “is a de facto ‘windfall tax’ on low-carbon generators that, if not designed and implemented correctly, could have severe negative consequences for investment in the renewable and wider energy market and so for the energy transition.”

Guido warned that Labour’s support for the new levy is not a good sign:

Ed Miliband welcoming the policy with open arms should give the government sufficient pause for thought before it buys its own spin…

The mystery of Liz signing UK up to EU’s PESCO

Early in October, Liz did a strange thing, considering she is a staunch Brexit supporter.

She attended the first ever meeting of the European Political Community in Prague. The European Political Community is Emmanuel Macron’s brainchild.

This group is made up of EU member countries, yet, somehow Liz got an invitation. No one knows for certain.

However, she went.

She met with Macron on Thursday, October 6, in an effort to get the Channel dinghy crossing issue resolved.

GB News reported:

Liz Truss hailed Emmanuel Macron as a “friend” on Thursday, as the two countries signalled that a new agreement could be close to tackle small-boat crossings in the Channel.

The pair met at the first summit of the European Political Community in Prague, a gathering pushed for by the French president.

There, the pair said they looked forward to “an ambitious package of measures this autumn” to address issue of migration across the Channel.

And in a sign that Ms Truss hopes to improve relations with Mr Macron, she had no hesitation in labelling him a “friend”, just weeks after refusing to do so …

Mr Macron later suggested it was a “problem” if Britain could not call itself a friend of France.

But Prime Minister Ms Truss adopted a different tone ahead of a meeting with Mr Macron in Prague on Thursday.

She told broadcasters: “I work very, very closely with President Macron and the French government and what we’re talking about is how the UK and France can work more closely together to build more nuclear power stations and to make sure that both countries have energy security in the future.

“We’re both very clear the foe is Vladimir Putin, who has through his appalling war in Ukraine threatened freedom and democracy in Europe and pushed up energy prices which we’re now all having to deal with.”

Asked if he was then a friend, Ms Truss said: “He is a friend.”

The bi-lateral meeting between the two leaders, which took place towards the end of the day, appeared to signal some progress on the issues of migration and energy, both areas Ms Truss had raised as priorities ahead of the summit.

“Thank you for being here,” Mr Macron told the PM when they met.

It also emerged that the two countries have agreed to hold a joint summit next year to “take forward a renewed bilateral agenda”, in a further sign of the desire for warmer relations between the two countries.

On migration, a joint statement said the leaders “agreed to deepen cooperation on illegal migration within the bounds of international law, to tackle criminal groups trafficking people across Europe, ending in dangerous journeys across the Channel”.

But the big, and secret, news was that Liz had signed the UK up to the EU’s PESCO — Permanent Structured Co-operation — which is a military initiative.

Nigel Farage announced the move on his GB News show as soon as he had heard.

On Friday, October 7, The Express said that the move could affect British armed forces by dragging them into an EU army:

The Prime Minister has been warned not to allow the UK to be dragged into an EU Army by accident after she signed a military deal this week at Emmanuel Macron’s European Political Community (EPC) summit in Prague. The decision to go into part of the PESCO has alarmed some Brexiteers who fear it could undermine the UK’s sovereignty.

Former defence minister Sir Gerald Howarth, a leading Brexiteer has led the campaign to resist joining PESCO for many years.

He said: “This is very serious and we must be very careful. The issue around PESCO is that the structures are permanent.

“We must not sign up to anything which undermines our sovereignty and where we do not have a veto.

“Second, we must not do anything that undermines NATO. If we have learnt anything over the last few months is that we need NATO for the defence of western values and Europe against our enemies which at the moment is clearly Russia.”

Even if this has to do with Ukraine, and enables us to move troops and military equipment more easily, it still raises questions:

At the EPC meeting on Thursday, the EU member states voted unanimously to allow the UK to join the the mobility project that would allow the UK to move troops and military equipment more quickly.

The UK Government decided to enter the strand in case Britain is called upon as a NATO ally to defend the Baltic states from a Russian invasion.

However, staunch Brexiteer Mark Francois MP was relaxed about it:

One senior Brexiteer, former Armed Forces Minister, Mark Francois, who now chairs the powerful group of Tory Brexiteers the European Research Group (ERG), said he believes that the move was the right one.

He said: “As we are outside the EU, we can opt in to individual PESCO projects if they have merit and looking at how we could speed up reinforcing the Baltic States from the UK, across internal EU borders, may well have military advantages.

“However, it is NATO that remains the bedrock of our security, especially in deterring further Russian adventurism and we should never forget that.”

On October 9, David Kurten, a former London Assembly member and founder of the Heritage Party, said that signing the UK up to PESCO was a betrayal of Brexit:

One month ago, the aforementioned Sir George Howarth appeared on Farage to say that we still do not know what part of PESCO Liz signed us up to. He was clearly concerned, saying that the implications could be important, especially as none of the countries involved has a veto. The EU calls all the shots:

Today, one month on, we are none the wiser about our involvement in PESCO.

Someone must know what’s going on. In fact, a lot of people probably do know.

Liz’s final week

All of Liz’s opponents, whether on the right or the left, told us that Liz and Kwasi, joined at the hip politically, had to go.

Project Fear started as soon as Kwasi delivered his mini-budget on September 23.

On September 27, Bloomberg told us that UK markets had lost $500 billion in combined value since Liz Truss became PM. Really?

‘Investor confidence’ means international markets, ergo part of the Establishment.

Also at that time, former Conservative Chancellor George Osborne, who served under David Cameron, stuck the boot in.

On September 29, a comment from an UnHerd reader appeared in response to one of their articles, beginning with ‘Is this the end for Liz Truss?’:

https://image.vuukle.com/cd72018a-5f0a-4709-9803-e23f8e87646b-764e1fe1-a6f9-4692-939c-102335eb4ec9

Osborne features heavily in it. The reader quotes him saying, ‘The markets are punishing Liz Truss for failing to balance her budget’.

The UnHerd reader says:

Right.

Of all people, George Osborne knows full well that is not what is happening. We can be sure he knows this — and is therefore engaging in a bout of very useful political lying — because Mr Osborne also dropped higher rate taxes [the 50% rate], on a backdrop of media squealing … and yet the tax receipts after making those cuts … went up.

So Mr Osborne is a classic shill of the modern era …

As to whether Liz would have to go, the reader supplies the answer at the top of his message:

well, if the globalists and left-leaning power brokers who’ve comfortably controlled global affairs for the past few decades still retain control, then yesit is the end for Truss

It doesn’t matter if that thing is related to tax, or to immigration, or to frackingthat’s not the point. The chattering and Davos classes are used to being in charge and controlling the direction of travel no matter who we elect.

Speaking of such people, on Wednesday, October 12, King Charles greeted Liz with, ‘Dear, oh dear’, while the press were still there to record it for posterity:

What did he know and when?

The beginning of the end came two days later on Friday, October 14, when Liz sacked Kwasi and appointed (ahem) Jeremy Hunt as Chancellor. This was the shortest and most painful press conference — she only took four questions — in living memory. She looked like a rabbit in the headlamps or a hostage being forced at gunpoint to read out a message:

As soon as she announced it, we knew Hunt was, at that point, the de facto Prime Minister.

Hours later, The Telegraph reported:

Mr Hunt, a former foreign secretary, took the helm at the Treasury following the sacking of Kwasi Kwarteng over the mini-Budget fiasco. Ms Truss turned to him even though the pair have strongly disagreed on economic policy.

Mr Hunt, also an ex-health secretary, endorsed Rishi Sunak for the Tory leadership after being voted out of the race in July, saying: “This is the wrong time for populist crowd-pleasing and the right time for honesty.”

He will hold huge power over a weakened Prime Minister, raising the likelihood that much of her growth plan will now be axed. Allies said that he would act as her “chief executive”.

Mr Hunt ran for the Conservative leadership on a platform of slashing corporation tax to 15 per cent to boost growth but also opposed cuts to personal levies such National Insurance and income tax, with which Ms Truss still intends to press ahead.

His appointment was announced moments before the Prime Minister unveiled her U-turn on corporation tax at a press conference. She ditched what had been a core leadership pledge, meaning the rate companies pay on their profits will go up from 19 to 25 per cent in April. It means she has reverted to the plan put in place by Mr Sunak when he was chancellor.

Quelle surprise!

Conservative Party members had voted Liz Truss in largely on her economic policy.

The elites took out her Chancellor. Soon afterwards, they came for her in the form of Conservative MPs and the 1922 Committee. It was a grand game of political chess, not seen since Margaret Thatcher was removed from office in 1990.

To be continued on Friday.

While this is a change to the previous schedule of analysing Liz Truss’s premiership, more about which next week, there are references below as to why hers and Kwasi Kwarteng’s plan was the right one for the UK.

Chancellor Jeremy Hunt delivered his Autumn Statement — a Labourite Conservative budget — on Thursday, November 17, 2022.

Compared with Kwasi Kwarteng’s fiscal event of September 23, this will be a disaster for most middle class Britons.

It was clear that Hunt designed this budget to placate the all-hallowed — for whatever reason — OBR (Office for Budget Responsibility) and the markets. Stability is their watchword. Growth, regardless of what Hunt said yesterday, plays little part in our economy for the foreseeable future.

Unlike Kwarteng’s, which did focus on growth, Hunt’s statement had little to no consideration of the British taxpayer in a cost of living crisis.

What Hunt said

Before going into Hunt’s address, Guido Fawkes has a brief summary and the full detail from the Treasury, a 70-page document.

Below are excerpts from Hunt’s Autumn Statement to the House of Commons (emphases mine):

… today we deliver a plan to tackle the cost of living crisis and rebuild our economy. Our priorities are stability, growth and public services. We also protect the vulnerable, because to be British is to be compassionate and this is a compassionate Conservative Government.

Remember when then-Chancellor Rishi Sunak told us we did not have to worry about the cost of borrowing and borrowing itself during the pandemic? Well, now we have to worry:

Most countries are still dealing with the fallout from a once-in-a-century pandemic. The furlough scheme, the vaccine roll-out and the response of the NHS did our country proud, but they all have to be paid for.

Hunt paid homage to the Bank of England and had a poke at Kwarteng for not doing so:

So the Bank of England, which has done an outstanding job since its independence, now has my wholehearted support in its mission to defeat inflation and I today confirm we will not change its remit. But we need fiscal and monetary policy to work together, and that means the Government and the Bank working in lockstep.

He delivered a deeper attack on Kwarteng:

I understand the motivation of my predecessor’s mini-Budget and he was correct to identify growth as a priority, but unfunded tax cuts are as risky as unfunded spending, which is why we reversed the planned measures quickly. As a result, Government borrowing has fallen, the pound has strengthened and the OBR says today that the lower interest rates generated by the Government’s actions are already benefiting our economy and public finances. But credibility cannot be taken for granted and yesterday’s inflation figures show we must continue a relentless fight to bring it down, including a rock solid commitment to rebuild our public finances.

He bowed before the all-powerful OBR, whose forecasts have not been terribly accurate over the past few years. Let us see if these come true in the coming months:

Richard Hughes and his team at the OBR today lay out starkly the impact of global headwinds on the UK economy, and I am enormously grateful to him and his team for their thorough work. The OBR forecasts the UK’s inflation rate to be 9.1% this year and 7.4% next year. It confirms that our actions today help inflation to fall sharply from the middle of next year. It also judges that the UK, like other countries, is now in recession. Overall this year, the economy is still forecast to grow by 4.2%. GDP then falls in 2023 by 1.4%, before rising by 1.3%, 2.6% and 2.7% in the following three years. The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March. It also expects a rise in unemployment from 3.6% today to 4.9% in 2024, before falling to 4.1%.

This is Hunt’s strategy, with the blessing of the OBR and borrowing Sunak’s morality from the August leadership campaign about leaving debts to the next generation:

I also confirm two new fiscal rules. The first is that underlying debt must fall as a percentage of GDP by the fifth year of a rolling five-year period. The second is that public sector borrowing over the same period must be below 3% of GDP. The plan I am announcing today meets both rules.

Today’s statement delivers a consolidation of £55 billion, and means inflation and interest rates end up significantly lower. We achieve this in a balanced way. In the short term, as growth slows and unemployment rises, we will use fiscal policy to support the economy. The OBR confirms that, because of our plans, the recession is shallower and inflation is reduced. Unemployment is also lower, with about 70,000 jobs saved as a result of our decisions today. Then, once growth returns, we increase the pace of consolidation to get debt falling. This further reduces the pressure on the Bank to raise interest rates, because as Conservatives we do not leave our debts to the next generation.

So this is a balanced path to stability, tackling inflation to reduce the cost of living and protect pensioner savings, while supporting the economy on a path to growth. But it means taking difficult decisions.

Hunt then discussed the fiscal drag elements of the budget. Fiscal drag means drawing the unsuspecting into paying new and more tax:

I start with personal taxes. Asking more from those who have more means that the first difficult decision I take on tax is to reduce the threshold at which the 45p rate becomes payable from £150,000 to £125,140. Those earning £150,000 or more will pay just over £1,200 more in tax every year. We are also taking difficult decisions on tax-free allowances. I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years, taking us to April 2028. Even after that, we will still have the most generous set of tax-free allowances of any G7 country.

I was amazed he could talk about 2028 with a straight face. By then, we will probably have a Labour government. Oh well, he’s done their work for them.

Continuing on tax rises, he said:

I am also reforming allowances on unearned income. The dividend allowance will be cut from £2,000 to £1,000 next year, and then to £500 from April 2024. The annual exempt amount for capital gains tax will be cut from £12,300 to £6,000 next year, and then £3,000 from April 2024. Those changes still leave us with more generous allowances than countries such as Germany, Ireland, France, and Canada.

Because the OBR forecasts that half of all new vehicles will be electric by 2025, to make our motoring tax system fairer, I have decided that from then electric vehicles will no longer be exempt from vehicle excise duty. Company car tax rates will remain lower for electric vehicles, and I have listened to industry bodies and will limit rate increases to 1 percentage point a year for three years from 2025.

At least he kept one thing from Kwarteng’s statement:

The OBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-Budget will remain in place but only until 31 March 2025. After that, I will sunset the measure, creating an incentive to support the housing market, and the jobs associated with it, by boosting transaction during the period when the economy most needs it.

He won’t even be Chancellor then.

Moving on to businesses:

I now turn to business taxes. Although I have decided to freeze the employers national insurance contributions threshold until April 2028, we will retain the employment allowance at its new higher level of £5,000. That means that 40% of all businesses will pay no NICs at all. The VAT threshold is already more than twice as high as the EU and OECD averages. I will maintain it at that level until March 2026.

Then came the windfall tax:

Can I just say that any such tax should be temporary, not deter investment and recognise the cyclical nature of energy businesses? So, taking account of that, I have decided that from 1 January until March 2028 we will increase the energy profits levy from 25% to 35%. The structure of our energy market also creates windfall profits for low-carbon electricity generation, so we have decided to introduce, from 1 January, a new, temporary 45% levy on electricity generators. Together, those measures will raise £14 billion next year.

Business rates have been a thorn in the side of those enterprises on our high streets. Here, it would seem, Hunt offered some relief:

Finally, I turn to business rates. It is an important principle that bills should accurately reflect market values, so we will proceed with the revaluation of business properties from April 2023, but I will soften the blow on businesses with a nearly £14 billion tax cut over the next five years. Nearly two thirds of properties will not pay a penny more next year and thousands of pubs, restaurants and small high street shops will benefit. That will include a new Government-funded transitional relief scheme, as called for by the CBI, the British Retail Consortium, the Federation of Small Businesses and others, benefiting around 700,000 businesses.

Then he turned to people on benefits, proving that Sunak’s furlough scheme during the pandemic was more than adequate:

… I am proud to live in a country with one of the most comprehensive safety nets anywhere in the world. But I am also concerned that we have seen a sharp increase in economically inactive working-age adults of about 630,000 people since the start of the pandemic. Employment levels have yet to return to pre-pandemic levels, which is bad for businesses who cannot fill vacancies and bad for people missing out on the opportunity to do well for themselves and their families, so the Prime Minister has asked the Work and Pensions Secretary to do a thorough review of issues holding back workforce participation, to conclude early in the new year.

Alongside that, I am also committed to helping people already in work to raise their incomes, progress in work and become financially independent. So we will ask over 600,000 more people on universal credit to meet with a work coach so that they can get the support that they need to increase their hours or earnings. I have also decided to move back the managed transition of people from employment and support allowance on to universal credit to 2028, and will invest an extra £280 million in the DWP to crack down on benefit fraud and error over the next two years. The Government’s review of the state pension age will be published in early 2023.

He then discussed foreign spending:

… I salute the citizens of another country right on the frontline … the brave people of Ukraine. The United Kingdom has given them military support worth £2.3 billion since the start of Putin’s invasion, the second highest contribution in the world after the United States, which demonstrates that our commitment to democracy and open societies remains steadfast. In that context, the Prime Minister and I both recognise the need to increase defence spending. But before we make that commitment, it is necessary to revise and update the integrated review, written as it was before the Ukraine invasion. I have asked for that vital work to be completed ahead of the next Budget and today I confirm that we will continue to maintain the defence budget at at least 2% of GDP to be consistent with our NATO commitment.

I was pleased to hear that overseas aid will stay at 0.5%:

Another important international commitment is to overseas aid. The OBR’s forecasts show a significant shock to public finances, so it will not be possible to return to the 0.7% target until the fiscal situation allows. We remain fully committed to that target, and the plans I have set out today assume that official development assistance spending will remain around 0.5% for the forecast period. As a percentage of GNI, we were the third highest donor in the G7 last year, and I am proud that our aid commitment has saved thousands of lives around the world.

Net Zero is still going ahead:

I also confirm that, despite the economic pressures, we remain fully committed to the historic Glasgow climate pact agreed at COP26, including a 68% reduction in our own emissions by 2030.

He discussed schools, beginning with those in England:

we have risen nine places in the global league tables for maths and reading in the last seven years.

… as Chancellor I want to know the answer to one simple question: will every young person leave the education system with the skills they would get in Japan, Germany or Switzerland? So, I have appointed Sir Michael Barber to advise me and my right hon. Friend the Education Secretary on the implementation of our skills reform programme.

Some have suggested putting VAT on independent school fees as a way of increasing core funding for schools, which would raise about £1.7 billion. But according to certain estimates, that would result in up to 90,000 children from the independent sector switching to state schools, giving with one hand only to take away with another.

So instead of being ideological, I am going to be practical: because we want school standards to continue to rise for every single child, we are going to do more than protect the schools budget—we are going to increase it. I can announce today that next year and the year after, we will invest an extra £2.3 billion per annum in our schools.

He has asked a former Labour MP, Patricia Hewitt, to help him reform the NHS. Oh, my days:

I have asked the former Health Secretary and chair of the Norfolk and Waveney integrated care system, Patricia Hewitt, to help me and the Health Secretary to achieve that by advising us on how to make sure that the new integrated care boards, the local NHS bodies, operate efficiently and with appropriate autonomy and accountability. I have also had discussions with NHS England about the inflationary pressures on their budgets.

More money will be pumped into the system:

With £3.3 billion for the NHS and £4.7 billion for social care, there is a record £8 billion package for our health and care system. That is a Conservative Government putting the NHS first.

Barnett consequentials, which come from the hard-pressed English taxpayer, will also increase:

The NHS and schools in Scotland, Wales and Northern Ireland face equivalent pressures, so the Barnett consequentials of today’s decisions mean an extra £1.5 billion for the Scottish Government, £1.2 billion for the Welsh Government, and £650 million for the Northern Ireland Executive. That means more resources for the schools and hospitals in our devolved nations next year, the year after and every year thereafter.

A new energy strategy will be forthcoming from the Business Secretary.

These are Hunt’s infrastructure commitments:

… today I can announce that I am not cutting a penny from our capital budgets in the next two years, and I am maintaining them at that level in cash terms for the following three years. That means that although we are not growing our capital budget as planned, it will still increase from £63 billion four years ago to £114 billion next year and £115 billion the year after, and will remain at that level—more than double what it was under the last Labour Government.

Smart countries build on their long-term commitments rather than discarding them, so today I confirm that because of this decision, alongside Sizewell C, we will deliver the core Northern Powerhouse Rail, HS2 to Manchester, East West Rail, the new hospitals programme and gigabit broadband roll-out. All these and more will be funded as promised, with over £600 billion of investment over the next five years to connect our country and grow our economy.

Our national Conservative mission is to level up economic opportunity across the country. That, too, needs investment in infrastructure, so I will proceed with round 2 of the levelling-up fund, at least matching the £1.7 billion value of round 1. We will also drive growth across the UK by working with the Scottish Government on the feasibility study for the A75, supporting the advanced technology research centre in Wales and funding a trade and investment event in Northern Ireland next year.

He is bringing devolution to England in the form of mayoralties:

Our brilliant [Conservative] Mayors such as Andy Street and Ben Houchen have shown the power of civic entrepreneurship. We need more of this inspirational local leadership, so today I can announce a new devolution deal that will bring an elected Mayor to Suffolk, and deals to bring Mayors to Cornwall, Norfolk and an area in the north-east to follow shortly. We are also making progress towards trailblazer devolution deals with the Greater Manchester Combined Authority and the West Midlands Combined Authority, and soon over half of England will be covered by devolution deals. Taken together, that £600 billion investment in our future growth represents the largest investment in public works for 40 years, so our children and grandchildren can be confident that this Conservative Government are investing in their future.

Hunt is altering the Truss-Kwarteng investment zones to be more in line with Michael Gove’s aspirations for levelling up:

I will also change our approach to investment zones, which will now focus on leveraging our research strengths by being centred on universities in left-behind areas, to help to build clusters for our new growth industries. My right hon. Friend the Levelling Up Secretary will work with Mayors, devolved Administrations and local partners to achieve this, with the first decisions announced ahead of the spring Budget.

The Truss-Kwarteng energy support plan remains in place until the end of March 2023:

I pay tribute to my predecessor, my right hon. Friend the Member for Spelthorne (Kwasi Kwarteng), and to the former Prime Minister, my right hon. Friend the Member for South West Norfolk (Elizabeth Truss), for their leadership in this area. This winter, we will stick with their plan to spend £55 billion to help households and businesses with their energy bills—one of the largest support plans in Europe. From April, we will continue the energy price guarantee for a further 12 months at a higher level of £3,000 per year for the average household. With prices forecast to remain elevated throughout next year, this will mean an average of £500 of support for every household in the country.

There is more help for the most vulnerable:

At the same time, for the most vulnerable, we will introduce additional cost of living payments next year of £900 to households on means-tested benefits, £300 to pensioner households and £150 for individuals on disability benefit. We will also provide an additional £1 billion of funding to enable a further 12-month extension to the household support fund, helping local authorities to assist those who might otherwise fall through the cracks. For those households that use alternative fuels such as heating oil and liquefied petroleum gas to heat their homes, I am today doubling the support from £100 to £200, which will be delivered as soon as possible this winter. Before the end of this year, we will also bring forward a new targeted approach to support businesses from next April.

But I want to go further to support the people most exposed to high inflation. Around 4 million families live in the social rented sector—almost one fifth of households in England. Their rents are set at 1% above the September inflation rate, which means that on current plans they are set to see rent hikes next year of up to 11%. For many, that would just be unaffordable, so today I can announce that this Government will cap the increase in social rents at a maximum of 7% in 2023-24. Compared with current plans, that is a saving for the average tenant of £200 next year.

Labour started a commotion at this point. Hunt then announced a rise in the minimum wage:

This Government introduced—[Interruption.] I thought they cared about the most vulnerable! This Government introduced the national living wage, which has been a giant step in eliminating low pay, so today I am accepting the recommendation of the Low Pay Commission to increase it next year by 9.7%. This means that, from April 2023, the hourly rate will be £10.42, which represents an annual pay rise worth over £1,600 to a full-time worker. It is expected to benefit over 2 million of the lowest-paid workers in our country, and it keeps us on track for our target to reach two thirds of median earnings by 2024. It is the largest increase in the UK’s national living wage ever.

Benefits will increase by the rate of inflation:

today I commit to uprating such benefits by inflation, with an increase of 10.1%. That is an expensive commitment, costing £11 billion, but it means that 10 million working-age families will see a much-needed increase next year, which speaks to our priorities as a Government and our priorities as a nation. On average, a family on universal credit will benefit next year by around £600. To increase the number of households that can benefit from this decision, I will also exceptionally increase the benefit cap by inflation next year.

Finally, I have talked a lot about the British values of compassion, hard work, dignity and fairness, but there is no more British value than our commitment to protect and honour those who built the country we live in, so to support the poorest pensioners I have decided to increase pension credit by 10.1%, which is worth up to £1,470 for a couple and £960 for a single pensioner in our most vulnerable households, but the cost of living crisis is harming not just our poorest pensioners but all pensioners.

The triple-lock stays:

Because we have taken difficult decisions elsewhere today, I can also announce that we will fulfil our pledge to the country to protect the pension triple lock. In April, the state pension will increase in line with inflation, an £870 increase, which represents the biggest ever increase in the state pension. To the millions of pensioners who will benefit from this measure, I say: “Now and always, this Government are on your side.”

Hunt did not receive a jubilant reception from Conservative MPs, some of whom had concerns.

Dr Liam Fox asked about quantitative easing and interest rates:

I congratulate my right hon. Friend on a balanced and skilful statement prioritising fiscal stability. He will be aware that some of us believe that the Bank of England maintained monetary conditions that were too loose for too long, but that it would also be a mistake to maintain monetary conditions that are too tight for too long. Can he therefore confirm that the anti-inflationary measures that he has taken today will mean that the pressure to raise interest rates will be minimised, and that there is a much greater chance that they will fall earlier than would otherwise have been the case?

Hunt replied:

My right hon. Friend is absolutely right to focus on this issue, because every 1% increase in interest rates is about £850 more on the average mortgage, so it is hugely important to families up and down the country. The OBR has said that the measures that we have taken today will mean that inflation is lower than it would otherwise have been. That means that the Bank of England is under less pressure to increase interest rates, which for reasons that he knows are such a worry for so many families.

Sir William Cash was concerned about the ever-increasing costs of the HS2 rail project:

My right hon. Friend argued for sound money and sound foundations. Would he be good enough to explain how it is that High Speed 2 will continue beyond Birmingham at a verifiable cost of at least £40 billion, when every independent report on HS2 condemns the project and confirms that phase 2 will make rail services to all west coast destinations north of Birmingham much worse? I ask him to make a clear commitment to keep this matter under review at all costs; it is in the national interest.

Hunt said:

My hon. Friend is right that the increases in the budget for HS2 are disappointing, but a strong economy needs to have consistency of purpose, and that means saying we will make sure that we are a better connected country. The lack of those connections is one of the fundamental reasons for the differences in wealth between north and south, which we are so committed to addressing. There is a bigger issue about the way that we do infrastructure projects: it takes too long, and the budgets therefore get out of control. We are just not very good at it, and we have to sort it out.

Theresa Villiers rightly asked how soon we could move to a lower-tax economy if the forecasts are wrong. For me, this was the question of the day:

I thank the Chancellor for the announcement on schools funding, which, as he knows, is something that I raised with him as being crucial. Can he also confirm that, if current forecasts about economic recovery and inflation prove to be overly pessimistic, we will move more quickly than he has announced today towards delivering a lower-tax economy?

Hunt was non-committal:

My right hon. Friend is an immensely experienced colleague. She is right to point out that there is always inaccuracy in any forecast, and there is always variation from fiscal event to fiscal event, so we keep all those decisions under review in the round. I think it is still important to have forecasts—that is better than not to have them—but we keep all those decisions under review.

Virginia Crosbie from Ynys Môn in Wales asked how soon the new nuclear programme would begin:

This Government’s commitment to Sizewell C and large-scale nuclear is welcome, and it was noted that Labour’s shadow Chancellor failed to mention nuclear. When will the launch of Great British Nuclear be announced, and will its scope include large-scale gigawatt nuclear at sites such as Wylfa in my constituency, as well as small modular reactors?

Hunt was encouraging:

There is no more formidable advocate for big nuclear investment on Ynys Môn than my hon. Friend. Indeed, when I went on a family holiday to Ynys Môn this summer, she tried to persuade me to visit the potential site of a nuclear power station with my children. I apologise that I did not take her up on the offer, but it shows her commitment. My right hon. Friend the Business Secretary will be making an announcement soon on things such as the launch of Great British Nuclear—I hope before Christmas, but if not just afterwards—because we want to crack on with our nuclear programme.

Richard Drax was concerned about the burden on the taxpayer, another excellent question:

I have huge sympathy for my right hon. Friend. We are facing severe financial challenges for the reasons he explained so well, but Members on both sides of the House are promising to spend billions and billions more pounds. I remind the House that it is the private sector, and hardworking people through their taxes, who pay for Government expenditure. Does my right hon. Friend agree that raising taxes on both risks stifling the growth and productivity that he and I both want, and that would counter the recession we are now in?

Hunt defended his budget:

My hon. Friend is right to make the case for a lightly taxed dynamic economy, and I would like to bring taxes down from their current level. We are faced with the necessity of doing something fast to restore sound money and bring inflation down from 11%, which is why we have made difficult decisions today. But yes, my hon. Friend is absolutely right: there is no future for this country unless we get back on the path to being a lower taxed economy.

Mark Pawsey asked about small businesses:

My constituents in Rugby and Bulkington will not enjoy the tough decisions that the Chancellor has had to make today, but they will understand the need for sound finances after the huge expenditure that the country has made on the pandemic and supporting people with their energy costs as a consequence of the war in Ukraine. They will also want to know that businesses will continue to invest to grow and to create jobs. Will he speak about the incentives that still exist for businesses to do exactly that?

Hunt pledged his support:

I am happy to do that. My hon. Friend is quite right to raise those issues. We are doing a lot of short-term things, including help with energy bills as well as business rates. As we move to a new business rates system, we are freezing the levels at which business rates can increase and introducing a 75% discount next year for retail, hospitality and leisure businesses. Fundamentally, as a Conservative Government, we know that we cannot flourish as an economy without flourishing small businesses, and we will back them to the hilt.

Greg Smith asked what Hunt was doing about reducing fuel duty:

I absolutely agree with my right hon. Friend when he talks about the inflationary pressures coming from the aftershocks of the pandemic and the war in Ukraine. We see that at the fuel pumps and, more significantly, our haulage and logistics sector sees it with the enormous level of taxation on diesel in particular driving inflation to get food and goods on to our shelves. As he prepares for the March Budget, will he look at the inflationary impact of fuel duty on top of the high cost of diesel and see whether we can reduce it?

Hunt said he was looking at the issue:

I assure my hon. Friend that I will absolutely do that. We have a little time, and I know that fuel duty is an important issue to him and many other colleagues.

March 2023 — fuel duty hike

Hunt’s answer to Greg Smith on the fuel duty hike sounded reassuring, but GB News’s economic editor Liam Halligan uncovered a planned fuel duty hike of 23% for March 2023 from the OBR forecast. It would be the first since 2011:

Here’s Liam Halligan talking about it:

Forbes noticed it, too, bringing the news to an even wider international audience:

https://image.vuukle.com/8d46442a-2514-45e7-9794-98dfc370ce1b-94c4922a-473b-4f2c-bf6c-332bb8ccac4e

Fiscal drag

The Times had an article on the upcoming fiscal drag following Hunt’s budget:

Disposable incomes, after adjusting for inflation, will fall by 4.3 per cent in 2022-23, which would be the largest fall since records began in the 1950s. It is set to be followed by the second largest fall — in 2023-24 — of 2.8 per cent.

… Despite the aspirations of Rishi Sunak to create a low-tax economy, Britain is on course for its biggest ever tax burden as hundreds of thousands of workers are dragged into higher income tax bands by the freezing of thresholds and allowances while businesses also face a jump in levies, including employment taxes.

The tax burden is set to rise to 37.5 per cent of GDP in the financial year ending 2025, reaching the highest level since records began shortly after the Second World War.

The level of taxation as a share of the national income will rise to 36.4 per cent of GDP this year and 37.4 per cent in the financial year ending 2024, breaking the previous record.

Recovery is not likely to begin until 2025, several months after the next general election. This is accurate only if Conservatives are still in power by then:

GDP is expected to rise by 4.2 per cent this year before falling by 1.4 per cent next year, only returning to pre-pandemic levels by the end of 2024. However, growth is expected to pick up to 2.6 per cent the following year and 2.7 per cent in 2026, following a recovery in real incomes, consumption and investment.

The Telegraph also had an article on fiscal drag:

Nearly a quarter of a million workers will be dragged into paying the 45p rate of income tax after Jeremy Hunt slashed the threshold at which it is charged.

The salary on which the additional rate is payable will be reduced from £150,000 to £125,140 effective next April, Chancellor Jeremy Hunt announced in the Autumn Statement, and frozen until 2028, forcing 232,000 workers into paying the top rate of tax for the first time and costing these quarter of a million taxpayers £620 on average, according to wealth manager Quilter.

The number of workers paying 45pc has more than doubled since the rate was first introduced in 2010 – rising from 236,000 to 629,000 today – as wage inflation has pushed more taxpayers into the highest income tax band.

Lowering the threshold will cost the 629,000 workers earning over £150,000 who are already impacted by the 45pc tax an additional £1,250 …

Just two months ago, then-Chancellor Kwasi Kwarteng promised that the top rate would be abolished altogether. But now the Government is hoping to earn £420m in 2023-24 by catching more taxpayers in the 45pc net, and almost double that – £855m – in 2027-28.

Neela Chauhan of accountancy firm UHY Hacker Young said the move was “a major attack” on higher earners.

She added: “It’s going to bring in people into the upper rate who feel that they are far from being rich.”

Tax firm RSM said that there are also unexpected consequences of slashing the additional-rate threshold and the Chancellor had opened the door to a new 67.5pc tax rate.

Taxpayers earning over £100,000 lose their personal allowance at a rate of £1 for every £2 of income.

This means for every £100 they earn between £100,000 and £125,140, a worker takes home just £40 – because £40 is lost to income tax and another £20 to the tapering of the personal allowance – creating a 60pc tax trap.

Dismal headlines

The Guardian has a breakdown of last Friday’s front pages, which were bleak.

The Telegraph noted the austerity of George Osborne, Chancellor when the Conservative-Lib Dem coalition took over from in 2010, and the Labourite policies of his predecessor Gordon Brown. At the bottom of the page is an analysis from Lord Frost:

Lord Frost’s analysis is pro-Truss/Kwarteng

Lord Frost points out that the OBR are predicting what Liz Truss did just a few weeks ago:

This was a very curious Autumn Statement. For the last month, we have been told that Britain needed to re-establish the confidence of the markets and put in place renewed fiscal discipline, supposedly so carelessly squandered by Liz Truss. “Eye-wateringly painful decisions” were coming for all of us …

… public spending will be at its highest since the 1970s and taxation the highest since the Second World War. Both only start to fall, gently, in the late 2020s, and then only because of some pretty heroic assumptions about growth. Indeed, under Liz Truss we were told that 2.5 per cent growth was impossible – yet the Office for Budget Responsibility (OBR) is predicting exactly that for 2025 and 2026.

How do we explain this?

To do so, I think, we have to go back to that extraordinary week in mid-October, when Truss’s government blew up on the launch pad

She was levered out of Downing Street with the argument that she had been careless about the public finances, casual about fiscal discipline and had lost market confidence. An emergency correction was needed – tax rises or spending cuts, and probably both.

Yet on taking office, our current government will have found – as the OBR has now acknowledged – that we were already into a deepening recession. Tightening fiscal policy with growth collapsing and interest rates increasing globally would clearly have been an insane policy, one at variance with what virtually every economist would suggest. But, having destroyed the Truss administration for being insufficiently fiscally disciplinarian, the Government could hardly overtly change course itself.

That is why we got what we got. Keep growing spending, raise taxes now on unpopular groups, defer deficit reduction and everything else until 2025, and meanwhile talk a lot about austerity and discipline to disguise the reality that this is likely a similar fiscal policy to what Truss’s would have been, just at higher levels of tax and spend. Then, after the election, if the Conservatives are still in power, it can all be looked at again …

… Taxes on business wreck investment and growth. Taxes on the (not very) rich destroy incentives. Britain’s hard-won reputation for being a low tax country is permanently lost. And we all have less of our own money and are less free.

Another defence of Trussonomics

The Mail reminds us that the Truss plan was to cap energy prices for two years. Hunt has reduced this to the end of March 2023:

Average energy bills will rise to £3,000 a year from April as Chancellor Jeremy Hunt confirmed he was scrapping previous Government plans.

In his Autumn Statement to the House of Commons, Mr Hunt revealed changes to the ‘Energy Price Guarantee’ would leave Britons facing higher gas and electricity payments next year.

When former prime minister Liz Truss first announced the cost of living support in September, she outlined how average energy bills would be frozen at £2,500 a year for the next two years

Delivering details of an altered plan today, Mr Hunt revealed the Energy Price Guarantee would now be set at a higher level of £3,000 a year for average households until April 2024.

Of course, those who use less energy at home might have less to pay:

The plan only caps the cost per unit that households pay, with actual bills still determined by how much is consumed.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said:

The fact that this comes on top of so many other price rises means life is going to get even tougher next spring.

More Trussonomics

The Spectator‘s editor Fraser Nelson wrote an analysis of the budget for The Telegraph, ‘This could turn out to be the week that the Tories lost the next election’.

I noted above that some of what Hunt said points far into the future.

Fraser Nelson also observed that fact:

Suspiciously, almost all of this austerity is due to take place after April 2025, after the election. The Tory benches were very quiet during Hunt’s speech, perhaps because they were piecing all this together. It was not just an Autumn Statement being written, but the next Conservative manifesto, too – with all the bad stuff saved for after the vote. Hardly the behaviour of a party expecting to win.

As one minister put it: “This was the day we lost the election.” This is how some Tories see the Autumn Statement: a suicide note, wrapping a poison pill for a Keir Starmer government to swallow.

This is the alarming rate of borrowing today. Factor in the previous QE and the generous Sunak pandemic programmes when he was Chancellor:

Even now, the Government is borrowing £485 million a day – or £20,000 by the time you finish this sentence. It all needs to be repaid. And the interest we all have to pay for such debt is, broadly, treble what it was a year ago.

The new forecasts show a UK Government expecting to pay £484 billion in debt interest over the next five years – almost £300 billion more than was expected this time last year. This year alone it’s £120 billion, twice last year’s sum.

This extra £60 billion has had to come from somewhere. It’s enough to double the size of the military, treble the police force or rebuild every school or hospital. But instead it is dead money, servicing an old debt – and things need to be squeezed to make room for it. For years, Tories wrote cheques, for HS2 and more, barely thinking about the cost. Now the bill has landed.

Nelson doesn’t mention the number of times long-serving Conservative backbenchers warned Sunak over the past two years that the bill would come due, but I saw them in parliamentary debates being duly ignored. To Sunak, those men were mere Thatcherites, so last century. Rishi told us we could borrow with little consequence. Not so.

He created a lot of our current problems and campaigned in August that he would be the candidate to get us out of this situation.

Now he is No. 10, just as he wanted to be from the beginning:

Sunak can’t be blamed for the debt interest. But he might have been expected to have better ideas of how to get out of the mess.

Of the Autumn Statement, Nelson writes:

Liz Truss said her message was “growth, growth, growth,” but Sunak’s seems to be “brace, brace, brace”. A massive fiscal impact lies ahead, he says – and our mission is to recognise it, make our peace with it, and accept that talk about a low-tax future is futile. So his Autumn Statement did not kick-start a recovery. It was, instead, a requiem for growth.

Of the August leadership campaign, he reminds us:

During the leadership debate, Truss was asked what advice she would give to Sunak. Don’t be so fatalistic, she told him. Don’t go along with narratives of decline. She had a point. Groundless optimism ended her premiership very quickly, but groundless pessimism can also be deeply damaging.

Nelson wonders how a government can so quickly discount its people:

A million more Brits, for example, are expected to join the 1.7 million already claiming disability or health-related benefits over the next five years. They will, in turn, join the 3.5 million others on out-of-work benefits. Was it so unreasonable to hope that this number might go down, with people helped back to work? We’ve been promised a review into all this, but not much else.

Another assumption is that most of the 400,000 who have dropped out of the economy since the pandemic started, citing long-term sickness, will never work again. It’s hard to find many other countries giving up so readily on such a stunningly large chunk of the population.

Is a uniquely British malady at work here? Or is the real problem a kind of Tory fatalism, where an exhausted governing party thinks the country is now too old, too sick or simply too workshy to get back to where it was in January 2020?

Many conservative voters said at the time that Rishi’s furlough scheme was a bit too helpful — and we were paying for it.

Now we are paying even more for it.

Nelson concludes:

the risk is that voters make up their mind now – and associate Toryism with chaos, broken promises and a general counsel of despair. Labour just needs to promise to do things better. As things stand, it’s not a very high bar.

Feeling fleeced yet?

The Telegraph‘s editorial warned, ‘Hard times ahead for British taxpayers’:

Unlike the tumultuous response to Kwasi Kwarteng’s unfunded growth measures in September, the market reaction was muted, which is precisely what Mr Hunt hoped for, even if the pound fell against the dollar amid forecasts of a year-long recession …

… benefits and the old age pension will rise in April by 10.1 per cent, the inflation rate in October.

This continues a trend of recent years whereby working people are expected to pay more in tax to protect social programmes that successive governments have been reluctant to reform. Although headline tax rates have not risen, the extended freeze on allowances at a time of double-digit inflation is a serious hit to the incomes of millions who will be dragged into higher bands. Some three million earners will pay income tax for the first time.

This year will see the sharpest fall in living standards on record, while the tax burden rises to its highest level as a share of GDP in decades. More than 47 per cent of national income will be spent in the public sector. In fact, spending will actually rise in real terms. The cuts are to planned budgets.

Rishi Sunak and Mr Hunt consider this social democratic approach to be fair and compassionate, closing off attack lines from Labour as a general election approaches. But there are consequences for the long-term well-being of the country if working people and businesses feel they are being fleeced to prop up failing public services and a benefit system in need of a drastic overhaul.

Essentially, the productive part of the economy is being squeezed to prop up the unproductive. The problem Mr Sunak faces is that, by 2024, the Conservatives will have been in office for 14 years and they need to offer voters a better slogan than “Labour will be worse”. In fact, Labour would support many of the measures in the Autumn Statement, from loading more tax on the wealthy to increasing windfall taxes on the energy companies.

ministers need to prepare for the worst and could proactively address the biggest drags on the economy, above all the NHS, social care and welfare benefits. The health service continues to soak up huge sums – with another £6 billion announced yesterday – and yet produces worse outcomes. Its shortcomings are causing problems throughout the economy, with treatment backlogs contributing to acute manpower shortages which the Government intends to fill by increasing immigration.

The Spectator‘s political editor James Forsyth, a close friend of Rishi Sunak’s, explained in The Times why this recession is different to previous ones and why we need more people in the workforce. I hope his friend pays attention to this:

One bright spot amid the gloom is the unemployment rate, which is just 3.6 per cent, down from 3.8 per cent this year. This is close to historic lows. But even this glimmer is tarnished. The low unemployment number disguises how many people have left the labour force: one in five working-age Brits are economically inactive, meaning they are neither in work nor looking for it. More than five million are claiming out-of-work benefits.

The recession may last a year, perhaps two — but it will be different. Unemployment, as formally defined, won’t exceed 5 per cent even during the worst of the downturn — in the 1980s it went into double digits. Seldom have there been more vacancies in the economy. It’s an odd form of recession where almost anyone who wants a job can find one, but that’s the situation we’re in. Almost every month, the number of those not looking for work grows: it jumped by 169,000 in the three months to August. That is more than the population of Oxford.

This has consequences. The OBR thinks the cost of health and disability benefits will rise by £7.5 billion — quite a sum. A shrinking labour market is also one of the reasons why the Bank of England thinks potential growth is now a mere 0.75 per cent even in 2024-25. The Tories desperately need to get back to moving people from welfare into work — not just to reduce the welfare bill but also to boost the economy

Alongside those not in work nor looking for it, there are 970,000 people on Universal Credit who are working very limited hours in an economy where employers are offering shifts. Hunt announced that about 600,000 of them will now be required to meet a work coach to try to increase their hours. This signals a return to Tory welfare reform …

to ensure taxes don’t need to keep going up indefinitely, two things are needed. The first is a renewed emphasis on public-sector reform. The Tory mantra used to be more for less from public services. But in recent years, it has felt like the opposite is the case. As the Institute for Fiscal Studies pointed out this week, the NHS has more money and more staff than it did before Covid yet is treating fewer people on the waiting list. This needs reversing if the tax burden is not to continue climbing ever higher.

The second is the economy needs to grow. Meat needs to be put on the bones of the growth agenda that Sunak and Hunt set out this week, with further incentives for businesses to invest.

After the debacle of the mini-budget, this autumn statement was always going to be about steadying the ship. Yet satisfying the markets is a necessary but not sufficient condition for a successful government. Sunak and Hunt must now deliver on public service reform, moving people from welfare into work and getting more out of the health and education budgets.

The Telegraph had more on the parlous state of the NHS, despite more taxpayer money being dumped into it, all for nought:

An analysis by the Institute for Fiscal Studies shows the health service in England carried out 600,000 fewer procedures in the first nine months of 2022, compared with the same period in 2019.

The NHS’s budget rose from £123.7 billion in 2019-20 to £151.8  billion in 2022-23, with the extra funding tied to a target of increasing elective hospital activity by 30 per cent compared with pre-pandemic levels. This will not only be missed but matters have worsened. Why is no one being held to account?

Record sums have been poured in for years, yet there is now a waiting list of more than seven million patients. Working practices remain stuck in the past, with consultants complaining that hospitals are “like the Mary Celeste” at weekends, while most GP surgeries are only open on weekdays, pushing patients to overstretched A&E services.

The NHS unions are not helping in their demands for more money.

The article concludes:

There is something fundamentally wrong with the NHS which politicians must confront before it crashes and brings the rest of the economy down with it.

Hunt puts economic hope in migrants

It seems the OBR, a quango started by the Conservative Chancellor George Osborne and staffed by Labourites, has convinced Jeremy Hunt that he should increase our already heavy migration levels to boost the economy.

That’s a left-wing idea that has never worked.

Home Secretary Suella Braverman will oppose that, but can she succeed? Only a few weeks ago, a 90-minute argument with Liz Truss and Hunt resulted in Braverman’s resignation. Her security violations were a likely smokescreen for what really happened.

The Telegraph reported:

Jeremy Hunt is relying on a surge in net migration to more than 200,000 people per year to help deliver economic growth as he oversees a sharp rise in the tax burden to its highest ever peacetime level.

The Office for Budget Responsibility (OBR) predicted net migration – the numbers entering the UK minus those leaving – will be 224,000 next year, before gently declining to settle at 205,000 a year from 2026 onwards.

This is dramatically higher than the OBR’s March estimate, when it predicted that net migration would be between 139,000 and 129,000 in the same years, some 80,000 lower.

It is also significantly higher than the long-term “ambition” of Suella Braverman, the Home Secretary, to reduce net migration to below 100,000 – similar to the target of Theresa May, one of her predecessors in the post.

The increase in migrant labour will help to buttress Britain’s economy as Mr Hunt imposes higher taxes on earnings, jobs and investment. The OBR said that an increase in migration would help add to the potential size of the economy.

However, rising costs from tax are creating “growing disincentives to work”, reduce business investment and depress wages, according to the OBR itself.

Business groups were even more damning. The Chancellor talked a lot about “hard work” and “fairness” in his Autumn Statement. But workers, entrepreneurs and businesses have been left to pick up the bill to keep Britain’s welfare state on the road.

The OBR are being deeply irresponsible in advocating city-sized populations coming from abroad each year.

Where will these people live? How is our infrastructure — medical facilities, schools, water supply — increase to meet this demand year upon year?

Anyone travelling by Tube can pick up a copy of the Evening Standard to read about how many British twenty-somethings in London cannot find a room to rent. In many cases, there are 100 of them chasing every available room. The Standard interviews them. Their stories are heart-breaking. These young people are signed up to every rental app, to no avail.

Council tax increasing

On top of all of this, The Times reported that Hunt has given the green light to councils to increase council tax:

… the chancellor announced “more council tax flexibilities”, enabling councils in England to raise council tax by 3 per cent a year (up from 2 per cent) from April 2023 and increase the adult social care precept by 2 per cent a year (up from 1 per cent) without having to hold a referendum — leaving councils free to raise the tax by up to 5 per cent next year.

Their article has charts of various council tax rates and offers this example:

If they decide to increase council tax by the full 5 per cent, council tax band D payments would rise by £115 from £2,300 to £2,415 a year in Rutland in the East Midlands — the local authority with the most expensive tax bills in England — while in Westminster in central London, the cheapest authority, they would increase by just £43 from £866 to £909 a year.

Short takes

The Telegraph has an article on winners and losers from the Autumn Statement. There are only two groups of winners: housebuyers and pensioners/benefits claimants.

The Guardian interviewed some of Hunt’s constituents in leafy South West Surrey. They are unhappy with him as MP and are equally unhappy with the Government.

Guido Fawkes’s sketchwriter summed up Hunt’s announcement as follows:

What was the job of the day? To persuade the markets that all was under control. That debt-to-GDP would fall in reasonable time, that things would get back to normal in his cool, technocratic, managerial hands.

It’s what we all need, to believe that someone knows how things work and that they know what they’re doing. That there is such a thing as “sound money”. That the great, communal hallucination of financial reality may be preserved.

In Guido’s view, the Chancellor did exactly that. (Pound crashes, housing market collapses, the global financial architecture disappears into the Pacific Trench)

The readers’ comments near the end of that post have to do with the raw deal Liz Truss got. Here’s the exchange:

I find it impossible to believe that Liz Truss did so much damage in a couple of weeks with a mini budget which was never even enacted to require today’s grotesque socialist budget. Hunt and Rishi must be following an ideological policy and using Truss as their excuse.

Yes, she’s been made a convenient scapegoat by the WEF shills, to cover all their earlier and current mistakes and wrongdoings.

She went too far too fast and, by doing so, gave the one nation Tories and SunakHunts the opportunity to bring her down. The real villains are Sunak and Bailey [Bank of England governor] with their money printing and inflation denial. We are paying for their mistakes.

She didn’t go too far too fast. That is the Conservative spin. The Socialist spin is that she crashed the economy. It was cautious and a promising start, a direction of travel being set, nothing more – except for that huge two year package on the gas bills which was pure socialism and not mentioned by anyone.

The true Conservative spin is that, as an experienced Cabinet minister, she didn’t scan the political and financial hinterlands and underestimated the faux Conservative forces ranged against her. Once she u-turned she was done for.

On another of Guido’s posts, a reader posited that this is all about reversing Brexit:

The champagne socialist billionaire Rishi Sunak and arch remainer narssisist Jeremy Hunt have nailed the final nails in the socialist party AKA as the Conservative party coffin. They will be wiped out at the next GE for a generation. They want to tank the economy and make everyone feel financial pain so they can say BREXIT didn’t work. They will then seem to come to the rescue with every excuse on the planet and join us up first to the single market and customs union. Then kicking and screaming back into the EU. Why do you think they staged this remainer coup and got rid of Truss? The Truss budget of low tax, high wages, high growth, low government spend and the scrapping of the 2300-3000 EU laws retained on the UK statue book would have taken advantage of BREXIT and boosted the economy. They could not allow that to happen. They want to ditch plans to scrap the EU laws as that will make it harder to leave. They have folded on the NI Protocol and leaving the Jurisdiction of the ECHR. Why? Because they want to rejoin. We now are having forced on us a low wage, high tax, low growth, high government spend economy that will cripple most people financially and small businesses. Who wants to invest in the UK now?

On that note, another reader posted a photo of Hunt and Sunak sharing a laugh, with this fictitious caption:

Hunt: Told you you didn’t need the support of the members.

Sunak: Yes, it was so easy to stab Truss in the back, too. Who needs democracy?

What taxpayers can do

All is not lost for taxpayers. There are ways to mitigate the effects from Hunt’s statement.

Anyone who needs to cut back on food costs, protein in particular, should start eating eggs, which are cheap and the best source of protein around. Supposedly, they’re in short supply, but I bought a dozen only yesterday.

The Telegraph has an excellent article on various egg preparations, whether sweet or savoury. It’s well worth reading.

The paper also has a helpful article about what taxpayers can do to mitigate Hunt’s raid on their money. Some will require advice from a financial planner. The most important tip is to get one’s capital gains in order and start liquidating shares or funds to put into an ISA — a process called ‘bed and ISA’ — without exceeding the CGT thresholds. This has to be started well before the end of the 2022-23 tax year in April, when the current capital gains threshold of £12,300 expires and becomes £6,000 for one year, then £3,000 the year after that.

Good luck!

Thursday, November 17 is a historic day, because the UK will be seeing a return to high taxes, this under a ‘Conservative’ government.

I’m writing this before Chancellor Jeremy Hunt gives his budget, or ‘statement’, but Guido Fawkes has a preview, which includes this:

Cutting capital gains tax allowance from £12,300 to £6,000;

Raising dividend tax rate across all three bands and cutting tax-free allowance to £1,000.

Shocking.

On the other hand, we have this:

Raising benefits in line with inflation;

Protecting the triple lock on pensions.

Liz: ‘No new taxes’

Let us cast our minds back to Liz Truss, who did not want to penalise ordinary Britons:

Clearly, she was the wrong person for Prime Minister.

Since Rishi became PM, I have read very little criticism of him in the media, recalling that, for whatever reason, they all wanted him in No. 10.

And, now that he is in No. 10, everything has been rolled back to a very Establishment Government, including the Treasury. There is no criticism of Jeremy Hunt, either, even though his budget will have a deleterious impact on Britain’s middle class.

Rishi’s Cabinet is more of the same old, same old, as I wrote yesterday. The media don’t criticise him for it, either.

Liz’s refreshing Cabinet

Liz made some splendid Cabinet appointments, some of which I covered yesterday.

Two others included Jacob Rees-Mogg as Business, Energy and Industrial Strategy Secretary and Simon Clarke as Levelling Up Secretary.

Out were Boris’s chaps, including Steve Barclay …

… Grant Shapps …

… and Dominic Raab, whose departure was also warmly welcomed. Note the warning in the reply tweet:

Interestingly, she kept Kit Malthouse, transferring him from Policing to Education. I, too, would have preferred Kemi Badenoch in that post:

Liz gave Tom Tugendhat, one of the summer’s Conservative Party leadership candidates, his first Cabinet role, one which he holds on to today under Rishi Sunak — that of Security Minister.

The Times noted that there was no longer a Minister for Women in Cabinet, which is a good thing. This is a hangover from Tony Blair’s time:

Liz Truss will not have a cabinet-level minister for women, having handed the equalities brief to a man.

Truss was minister for women and equalities in conjunction with her role as foreign secretary before she became prime minister on Tuesday.

The ministerial post, which Truss had held since February 2020, means taking charge of the government equalities office (GEO), which was created in 2007. This oversees government policy on women, sexual orientation, transgender rights and related issues.

Truss has appointed Nadhim Zahawi, the new chancellor of the Duchy of Lancaster, to succeed her in the position. Because he is a man, it was decided his title would be minister for equalities. But No 10 confirmed yesterday that his job was the same as when Truss held it …

The title of minister for women was created by Tony Blair in 1997, before the GEO was set up …

With regard to education and diversity, Liz’s Cabinet was a testament to opportunity in the United Kingdom.

On Thursday, September 8, The Times told us that she had the most privately-educated Cabinet since John Major’s time (1990-1997):

The new prime minister’s cabinet are more than nine times more likely to have gone to an independent school than the general population, according to analysis by the Sutton Trust, a social mobility charity.

It found that 68 per cent of the cabinet were educated at fee-charging schools, while 19 per cent went to a comprehensive and 10 per cent attended a grammar school. This compares with around 7 per cent of the wider population.

Under Boris Johnson’s first cabinet, 64 per cent of members were alumni of private schools and the proportion is more than twice that of Theresa May’s 2016 cabinet, of which 30 per cent were privately educated.

David Cameron — who like Johnson attended Eton — appointed 50 per cent alumni of private schools in his first cabinet and for the 2010 coalition cabinet the proportion was 62 per cent

The article noted that Liz herself attended a private secondary school:

Roundhay School in Leeds. She was criticised during her leadership campaign for suggesting the outstanding school, in an affluent suburb, had low expectations and a lack of opportunity.

Margaret Thatcher and John Major had higher percentages of privately educated Cabinet members:

John Major (71 per cent in 1992) and Margaret Thatcher (91 per cent in 1979).

The Sutton Trust disapproved of Liz having such a high proportion of privately educated Cabinet members, but, considering how diverse everyone was, it was a positive optic.

Thankfully, on Sunday, September 11, The Sunday Times pointed out ‘Cabinet heavyweights crown the success of post-colonial African migrants’. Why hadn’t the Sutton Trust done a press release on that?

The article said:

The sound of glass ceilings cracking could be heard all over Whitehall last week, as Liz Truss announced her first cabinet. With the elevation of Kwasi Kwarteng to chancellor of the exchequer, Suella Braverman to home secretary, James Cleverly to foreign secretary and Kemi Badenoch to trade secretary, Truss’s cabinet represents the most diverse ruling cadre ever appointed in Britain. At least when it comes to ethnicity.

The arrival of these individuals into the great offices of the British state also represents the culmination of an extraordinary and underplayed success story: post-colonial African migration into the UK. All four are children of parents who arrived in the waves of late 20th century migration that followed the retreat of the British empire.

Kwarteng’s parents came from Ghana in the 1960s. Although Braverman’s parents are of Indian ethnicity, they lived in Kenya and Mauritius before emigrating to the United Kingdom in the 1960s. Cleverly’s mother emigrated from Sierra Leone in that decade. Badenoch’s parents both come from Lagos, Nigeria. Although Badenoch is British, she spent much of her childhood there.

Furthermore, previous Cabinet members at the time also had parents who emigrated from Africa:

Two recently departed cabinet heavyweights, Priti Patel and Rishi Sunak, also have parents who migrated to Britain from east Africa: Uganda in Patel’s case, Kenya and Tanzania in Sunak’s. Each individual story is different of course, and all faced a variety of economic and social hurdles to success in Britain. But taken together, they reflect a journey from post-imperial Africa to the very heart of the British establishment, over the course of just two generations.

And, they are all Conservatives!

Jimi Famurewa, food critic for the Evening Standard and author of a new book, Settlers, about African migration to Britain, told The Sunday Times that private education for African immigrants was very important:

My family and a lot of families from west African countries that came here in the 1980s were very aspirational middle class. There’s a huge culture around the importance of education, across the African diaspora. It’s drummed into you that that’s your route to success.

It was really important to my parents that if they were in any way able to send us to private schools, that’s something they would do.

Education was seen as the silver bullet to advance socially and professionally. You can see reverberations of that in people like Kemi and Kwasi.

He was not surprised they are Conservative rather than Labour MPs:

Given their generally middle-class background and private education, it is perhaps no coincidence that many of the first black or Asian figures to hold the great offices of state are Conservative MPs. “It doesn’t hugely surprise me that they are all Conservatives,” said Famurewa. “By and large west African families are quite socially conservative in their beliefs.”

On a lighter note, the previous Leader of the House, Mark Spencer, received a food brief as Minister of State for the Department for Environment, Food and Rural Affairs (DEFRA).

Someone on Twitter did a play on words with Marks & Spencer’s advert, including their brand Simply Food:

Thérèse Coffey’s plan for the NHS

Yesterday, I mentioned Liz’s Secretary for Health and Social Care, Thérèse Coffey. I neglected to mention that Coffey was also her Deputy Prime Minister.

Coffey is shown here at a 2015 Spectator summer party. Yes, she enjoys cigars:

The photo shocked those on social media:

On Wednesday, September 7, the Mail‘s Andrew Pierce told us that Coffey, whom Liz refers to as Tiz, is her long-time confidante:

Truss knows she owes a large part of her victory to her ever-faithful parliamentary companion. She has rewarded her lavishly – appointing her as Deputy Prime Minister and Health Secretary.

In a cut-throat political world, Coffey has shown absolute loyalty to her new boss over many years. She not only ran Truss’s successful campaign against Rishi Sunak for the leadership, but wisely persuaded her not to stand against Boris Johnson in the 2019 leadership contest – paving the way for her to become his successor instead.

The two have been friends since their student politics days more than 25 years ago and are known by some colleagues as ‘Yin and Yang’. Truss refers to Coffey affectionately as ‘Tiz’.

Interestingly, they started out as rivals, running against one another to be the Tory parliamentary candidate in South West Norfolk in 2007. It was Truss who triumphed.

She then took Coffey under her wing, coaching her on how to raise her game in selection meetings. Coffey was duly chosen for the neighbouring Suffolk Coastal constituency in 2010.

The two share a love of karaoke – which has got them into trouble in the past. Their regular karaoke evenings on the ministerial corridor in the Commons have on occasion become so boisterous that they were ticked off by Parliamentary authorities.

Coffey herself has had her own problems with karaoke – and they were nothing to do with how tuneful she is. During the 2021 Tory conference in Manchester, the then Work and Pensions Secretary was filmed at 1am belting out the classic song from the film Dirty Dancing, (I’ve Had) The Time Of My Life.

Alas, only one hour earlier, her department had withdrawn the £20 weekly increase in universal credit for benefit claimants introduced during the pandemic. Coffey was upbraided over her lack of tact and her insensitive choice of song. She now prefers singing Queen’s Don’t Stop Me Now.

However, Coffey has never lived down a picture taken at a Spectator magazine party in 2015 at which she was snapped puffing away on a large cigar and clutching a glass of champagne.

‘I do enjoy a cigar. I hadn’t realised I had spilt something on my top. I looked very odd. You’ll never see me smoke a cigar in front of anyone again,’ she said later. ‘It’s not a photograph I’m proud of.’

But despite all her faux pas, she is generally regarded as a safe pair of hands who avoids controversy

Both campaigned for Remain in the 2016 referendum and both backed Boris Johnson in the 2019 leadership contest. Truss was made Foreign Secretary, while Coffey entered the Cabinet as Work and Pensions Secretary.

A proud Scouser, Therese Anne Coffey was brought up in Liverpool. The daughter of two teachers, George and Alice, who worked in state schools, she was privately educated at St Mary’s College boarding school in North Wales and remains a practising Catholic to this day.

After sixth form at St Edward’s College in Liverpool (a grammar school that has since turned independent) Coffey read chemistry at Somerville College, Oxford – the same degree course at the same college as her political heroine Margaret Thatcher.

It was Thatcher’s battle with Militant Tendency, a Marxist group that had infiltrated Liverpool’s council and driven the city to the edge of bankruptcy in 1985, that converted Coffey to Conservative politics. She was only 14 when she joined the Young Conservatives.

By the time Mrs Thatcher visited Somerville College in 1994, the Tories were languishing in the polls behind Labour’s telegenic leader Tony Blair and many students had to be dragooned into a line-up to greet her. But one student – Coffey – broke ranks and ran noisily across the concourse to shake Mrs Thatcher’s hand.

After university she qualified as a chartered accountant, serving as finance director for Mars and as a finance manager at the BBC – one parallel with Truss, a chartered accountant who became economic director at Cable & Wireless.

Coffey’s Roman Catholicism defines her worldview, says Andrew Pierce. She has never married — and she is Liz’s next door neighbour in Greenwich. Kwasi Kwarteng lives nearby.

In 2018, Coffey became gravely ill because of an ear infection, which spread to her brain. She was diagnosed with meningitis and required hospitalisation as well as an operation. She was in hospital for one month:

At times, she had difficulty forming sentences and suffered memory loss. When her sister Clare, who runs her parliamentary office, came to visit, she said: ‘I have forgotten what these things on my feet are called.’ She was pointing at her slippers.

She later said she felt she’d had a ‘near miss’ and her recovery had made her enjoy life, adding: ‘You realise that you can be gone tomorrow. Cherish what you have.’

Liz was a regular visitor while her friend was in hospital – and again when she was recuperating at home.

On Thursday, September 8, The Times told us about Coffey’s plan for greater efficiency in the NHS:

Thérèse Coffey has demanded to know why all GPs and hospitals cannot match the best performers as she attempts to fulfil Liz Truss’s promise of enabling people to see a doctor easily.

The new health secretary said she wanted to set out “clear expectations” for the NHS after Truss said that dealing with the dire state of the health service would be a priority for her government. Coffey acknowledged yesterday she was not a “role model” after being criticised on social media about her weight and smoking …

Coffey has said her “A-B-C-D” priorities will involve focusing on ambulances, backlogs of routine treatment, care, doctors and dentistry.

She is due to set out her plan for the NHS next week but is understood not to have yet finalised specific actions. However, Coffey has asked for detail on “unwarranted variation” in the NHS, including ideas on how this could be used for performance management of hospitals and GPs …

The MP for Suffolk Coastal added: “My focus is on how we deliver for patients and I appreciate I may not be the role model but I am sure the chief medical officer and others will continue to be role models in that regard and I will do my best as well.”

Coffey had to take an early morning newsround, the first of the new premiership. LBC listeners discovered that the 50-year-old enjoys rap music, too:

“I’ve just realised my alarm is going off on my phone, I apologise,” Coffey said. “You’re getting a bit of Dr Dre. It’s just an eight o’clock alarm.”

The song was Still D.R.E., a 1999 track by Dr Dre, the American rapper, featuring Snoop Dogg. Dre, 57, whose real name is Andre Young, was a member of the rap group N.W.A. before becoming a solo artist and producer. Coffey is known as Dr Coffey thanks to her doctorate in chemistry from UCL.

No. 10 advisers

Liz also cleared out Boris’s advisers from No. 10.

On Tuesday, September 6, The Telegraph reported (emphases mine):

Liz Truss has appointed a new chief economic adviser who previously warned against heavy-handed green energy measures and wrote a book on how to shrink the state.

Matthew Sinclair – described by former colleagues as a “safe pair of hands” – has been appointed as the country faces an unprecedented rise in energy costs amid Russia’s war in Ukraine.

He will enter Downing Street as part of an inexperienced top team under the new Prime Minister, after she ordered a mass clear out of officials who had served under Boris Johnson.

Ms Truss wielded the axe shortly after taking power on Tuesday, with even … Mr Johnson’s deputy chief of staff David Canzini, who had been tipped to stay on at No 10 – failing to survive the cull.

Mr Sinclair has held a number of roles in the private sector, most recently at the accounting firm Deloitte, where he led its work on the digital economy. He has also worked on projects for the UK and European Parliaments.

The 38-year-old previously rose through the ranks of the Taxpayers’ Alliance, joining as a policy analyst but rising to chief executive in 2012. During this time, he made the case for small government, low taxes and ensuring British families get value for money.

Matthew Elliott, founder of the Taxpayers’ Alliance, who hired Mr Sinclair, said: “He is very much an ideas person, but he’s able to deliver the detail in spades. That’s going to prove very useful in government” …

He has also spoken out in favour of clear tax and spending rules, with fiscal targets and a system that prizes simplicity, as well as abolishing unnecessary quangos, maintaining a lean civil service, and decentralising power.

Mr Sinclair has also criticised MPs for using “climate change as an excuse to take your money”.

Clearly, supporting the public would turn out to be too good to be true. This could not last.

Matthew Sinclair’s former boss, Andrew Lilico, wrote a glowing recommendation for The Telegraph:

Liz Truss’s new chief economic adviser is Matthew Sinclair. In the Westminster world, Matthew is probably best-known for his stint as Chief Executive of the Taxpayers’ Alliance, arguing vigorously for all kinds of cuts to public expenditure, against tax rises and for greater transparency in taxes (including the campaign to get beer duty reported on till receipts and the end of the “fuel duty escalator”). He went on from there to work for me at Europe Economics as an economics consultant, doing hard-core economics projects for bodies such as the European Parliament on the sharing economy, the Department for Business on theories of competition in online platforms, and the Woodland Trust on the economic value of trees. He moved on from us to Deloitte, where until now he has been a Director in the Economic Advisory team, leading its work on the digital economy

He was a keen Brexiteer when the moment came, but having worked on projects for the EU agencies, he understands why they function as they do and their strengths as well as their weaknesses. His Italian wife also offers him an additional European perspective. No caricatured anti-European he. As well as wanting to diverge from the EU he will be keen that policy should learn from them where what they do is good.

Unafraid to look at the world squarely and challenge his own points of view, he likes to consider what would make his beliefs and recommendations prove to be wrong, after the event, as well as what might prove them to be right. Politically pragmatic and savvy, we can expect him to be closely interested in whether enough MPs might support this or that measure to get it through, as well as whether it would be right in an ideal world.

On Wednesday, September 7, the Mail told us more about Liz’s other advisers:

Mark Fullbrook, a former business partner of the Tory strategist Sir Lynton Crosby is set to become Miss Truss’s chief of staff, despite initially running the campaign for her rival Nadhim Zahawi.

Jason Stein, who worked with the new Prime Minister when she was chief secretary to the Treasury and helped her leadership campaign, will come on as a senior adviser with Ruth Porter, who worked with Miss Truss when she was justice secretary.

Adam Jones, who ran Miss Truss’s communications operation during her leadership campaign will be political director of communications. John Bew, Boris Johnson’s foreign policy adviser, is the only one to stay on with Miss Truss, having worked with her when she was foreign secretary.

Some of the 40 roles that Mr Johnson had in his team will not be filled as Miss Truss attempts to shrink the size of the Downing Street operation in a bid to set an example to the rest of Whitehall.

Miss Truss had said she will wage war on Whitehall waste and make billions of pounds of cuts. It is believed Mr Sinclair will be a key ally in helping her achieve her aims.

In 2012, Mr Sinclair set out a six-point plan to cut Whitehall spending.

His first idea was to abolish the Equality and Human Rights Commission to save £48.9million in funding. Even a decade ago, he complained that the EHRC had taken on ‘a campaigning role that is inappropriate for a public sector body’.

This drive for efficiency could not last, could it?

No, it could not. Nor would it.

Shaky perception

The prospect of Liz Truss as Prime Minister had not moved the polls at the end of August, as YouGov demonstrated:

Guido Fawkes wrote (emphases his):

Labour leads the Tories by 15 points, 43% to 28%. It is a big mountain to climb before the next election. Good luck…

On September 6, The Telegraph‘s Allison Pearson analysed Truss’s victory and the criticism she received:

Few believe that Truss is the cat’s whiskers. Not even on her own side. Of the 172,437 Tory party members who were eligible to vote, 30,712 didn’t bother at all and 60,399 voted for Rishi Sunak. It’s the narrowest margin of victory since members were allowed to decide. A YouGov poll suggested that only 21 per cent of the public like Truss and, of those who voted Conservative at the last general election, 50 per cent don’t trust her.

Even before she was declared the winner, the brickbats were coming thick and fast. I don’t use the word misogyny lightly, but I have been shocked by the hateful abuse hurled at Liz Truss by lofty male commentators. “The worst PM ever,” suggested one …

Although Truss ended up reading PPE, I’m told by one of her contemporaries that she got into Merton College to read maths. A girl from a Northern comprehensive does not win a mathematics place at Oxford without being seriously clever.

If anything, I reckon it is a slight spoddy tendency, inherited from her maths-lecturer father, which inhibits Truss’s ability to communicate with feeling. A deficiency in expressiveness and verbal felicity doesn’t mean a lack of thinking power. Quite the contrary. Wiffly, wordy arts graduates have had their turn running the country; time to let the numbers girl have a go.

Pearson was referring to Boris in that sentence.

Also:

Shame on those backbench Tory MPs who are rumoured to be murmuring about confidence votes and slyly manoeuvring against their new leader before she’s even got her feet under the desk. Have we really reached a point of such decadence, after 12 years in power, that Conservatives prefer to devote their energies to undermining a loyal friend than smiting the enemy? If so, electoral wipeout in 2024 will be richly deserved – even welcome.

This was a typical anti-Liz comment:

The outspoken Labour MP Chris Bryant who, somehow, had won the Civility in Politics award, said this:

It feels like pretty much anyone with a brain, a conscience and a work ethic has been purged from government either by Johnson or Truss. It’s an empty vessel of a government – loud, noisy but dangerously vacuous.

By contrast, when he accepted the award, he said:

Politics doesn’t have to be brutal. Our opponents are human and nobody has a monopoly on truth, so I try to be polite, civil and empathetic in every engagement… Manners maketh humanity.

Queen postpones Privy Council meeting

Bad news arrived on Wednesday, September 7, when the Queen postponed a virtual meeting of the Privy Council.

The Times reported:

The Queen has postponed a meeting of the Privy Council on the advice of her doctors, Buckingham Palace said today …

“After a full day yesterday, Her Majesty has this afternoon accepted doctors’ advice to rest,” a spokesman said. “This means that the Privy Council meeting that had been due to take place this evening will be rearranged.”

A royal source said that there would be “no running commentary” on the Queen’s health.

The meeting was necessary in order for Elizabeth Truss to become First Lord of the Treasury, a title that goes to the Prime Minister. The Mail said:

During the proceedings, Ms Truss would have taken her oath as First Lord of the Treasury and new cabinet ministers would have been sworn into their roles, and also made privy counsellors if not already appointed as one in past.

The Privy Council is a formal body of advisers to the Sovereign of the United Kingdom. As of last month, there were 719 members on the council, with membership lasting for life.

It is composed of politicians, civil servants, judges, members of the clergy as well as Prince Charles and the Duke of Cambridge

There is no constitutional issue with the delay to the proceedings, the palace said.

King Charles held the meeting the weekend after his mother died.

On Thursday, September 8, the world was shocked to learn of Her Majesty’s death. Earlier that afternoon, the extraordinary news that she was unwell filtered to the House of Commons, where Liz was outlining her energy support plan.

On Saturday, September 10, The Times reported that Liz had a lot on her plate, beginning with her energy statement, knowing that the Queen was dying:

Truss had got to her feet knowing the Queen’s death was “imminent”. She was with her team in her House of Commons office preparing for the energy statement when she heard …

If Truss is prime minister for a decade she may never have a bigger day than Thursday: a head of government less than two days into the job making an even bigger economic intervention than the pandemic furlough scheme, battling to finalise her ministerial team and facing the death of a beloved head of state whose final public act was to make her prime minister.

However, Liz and her team were beginning what they hoped would be a new era of reform:

The Queen’s death robbed the government of media coverage to publicise details of its help for families at a time when the public wants to know how they will deal with soaring inflation. As these problems piled up, the new team began, under the radar, one of the most radical shake-ups of how government is run that anyone can remember. It has left Conservative MPs wondering if Truss has bitten off more than she can chew.

One of the big ructions earlier that week involved Chancellor Kwasi Kwarteng sacking Gordon Brown’s Chief of Staff, Sir Tom Scholar, who, inexpicably, had been made Permanent Secretary to the Treasury and served under no fewer than five Conservative Chancellors between 2016 and 2022. Before that, he was the Prime Minister’s Adviser for Europe and Global Issues to David Cameron.

Many conservatives were delighted, but, in the Blob (our equivalent of the Swamp), the news did not go down well:

At the start of the week, it looked like officials were being sidelined. Dozens of civil servants in Downing Street received a peremptory email on Tuesday telling them to leave No 10. Sir Tom Scholar, the permanent secretary at the Treasury, was told he was no longer required in his first meeting with Kwasi Kwarteng, the new chancellor. The mood in the civil service was “sulphurous”. One official phoned a friend in the Labour Party and said: “They’re making a real rod for their own backs.”

Liz’s ambition for a leaner structure in Downing Street also upset the Blob:

when photos of Truss’s first cabinet emerged on Wednesday morning MPs were surprised to see that not one of her spin doctors or political aides, from chief of staff Mark Fullbrook down, was present. Only Truss’s closest civil service aide, Nick Catsaras, her new principal private secretary, was there. One politico from a previous Downing Street regime remarked drily: “The irony was that those people had to be in cabinet when she was a secretary of state as you had to deal with all her leaks.”

“Liz doesn’t want a presidential style No 10,” an aide said. “She wants it to be lean, professional and relentlessly focused on delivery — policymaking and legislating. You’ll see fewer prime ministerial visits, fewer events in No 10, and in its place more meetings on the economy, on energy and the things people really care about.”

Ironically, although the Blob were complaining, she was actually giving some among them more power than ever before:

… in this she has handed huge power to the civil servants. One close ally explained: “The good ones will be deeply empowered by her. The civil service are always in the ascendancy with Liz as long as they actually do their job.”

When she announced the outline of her energy support plan, she had no details:

Key details of how the plan will work were left unexplained in her statement to parliament on Thursday, not least the estimated cost. Aides argued that this depends on the price of gas. “If I knew what that was going to be in a year’s time I would be working for a hedge fund, not the government,” one said.

As for a leaner No. 10, some were sceptical it could work. Others remained positive:

Scepticism remains about whether a slimmed-down No 10 can really deal with the challenges it faces. A former No 10 aide said: “PMs always go in with some great new structure that will streamline things and then discover they’ve just handed away power before spending 12 months scrabbling to get it back” …

… from their point of view, the new team has been tested early, something that will stand them in good stead through the turbulence ahead. “Officials have described it as the busiest week in No 10 in living memory,” an aide said. “We had no idea when we wrote the line ‘Together we can get through the storm’ into Liz’s Downing Street speech how apposite it would come to feel.”

In policy areas, Liz was keen on fracking and, towards that end, sacked the eco-friendly Lord Goldsmith in his DEFRA ministerial post in the House of Lords.

On Friday, September 16, Guido reported:

Despite the reshuffle being formally paused until after the Queen’s funeral, Liz Truss has ploughed on with sacking Tory tree-hugger-in-chief Zac Goldsmith from his DEFRA ministerial post. While the government is still paying lip service to the Net Zero target, they’ve signalled climate and animal welfare issues could be de-prioritised over the coming months. The Guardian speculates that the Animal Welfare Bill could be first up for slaughter. The PM’s next royal audience should be interesting… 

The news comes as The Guardian reports Liz is planning to follow through on her leadership election pledge and lift the ban on fracking as soon as possible, with first licences set to be issued as early as next week. This will no doubt come as welcome relief as energy bills continue to rise during winter. The decision comes despite the paper’s ominous quote from a forthcoming report that forecasting fracking-induced earthquakes “remains a significant challenge”. In August 2019 Caudrilla halted work after recording the UK’s “biggest fracking tremor”. The tremor in question was 1.55ML on the Richter scale, “which it likened to ‘a large bag of shopping dropping to the floor’”…

Former Labour adviser John McTernan wrote an article for UnHerd, saying that Liz’s policy strategy could unhinge Labour:

The abandonment of the sugar tax, and possibly the entire government anti-obesity strategy has been floated. As has ending the cap on bonuses in the City. These give the flavour of what the 100 Days Plan must have looked like. Sir Lynton Crosby famously talks of “getting rid of the barnacles”: that before a government can campaign effectively, it needs to rid itself of unnecessary distractions. These could be unpopular policies, ungrasped nettles, or unresolved disputes, but the Queen’s death has prevented this, disrupting the Government’s momentum.

The Prime Minister wants to govern as she campaigned for the leadership. Directly, clearly and simply. She has said she wants a smaller state, and Labour have taken the bait. Without waiting to see any government policy, some Labour frontbenchers have immediately attacked Truss as a Thatcherite intent on cutting public spending. That’s hard to argue in the face of the energy price cap — one of the biggest unfunded public spending commitments ever made by a UK government.

Worse, it showed that some in Labour haven’t been listening to Truss, or taking her seriously. There’s more than one way to shrink the state — and getting out of people’s lives is an effective and popular one. One of the greatest weaknesses of progressive politics is the belief that what the country is crying out for is “more government”. A large part of the fuel that drives the campaign against political correctness is the sense that government is over-reaching, interfering in bits of life where it has no place. Liz Truss wants to tap into that. She instinctively knows that most people want to look after themselves, their families and their communities without government interference.

The other headline announcement — uncapping City bonuses — has trapped Labour too. Missing the wood for the trees, opposition frontbenchers have spluttered in outrage at policies that would benefit fat-cat bankers rather than the general public. The point, of course, is what David Cameron’s team used to call the politics of “aroma”. It is not the specific policy detail that matters; it is the sense of the overall direction.Hugging a husky” showed a greener, more compassionate, modern Conservative party. Uncapping City bonuses shows a government committed to Go For Growth — no old-fashioned prejudices or well-meaning sacred cows will be allowed to stand in the way. The point is to grow the pie, not, as Labour want, to talk about tax and redistribution of the proceeds of growth.

Note what he says about Rishi Sunak:

Is this a risky approach? Yes. Is it a clear one? Absolutely. The trap for Labour is that they adopt the Sunak Strategy. Liz Truss’s ideas are simplified not simplistic; and as Rishi Sunak’s defeat showed, treating the new PM as a simpleton won’t win votes. Truss may not have the right answers, but she has asked the right question. Growth is the only game in town. If Truss manages to keep it on The Grid when parliament returns next month, her lost 100 days might not be fatal.

Unfortunately, for the British people, it was the beginning of the end, with all roads leading to Rishi.

To be continued tomorrow.

As I need something positive to think about while awaiting Chancellor Jeremy Hunt’s awful budget on Thursday, November 17, here is a retrospective on Liz Truss’s rise to power, however short-lived.

The Conservative Party leadership campaign dominated the latter half of July and all of August.

By Tuesday, August 16, like the Telegraph‘s Tim Stanley, I, too, had watched every hustings up to that point.

Who could have guessed that, in an extraordinary turn of events, both she and Rishi Sunak would be in No. 10 within weeks of each other?

Reporting on what happened north of the border in Perth, Stanley wrote:

The hustings had become so repetitive, I know the speeches by rote. Rishi grew up in a pharmacy, Liz sat on a planning committee. My only pleasure has been waiting for the day they cross their wires and Rishi announces he grew up on a planning committee and Liz that she sat on a pharmacy.

But on Tuesday we were in Scotland, so the script was rewritten. Lots of references to whisky, gas and Nicola Sturgeon, who Liz once said we should ignore, so Rishi said: “I don’t just want to ignore [her], I want to take her on and beat her!” Big clap for that …

“I grew up in a small business,” he said. And the cream for your burn, sir, can be found on the fourth aisle.

Liz did a much better job of showing that she knew she was in Scotland, referencing Adam Smith, JK Rowling and salmon fishing – and reminding us that she understood what poverty was because she grew up in a recession in Paisley in the 1980s (when the Tories were in power) and later in Leeds in the 1990s (ditto). 

In fairness to Liz, she meant local councils, not the Government.

The Mail highlighted the disagreement Liz and Rishi had on taxes:

Miss Truss has pledged to reverse the national insurance hike to help struggling families, but has not ruled out offering further support. But Mr Sunak said the right way to help people with higher energy bills is through direct support.

He told the hustings: ‘The tax cuts that Liz is proposing are worth about £1,700 to someone on her income. For someone working very hard on the national living wage, it’s worth about a quid a week …’

On Wednesday, August 17, the duo were in Northern Ireland, where, yes, there is a Conservative Party. It has around 600 members. I had no idea.

The Guardian had unearthed an old video of her saying that the British weren’t very good workers. The Mail said that she defended her remarks to the press in Northern Ireland:

Pressed by reporters in Northern Ireland today whether she believes British workers are not working hard enough, Ms Truss replied: ‘What I believe is that we need more skills in our country, we need more capital investment in our country, we need more opportunity in our country. That is what I would deliver as prime minister …

She added : ‘I’m fundamentally on the side of people who work hard, who do the right thing. Those are the people I want back.’

Conservatives did not object to Liz’s views (emphases mine):

Despite the furore, Ms Truss was delivered a major boost today with the latest ConservativeHome poll showing she is firmly on track for victory on September 5. She was 60 per cent to 28 per cent ahead of Rishi Sunak in a survey of activists.

The Belfast hustings was the only uncomfortable one of the campaign. It was clear neither candidate had any grasp of Northern Ireland or people’s concerns:

The furthest Liz could connect with the small group of Conservative members was to say that she knew that a ‘woman is a woman’, for which she received applause (somewhere around the 12-minute mark). Near the end of her Q&A, a man expressed concern about abortion, which was foisted on them by Westminster. He asked about the fairness of that, since Northern Ireland has its own Assembly. She bristled at the question and brusquely replied that all the devolved nations had to have the same health policies (somewhere between 32 and 35 minutes in).

Rishi’s intro and Q&A followed Liz’s.

The London Evening Standard had an excellent report from Rebecca Black following the hustings at the Culloden Hotel on the outskirts of Belfast:

The Brexit protocol, the Stormont Assembly, the health service, abortion, foreign policy and support for the party in Northern Ireland were among the issues raised …

Martin Craigs said he remained undecided after hearing their pitches.

He said he felt their content in terms of Northern Ireland had been “very weak”.

“They’re sitting on the fence, this isn’t the audience they’re playing to, the audience they’re playing to are the 160,000 Conservative members, and there are very few of them in Northern Ireland, but they obviously have to go to all corners of the UK to be seen to be democratic,” he told the PA news agency.

“I might actually not vote at all because I think the performance has been so poor.”

Matthew Robinson, chairman of the Northern Ireland Conservatives, welcomed the candidates’ visit and paid tribute to the commitment they were showing to the region.

He said he had been holding back on deciding who to vote for, but based on what he heard at the hustings he would back Ms Truss.

“I think she outlined an unwavering commitment to what we do locally here as a political force,” he said.

“I’m not just encouraged but excited about what we can achieve together during her hopeful premiership.”

David Trimble’s widow said that, just before he died, he wanted to make sure he voted for Liz. Lord Trimble had originally been a member of the Ulster Unionist Party (UUP) but became a Conservative in 2007. The following year, a voting alliance was created between the UUP and Conservatives in Northern Ireland.

The Standard reported on Lady Trimble’s article in the Telegraph in which she supported Liz. The Stormont Assembly has not been meeting for several months now:

The powersharing structures Lord Trimble helped create in the landmark 1998 agreement are currently in limbo, with the DUP blocking the creation of a governing executive in protest at Brexit’s Northern Ireland Protocol.

Lady Trimble wrote: “I believe that in this contest, Liz Truss has the best record and a viable plan to protect our Union and Northern Ireland’s integral place within it.

“I know David thought the same.

“One of the last things he did before we lost him was to ask his son to collect his voting papers so he could vote for Liz.

“He was adamant that she was what the country needed and I agree.

“She has already proven her resolve and bravery in the face of opposition to our most valuable asset, and I am confident that my husband’s legacy, peace in Northern Ireland, will be safe with her.”

Lady Trimble, born Daphne Orr, is an academic who served as a member of the Equality Commission for Northern Ireland and the Northern Ireland Human Rights Commission.

Another article in the Standard showed that Liz understood the difficulty with the post-Brexit Protocol:

The Foreign Secretary also said she would not accept any compromises on a renegotiated Northern Ireland Protocol as prime minister if it meant key UK demands were not met.

She made the comments during a visit to Belfast, where she and Rishi Sunak were quizzed by Tory members during a hustings event.

She told party members that until the Northern Ireland Protocol is sorted, Stormont will not be back up and running.

The Standard‘s Rebecca Black wrote a separate article on the abortion question:

Abortion laws in the region were liberalised in 2019 in laws passed by Westminster at a time when the power-sharing government at Stormont had collapsed.

During a Conservative Party leadership hustings event at the Culloden Hotel on the outskirts of Belfast, Ms Truss was asked if she would abolish abortion in Northern Ireland, “ending infanticide”, or let the people of the region have their say on the issue.

She responded to applause [for the man, not her]: “I’m afraid I don’t agree with you.

“We are a United Kingdom and we need all of our laws to apply right across the United Kingdom – that is what being a union is.”

Rishi’s highlight of the hustings was about Liz’s £50 billion black hole:

Rishi Sunak has warned that Tory leadership rival Liz Truss’s tax plans would add £50 billion to borrowing while failing to give direct support to the most vulnerable in society, as the cost-of-living crisis deepened.

The former chancellor said the Foreign Secretary would be guilty of “moral failure” if she does not focus on the nation’s poorest, and warned her policies could further stoke inflation.

Ms Truss instead insisted “taxes are too high and they are potentially choking off growth”, as she promised an emergency budget to tackle the situation.

On Thursday, August 18, the eminently sensible Lord Moylan told GB News that he was voting for Liz because Rishi’s economic plans did not make sense:

On Saturday, August 20, Sir John Redwood MP criticised the pro-Rishi media:

Redwood laid out his Thatcherite economic plan for Liz in that day’s Telegraph:

Britain’s fiscal rules should be ripped up by Liz Truss if she wins the Conservative leadership race, one of her key allies has said.

Sir John Redwood, who served as the head of Margaret Thatcher’s Downing Street policy unit and is tipped to return to government if Ms Truss wins, said she should abandon the practice of targeting a set percentage of GDP for national debt and the deficit.

He also called for a review of both the Bank of England and Office for Budget Responsibility (OBR), and suggested the Foreign Secretary should be inspired by Mrs Thatcher in removing utilities and transport from state control.

Since 1997, fiscal rules have been announced by chancellors during Budget statements in an attempt to control government spending.

They usually set a restriction on the proportion of national debt or deficit as a percentage of economic output.

But in an interview with The Telegraph, Sir John said the practice is a hangover from EU fiscal regulation agreed between member states at the Maastricht conference in 1992, and does not encourage economic growth or limit inflation.

“I think having a fiscal rule, which is a variant of state debt as a percentage of GDP, and the public deficit as a percentage of GDP in any given year, is not really the right couple of rules for the two targets you’re trying to meet,” he said.

The Tory backbencher said ministers should maintain “sensible controls over growth in public spending and in public debt” by instead monitoring the amount of money paid by the Treasury to lenders in interest payments.

In a coded rebuke to Rishi Sunak, who was the chancellor until last month, he added: “You have to elect governments that take controlling public finances seriously, and they then have to take them seriously.

“If you have a government that doesn’t take controlling public finances seriously, it won’t matter what your fiscal rules say, as we know from recent past experience,” he said.

Sir John is expected to be appointed as a Treasury minister in Ms Truss’s government and is understood to have helped shape her thinking on economic issues during the campaign

Sir John said he had not had “any discussions” with Ms Truss about taking a role if she wins the contest, but told The Telegraph he would accept a job if he was offered one.

The Times also thought that Liz would give Redwood a role. One campaign source said:

“There are a lot of crumpled up bits of paper. I’ve been in three meetings about the cabinet and it keeps changing.”

Among the names on the pieces of paper: Iain Duncan Smith, who is heading back to cabinet, and John Redwood, who was last a minister 27 years ago and is earmarked for a junior Treasury post.

This weekend Truss will take a team of her senior aides to Chevening, the grace and favour home in Kent which she enjoys as foreign secretary, with the aim of getting people and policies more firmly nailed down.

In the past few days she has repeatedly told her team “no complacency”. As an ally puts it more prosaically: “No f***-ups, basically.”

Sadly, Liz never offered Redwood a role. If she had, she might still be Prime Minister today.

The Times was also wrong about Iain Duncan Smith, who was not part of Liz’s Cabinet, either.

Also on August 20, the Mail‘s Dan Hodges wrote that Rishi’s campaign was effectively over because of his mansplaining:

It was the moment Rishi Sunak‘s leadership campaign started to unravel. Actually, it was one of 20 moments. ‘Please let me respond,’ Liz Truss chided, as her opponent butted in during their first head- to-head TV debate. ‘Absolutely, let Liz Truss respond,’ the BBC‘s moderator Sophie Raworth was forced to interject.

Sunak didn’t. Time and again he talked over his rival, interrupting and silencing her. It was a strategy his team seemed to think would put Truss on the defensive.

They were wrong

the damage was done. Sunak was branded a ‘Mansplainer’.

To some, this episode provided further evidence of Sunak’s poor political tradecraft. But he’d actually fallen into a well-prepared trap.

‘We were ready for him!’ one Truss campaign ally told me. ‘For years, Liz has been patronised by men who are a bit full of themselves. She’s not going to just stand there and take it.’

In 15 days’ time, Britain will have our third woman Prime Minister. And unlike her predecessors, Liz Truss isn’t going to be shy of reminding people of it.

Let us recall that only the Conservatives have had female Party leaders, all of whom were Prime Minister.

By contrast, Labour have yet to elect a woman leader.

On August 21, The Sunday Times told us what Labour-to-Conservative voters in Oldham thought of the two candidates:

If Rishi Sunak (the ferret) and Liz Truss (the budgie) had put a glass to the wall of the room in Oldham where ten swing voters gathered by Public First, all of whom voted Conservative in the last general election, were sharing their impressions of the Tory leadership hopefuls, they would have blushed. But mostly not with pride.

They had been asked to say which animal, item of clothing or single word would best describe each of the candidates (Truss was also a “bunny rabbit”, for the record). As someone who has posed for photos atop a tank and astride a motorbike during her cabinet career, she might have been surprised to hear herself described as “mumsy”, “dull as dishwater”, a “cardigan”, “Jemima Puddle-Duck” and, possibly worst of all, an “unknown”.

Sunak would have heard that he was a “suit” a “backstabber” and a “traitor” (to Boris Johnson, that is) and he would have certainly regretted wearing a pair of £490 suede Prada shoes to visit a Teesside building site as he did last month. This did not go down well at all with many of these C2DE (aka working class) voters. It suggested, said Rachel, 33, a bar worker, that he was so rich he had “no respect for money”; after all a building site, she said, is going to be messy. She said “quite a lot of people were upset” by it, especially those struggling to make ends meet. “I certainly couldn’t afford to buy a £500 pair of shoes,” she said.

Matthew, 40, who works in the oil trade, asked how Sunak could possibly relate to low-wage people. The group wondered what his PR advisers were thinking, allowing it to happen. It was quite simple, said Mandy, an educator in a prison: “If you are going to an area where . . . people are on the minimum wage, don’t wear £500 shoes.”

But there was happier news for Sunak when it came to which of the two leadership candidates they preferred. Five chose Sunak, compared with three for Truss while two didn’t know, though by the end of the discussion a couple had changed to “don’t know”.

Sunak, according to those who picked him, had a higher profile due to the furlough scheme during lockdown. Jodie, 33, a school administrator, said she associated him with helping people during that period. “I had never heard of Liz Truss before this race, but Rishi Sunak . . . we’ve seen him in action. He’s helped out, like, working class people.”

Mandy, however, who chose Truss, said the foreign secretary had been growing as a force in the “background” for some time now. She mentioned the “scandals” involving Sunak. This was a reference to a recent video in which he boasted to Conservative party members in Kent of taking money from deprived urban areas in order to give it to other parts of the country

That day, Guido Fawkes revealed that Rishi’s team broke down Liz’s £50 billion black hole, which is actually tax savings.

Even now, with Thursday’s Rishi-Hunt budget in view, Guido still appears to be correct in his assessment:

Guido also thought that the Conservatives would win the next general election:

Guido’s post has Rishi’s breakdown of Liz’s black hole. This is Guido’s analysis of Liz’s savings for the taxpayer (emphases his):

According to figures just released by the Rishi campaign, taxpayers will get a net saving of £48.3 billion in reduced taxes under Liz as Prime Minister compared to Rishi. This is a similar figure to calculations made by the Guardian newspaper. This is intended to be an attack line, the argument Rishi is making is that Liz will have to choose between tax cuts or handouts. When you consider that this is equivalent to some £2,000 per taxpayer you will understand what Liz means when she says she wants to “help people in a Conservative way”

In the Rishi campaign’s press release the tax savings are described as “costs”. This approach hasn’t been seen since 2010, when Gordon Brown would point to any tax saving proposed by the opposition and demand to know from Cameron and Osborne what spending would be cut. It is a mindset that considers the public’s money to belong to the government and any income not taxed to be a “cost”. Guido’s not sure why Liam Booth-Smith, Rishi’s policy guru, ever thought this orthodox Brownian line of attack would appeal to Tory members…

By Monday, August 22, with a week and a half left to go in the seemingly endless campaign, Rishi’s poll ratings were tanking.

The Guardian warned that Labour found that Liz could boost the Conservatives in the polls, which Labour had been leading for several months by that point. They still are in the lead.

However, the paper said that any poll boost would be short lived:

Tory leadership frontrunner Liz Truss could give the government a double-figure bounce in the polls once she is installed in No 10, according to internal Labour analysis.

A memo drawn up by Keir Starmer’s director of strategy, Deborah Mattinson, claimed the foreign secretary could dramatically improve Conservative fortunes.

The document, dated 18 August and leaked to the Guardian, comes amid speculation that Truss could be tempted to capitalise on the upswing and call a snap general election.

However, the research also suggests that any improvement in the government’s position could be very short-lived, with voters already concerned about aspects of Truss’s character.

“Our focus groups suggest that as voters get to know Truss better they like her less,” it says. “Serious negatives – untrustworthiness, inauthenticity, U-turns, lack of grip – are starting to cut through suggesting that any bounce may be very short-lived.”

Meanwhile, Rishi allegedly scoffed at the idea he would take a post in Liz’s Cabinet. That day, The Times reported on his interview with BBC Radio 2:

Truss has said that she would offer Sunak a cabinet job if she were to win. The Times reported at the weekend that she is considering asking him to become health secretary.

Sunak appeared to scoff at the prospect today, however, suggesting he did not want to serve in a cabinet in which he and the prime minister would disagree on “the big things”.

Liz’s poll results were buoyant. An Italian firm, Techne, cut their teeth in the UK on this campaign:

In the end, the result was much closer, although Liz still had a clear majority.

However, on the same day, a GB News Peoples Poll (Peoples Poll being the name of the polling organisation) showed that Britons overwhelmingly prefer Labour’s Keir Starmer as the next Prime Minister, viewing Liz Truss as ‘untrustworthy’:

A poll exclusively commissioned by GB News has found that British people would prefer Keir Starmer to be Prime Minister over both Rishi Sunak and Liz Truss.

41 percent of the 1,235 Brits polled said they would be more likely to vote for a Labour Party led by Keir Starmer than the Conservatives led by Liz Truss, who received 22 percent of the vote.

And Rishi Sunak, also standing to become the next Tory leader and Prime Minister, only fared one percent better than Ms Truss when compared with Sir Keir, who received a share of 40 percent of the poll.

In both cases, 28 percent of people said they didn’t know who they would prefer, with nine percent preferring not to say.

The results raise questions about the popularity of both candidates, with the Conservatives faring better in a straight contest with Labour.

When asked which party they would vote for if there was a General Election tomorrow, Labour came out on top with 31 percent.

But the margin between the two parties was a lot smaller than between the leaders, with 20 percent voting Conservative

When asked to give one word they associated with Liz Truss, Brits’ top answer was “untrustworthy”.

Unfortunately for Ms Truss, second most popular answer was “useless”, with the even less flattering “idiot” in third.

On Monday, August 29, the anti-Liz media went into a tizz when she declined an interview with the BBC’s Nick Robinson.

The Telegraph reported:

Liz Truss has pulled out of a BBC interview with Nick Robinson because she can “no longer spare the time”.

Ms Truss, the Tory leadership front-runner, committed to the primetime sit-down interview with Mr Robinson, who presents the Today programme, on Aug 18.

But the Foreign Secretary now appears to have changed her mind as the race to succeed Boris Johnson enters its final week. Rishi Sunak, her leadership rival, was interviewed by Mr Robinson on Aug 10 …

Mr Sunak has taken part in nine one-on-one broadcast interviews throughout the leadership campaign, including three appearances on the Today programme.

Ms Truss has done two such interviews, including the Today programme, when she was interviewed at the start of the head-to-head stage of the contest, and the People’s Forum show on GB News.

A bigger controversy that day was that Liz was preparing to cut VAT. She never did, but someone should, because VAT is an EU law. Here is smoked salmon king Lance Forman’s wise opinion, saying that the people who object to a VAT cut are on the Left:

On the penultimate day of Conservative Party member voting, Liz pledged to revive Conservative grassroots activism, but readers of ConservativeHome were unimpressed.

One of the comments read:

This and other similar pieces of rhetoric just prove to me that it’s all about strategies to win elections rather than a coherent, well thought-out set of policies that will benefit the country in both the short- and long-term, much the same as some of the statements made by both candidates in this “leadership” election.

Surely we are capable of better?

Yes, we are capable of better.

On the last day of members voting, Wednesday, August 31, The Telegraph asked readers who should be in and out of Liz’s Cabinet.

Interestingly, everyone the readers wanted out are in Rishi Sunak’s Cabinet. Priti Patel is the only exception. And, Alok Sharma is still COP26 president, although he is not in Cabinet.

In conclusion, within weeks, we went back to the same old, same old thing.

I still have a few more items about Liz Truss to cover. Stay tuned.

On Thursday night, November 10, 2022, Liz Truss’s Chancellor, Kwasi Kwarteng, broke his silence in an interview with TalkTV’s Tom Newton Dunn on First Edition.

He and Truss disagreed on how quickly to move on the economy.

Background

Looking back at that period of mourning for the late Queen when Truss assumed office, the nation had been jittery over the cost of living crisis.

The Conservative leadership contest, which had lasted several weeks, put paid to any constructive solutions to the problem in the latter half of the summer.

Furthermore, Parliament had been in its customary weeks-long recess at that time.

During that period, energy prices were forecasted to be at a crippling high. Every news outlet was full of articles and broadcasts on the choice between food or fuel.

People wanted Parliament to be recalled because ‘something must be done’.

A general election is also coming up in two years’ time, therefore, Truss wanted to hit the ground running and make up for the two-and-a-half years lost with the pandemic.

Hence Truss’s ambitious and, to use her word, bold economic plan.

Kwasi explains

Tom Newton Dunn wrote up highlights in The Times of what Kwarteng told him (emphases mine):

In his first interview since being sacked as chancellor, Kwarteng told TalkTV that he had advised Truss to “slow down” and take a “methodical and strategic approach” to boosting growth as prime minister …

In the interview with First Edition, Kwarteng also revealed that Truss was “distressed and emotional” when she summoned him to be sacked days before she was forced from Downing Street.

He said he told her during their meeting that she was “mad” to fire him, adding: “People will ask, ‘If you sacked the person who was doing what you wanted, why are you still there?’”

Which is exactly what happened. The Sun‘s Harry Cole asked that very question at Truss’s press conference that fateful day, Friday, October 14. Truss thought that Cole would be more empathetic, as The Sun generally supports the Government.

Whilst unapologetic for his economic plan, the former Chancellor did say that lessons had been learned:

Kwarteng repeatedly refused to apologise for pursuing the principle of the pair’s economic agenda and warned Rishi Sunak that he could not “simply keep putting up taxes”.

He said that he had had reservations about the scale of the planned tax cuts in his mini-budget, especially as there were no accompanying plans to reduce government spending. “The prime minister was very much of the view that we needed to seize the opportunity and we hit the ground running,” he said. “She’s very dynamic, very forceful. That’s a great strength. But I think you had to have a measured approach, especially doing the things that were radical, that were bold. And that’s the lesson that we’ve learnt.”

Asked who controlled the timetable of the mini-budget, Kwarteng said that he bore “some responsibility for it” but added: “I think the prime minister was very much of the view that we needed to move things fast. But I think it was too quick. If you look at it, it was on the 23rd of September. We only got into the office on the 6th of September. And looking back I think a measured pace would have been much better.”

Kwarteng said that afterwards he confronted Truss and warned her the government could fall unless she slowed down. “After the mini-budget we were going at breakneck speed and I said, you know, we should slow down, slow down. She said, ‘Well, I’ve only got two years’ and I said, ‘You will have two months if you carry on like this’. And that is, I’m afraid, what happened.”

He also said:

She was very emotional. I can’t remember whether she was actually shedding tears but she was very emotional and it was a difficult thing to do. I think she genuinely thought that that was the right thing to buy her more time to set her premiership on the right path. I disagreed, obviously. I thought that if chancellors are sacked by the prime minister for doing what the prime minister campaigned on, that leaves the prime minister in a very weak position.

Kwarteng revealed that he found out he was being sacked by reading a tweet from a Times journalist:

… a tweet from The Times’ political editor as he drove to a meeting with Truss in Downing Street.

As King Charles said to Truss only a month ago — and just days before she sacked her Chancellor:

Dear, oh dear.

Kwarteng is supportive of Prime Minister Rishi Sunak but says that he and Chancellor Jeremy Hunt should not put the blame for a cratering economy on him and Truss:

Kwarteng praised Sunak as a “very credible prime minister” but said he and the new chancellor, Jeremy Hunt, should not attempt to blame him and Truss for all the government’s current problems. “The only thing that they could possibly blame us for is the interest rates and interest rates have come down and the gilt rates have come down. I mean, it wasn’t that the national debt was created by Liz Truss’s 44 days in government.”

He added that although he accepted that taxes would need to rise in the short term, the government still needed a growth strategy. “You’re not going to grow an economy or incentivise economic growth by putting up our taxes,” he said.

True. I wrote earlier this week about why the Truss-Kwarteng plan was the correct one for the UK.

Kwarteng and Truss have known each other for years and live near each other in Greenwich.

He says they are ‘still friends’, but:

he had still not returned a missed call from her two days ago. “I will call her back,” he said.

The BBC’s analysis

In an analysis of the interview, the BBC points out that, at the time of the mini-budget, Kwarteng promised more tax cuts to come:

During his time as chancellor, he repeatedly advocated measures of the sort set out in the mini-budget, and two days after delivering it told the BBC there was “more to come” in the way of tax cuts.

The comment, along with a decision to announce the mini-budget without publishing an assessment by the government’s fiscal watchdog, was later seen as key to convincing investors that the government did not have a credible plan to keep debt levels under control.

Did Kwarteng reveal too much in the interview?

He insists that he remains friends with Ms Truss. But in this interview he does reveal elements of private conversations during his sacking that Ms Truss may well have preferred had stayed within the walls of Downing Street.

He once toured TV studios insisting she would make a great prime minister. It doesn’t feel like they’re on as good terms now as they once were.

And what next for Mr Kwarteng? It doesn’t sound like he’s going to be an awkward backbencher: he’s pledging complete loyalty to Rishi Sunak.

There was lots of detail in this interview, but it’s important to remember that this is only one side of the events that took place as Ms Truss’s premiership began to crumble. When will she break her silence?

Jeremy Hunt’s tactful comments

On Friday, November 11, the new Chancellor reacted to Kwarteng’s interview.

The Guardian reported:

Good morning. We’ve got less than a week to go now until the autumn statement – in effect, the second budget of the autumn – and already a blame game has broken out in the Conservative party about who is responsible for the massive spending cuts and tax rises the nation is about to face.

Kwarteng had denied there is a black hole in the nation’s finances:

The national debt wasn’t radically changed by Liz Truss … There isn’t a black hole and the interest rates and the gilt rate funding the debt is exactly the same as it was before the mini-budget. So the black hole hasn’t been caused by the mini budget. It’s something that Jeremy and Rishi and their officials are going to have to tackle on their own regardless of what happened in the budget.

However, on Sky News, Jeremy Hunt pushed back on Kwarteng’s claim:

All I would say is that when we produced a fiscal statement that didn’t show how we were going to bring our debts down over the medium term, the markets reacted very badly and so we have learned that you can’t fund either spending or borrowing without showing how you are going to pay for it and that is what I will do.

The Guardian concludes:

Hunt did not engage with Kwarteng’s specific argument, but he was clearly implying that his predecessor was at fault.

The article includes a clip from Hunt’s interview:

Hunt was giving an interview to respond to this morning’s growth figures showing the economy shrank by 0.2% in the third quarter of the year.

The Bank of England admits QE wrong policy

But wait, there’s more.

On Tuesday, November 8, the Bank of England (BoE) finally admitted that QE — quantitative easing — was a mistake during the pandemic.

This is where the real problem lies. It has nothing to do with Kwarteng or Truss.

The Daily Mail reported that the BoE’s chief economist, Huw Pill, appeared before the House of Lords economic affairs committee, admitting:

the Bank played a part in driving up inflation through its massive money-printing programme.

Known as quantitative easing (QE), this pumped £450billion into the economy during 2020.

He had more to say on inflation:

Pill also blamed the huge mismatch between supply and demand in the aftermath of Covid lockdowns for pushing the price of goods ever higher.

Pill has only been in his job for a year, so no one can blame him, but:

The comments could make uncomfortable reading for Bank Governor Andrew Bailey, who oversaw the explosion in QE, and new Prime Minister Rishi Sunak, who as chancellor was at the heart of the Government’s response to Covid.

The Government has been fond of blaming the war in Ukraine for our current problems, however:

even before Russia’s invasion of Ukraine in February, which caused gas prices to spike, inflation was already at 6.2 per cent – more than three times the Bank’s target of 2 per cent.

Rishi and the BoE are to blame for this. As Chancellor, Rishi told MPs that we could borrow, borrow, borrow during the pandemic at little to no cost.

However, Huw Pill sees things differently:

Gas prices do not ‘explain all of the overshoot’ in inflation, said Pill. One factor, he said, was ‘developments in the past – including choices over monetary policy’.

Warning that ‘QE and the choices over QE may have contributed’ to the rise in the cost of living, Pill added: ‘I was not at the Bank two or three years ago when some of those rounds of QE were undertaken. Whether those would be chosen to do now is an open question.’

He also suggested that lockdowns – and the support offered to households and businesses through the pandemic such as the furlough scheme – played a part as they boosted demand at a time when the supply of goods and services was severely hit.

‘Looking back at the impact of the pandemic, I think one can say that destruction of demand was over-emphasised relative to the destruction of supply,’ he said.

‘The support coming from the macroeconomic side – both fiscal support and monetary support –was very profound.’

QE works in the UK as follows:

buying bonds from investors – mainly government bonds known as gilts – reducing borrowing costs and freeing up cash for those investors to plough into the economy.

During the pandemic:

this helped to fuel demand by propping up buying activity while ignoring the supply problems caused by lockdowns, when businesses were forced to shut their doors.

When economies reopened, there was a surge in demand that could not be met, driving up prices and causing workers to demand higher wages.

Other economists and financial experts sounded the alarm at the time:

Andy Haldane, Pill’s predecessor at the Bank, predicted as much when he began warning early last year that inflation could get out of hand.

Delaying efforts to tame inflation would be like ‘trying to catch a tiger by its tail’, Haldane said.

But other members of the Bank of England’s interest rate-setting committee remained adamant that inflation would be ‘transient’.

The Bank only began to raise interest rates in an attempt to get a grip on inflation in December last year and has now raised them from 0.1 per cent to 3 per cent.

Gerard Lyons, chief economist at investment firm Netwealth and former economic adviser to Boris Johnson during his time as mayor of London, accused the Bank of making a ‘major policy mistake’ with QE.

And Sir Paul Marshall, a hedge fund veteran, compared QE with a drug to which markets had become ‘addicted’.

One week ago, sterling slumped as the BoE raised interest rates to 3%.

The Daily Mail reported:

Sterling slid around 2 per cent towards $1.11 as Andrew Bailey said markets were wrong to believe rates would peak as high as 5.25 per cent next year. 

His comments came as the Bank raised rates by a mammoth 0.75 percentage points to 3 per cent, the largest hike in more than 30 years. But in a warning to traders who were expecting more bumper hikes, Bailey suggested the unprecedented speed of rate hikes would soon begin to slow

There is internal disagreement among the BoE’s ninestrong Monetary Policy Committee (MPC). A vote had to be taken on the interest rate rise:

More splits emerged at the Bank of England as two members of its ratesetting Monetary Policy Committee ( M P C ) opposed the hike to 3 per cent. Swati Dhingra argued that interest rates should be raised by 0.5 percentage points to 2.75 per cent and Silvana Tenreyro voted for an increase of just 0.25 percentage points to 2.5 per cent. They were outvoted by the other seven members, who opted for a 0.75 percentage point rise. The split exposed the difficulty the Bank is having in navigating Britain through the economic storm. Dhingra said that ‘a small rate increase was warranted to safeguard against creating a deeper and longer recession’ in Britain. Tenreyro, meanwhile, said the rate rises seen already would bring inflation back below 2 per cent in due course.

Sterling hadn’t been that low since Kwarteng was Chancellor one month ago:

The pound slid by more than 2 per cent. Yesterday’s [last week’s] clash with traders again pulled down the value of sterling, which would usually rise on news of higher rates as traders shift to a currency promising greater returns. It is now at its lowest point since before Kwasi Kwarteng was sacked in mid-October following a disastrous six-week stint as Chancellor.

The US Federal Reserve has also affected sterling:

The pound has also been dragged down by the US Federal Reserve, which has been more aggressive than the Bank in its fight against inflation. The Fed has hiked rates by the unusually high amount of 0.75 percentage points at its last four meetings, taking its base rate to a range of 3.75 to 4 per cent and causing traders to flock to the dollar. While the Bank of England said its own base rate was unlikely to hit 5.25 per cent, it conceded it was also unlikely to remain at 3 per cent

Bailey said: ‘Where the truth is between the two, we’re not giving guidance on that.’ 

Analysts pointed out that more uncertainty lies ahead of Jeremy Hunt’s budget next Thursday, November 17:

Analysts said Threadneedle Street [where the BoE is] would be worrying about what other unpleasant surprises could be in store – especially regarding gas prices, which have been a key driver behind rising prices.

Philip Shaw, an economist at Investec, said rate-setters also had little idea what Chancellor Jeremy Hunt would announce in his Autumn Statement later this month, and whether there would be any further help for households which could fuel inflation.

Other economic news

More economic news came to light this week.

London

On November 10, Mayor of London Sadiq Khan told Times Radio that he has never been so worried about the capital:

I’ve lived in London my entire life; including the 80s during Thatcher’s reign and the recession. I’ve never known it so bad.

Really?

I had the good fortune of being in London three times in the past week: once in the afternoon and twice at night.

I have not seen so many people on the streets in the evening since before the pandemic. The streets were filled, especially with 20-somethings, giggling as they made their way to their various destinations. I saw no unhappiness.

The restaurants were full. The one my better half and I ate at this week was already booked for the next several weeks. The one we ate at last week started filling up from 5:30 onwards. It had plenty of students dining there.

Furthermore, the Tube was heaving with passengers. Maybe Sadiq Khan (Labour) needs to take the Underground now and again rather than his motorcade to see what’s really going on in London.

NHS — eye-watering costs

The NHS always wants more money: billions and billions more.

No one has got the nerve to reform its bloated ways.

Today, The Guardian reported that agency fees are spiralling out of control, yet Labour wants to give the NHS even more money if/when they get into Government:

NHS trusts are paying as much as £2,500 for a single agency nursing shift, research by the Labour party has revealed.

The party produced the figures by submitting freedom of information requests, and it says the results show the need for a big investment in NHS recruitment – which is what Labour is promising.

… A BBC investigation on the same topic found that, even though pay rates for agency staff are supposedly capped, these limits are regularly ignored, on the grounds that patient safety would otherwise be at risk.

Hmm.

Yesterday, the Daily Mail reported that the NHS will be curbing procedures such as tummy tucks and liposuction in order to save money.

An excellent idea. This should have been done years ago:

Circumcisions, tummy tucks and liposuction are among 13 operations which will stop being funded by the NHS in a ‘crackdown’ on wasteful spending.

It is thought that stopping the state funding of these operations could save £2 billon a year, along with less wasteful prescribing methods.

Last week bosses of the ailing NHS said that they want billions more cash to keep key services running this winter as Rishi Sunak ruled out cutting its budget as part of the public spending squeeze.

The £152 billion-per-year health service is seeking an extra £7 billion this year — the equivalent of an extra five per cent of its budget — to counter the effects of sky-high inflation, pay rises and Covid costs.

Finance chiefs warned that vital cancer, mental health and GP services face being axed unless the Treasury stumps up the cash.

Somehow, though, past efforts have not been proven money-savers:

It follows years of plans being drawn up to cut NHS costs.

In 2018, plans to stop funding breast reductions, tonsillectomies, and varicose vein surgeries were estimated to save the NHS £439 million a year, but in 2019 the spending had only dropped by three per cent in these areas, the newspaper reported.

Two years ago, 31 procedures were complied in a list in a plan to limit funding, including imaging for lower back pain. It is estimated that around 2.7 million procedures on the list were being carried out each year prior to this.

The new list, which includes circumcisions, tummy tucks and liposuction is the third that the NHS has made a bid to reduce costs.

The NHS will fund procedures on the list only if specific criteria are met:

Created by NHS bosses and medics from the Academy of Medical Royal Colleges, the plan states that the procedures should only be performed via NHS funding if specific criteria have been met …

The right-wing think tank The Policy Exchange estimates that this new guidance could save the NHS up to £2 billion.

Chairman of the Academy of Medical Royal Colleges, Professor Dame Helen Stokes-Lampard, told the newspaper: ‘In short, this programme is about making sure we don’t waste money doing things that don’t work and we are instead redirecting that cash towards those things that are proven to be beneficial.’

MPs’ ‘golden goodbyes’

The UK’s parliamentary constituency boundaries are being redrawn prior to the next general election.

As such, some MPs will lose their current constituencies, meaning they will stand to gain from ‘loss of office’ payments, or LOOPs.

The Daily Mail reported:

Rules on ‘golden goodbyes’ for MPs could be made more generous after a swathe of constituencies had their boundaries overhauled for the next election.

The Commons watchdog is looking at changing the provisions for politicians who are ejected from the House after it emerged very few could be entitled to cash.

Under the existing rules, departing MPs are only eligible for ‘Loss of Office’ payments – LOOP – if they have served at least two years and stood for re-election in the ‘same seat’. 

However, the extent of the boundary review – due to be finalised in the coming months – means that all but a handful of constituencies have either been redrawn, had their names changed, or both

LOOP is equivalent to two or three weeks’ salary for every year served, depending on age. For an MP on the core wage of £84,000 with 10 years’ service that would be worth between £30,000 and £50,000.

Similar rules apply to ‘winding up’ payments, which are equivalent to a lump sum of two months’ salary after tax and NICs [National Insurance Contributions] roughly £10,000.

The turnover of MPs could be particularly high at the election – potentially in 2024 – with Labour riding high in the polls.

Conclusion

Various news outlets have reported that the UK is in for six years of austerity, beginning with Hunt’s budget next Thursday.

Despite that, Rishi Sunak has just pledged billions in foreign aid — climate reparations — this week at COP27:

What about the folks back home?

What about Kwarteng’s £50m notional ‘black hole’ that the media and Labour have been crying about?

On Monday, Guido Fawkes’s sketch writer wrote about Sunak’s new commitments to apologise for … the advances the Industrial Revolution brought the world:

Not only was Little Rishi backed up in the speaking queue behind Iraq, Mozambique, Kenya, Tonga and the Congo – he had to listen to Barbados telling him to up his giving game. Billions? That was last year. Trillions are the new billions.

Other speakers pointed out that we in the rich world had failed to make good on our pledges for £100 billion in climate finance. In the new world order, we will fail to make good on our trillion-pound pledges and they’ll be a thousand times better off. “I profoundly believe it is the right thing to do,” he said. He heard none of us who were shouting at the screen.

He went on to tell the COP that Britain had been the first major economy to legislate for Net Zero. He suggested that it was our leadership that had raised the proportion of countries going for zero emissions from one third to 90%. That we were going to reduce our emissions by 68% by 2030. Not a shred of shame did he allow himself for any of this.

Are we one of the rich countries anymore? It seems odd that the Treasury is agonising over a £50 billion hole in this year’s budget and Rishi stood there offering the world £11.6 billion because of something we started 250 years ago.

Lance Forman, who runs his family’s smoked salmon business and was a Brexit Party MEP, also points out the radio silence surrounding Rishi’s pronouncements:

I can’t figure it out, either.

It must have something to do with being on the correct side of the Establishment.

November 17, 2022 will be a day of doom for the UK as the Chancellor of the Exchequer, Jeremy Hunt, lays out his and Rishi Sunak’s new economic plan.

This plan is likely to increase taxes dramatically for the foreseeable future — years, rather than months.

When Kwasi Kwarteng was Chancellor I had hope for our economic future. Regardless of what Jeremy Hunt says next week, Kwasi’s plan will be proven in the years ahead to have been the right one for the UK.

An economist explains

In an October 16 article for the Telegraph, Liam Halligan, an economist, journalist and broadcaster, explains why the Truss-Kwarteng plan was good.

Its title is ‘The trashing of Truss’s mini-Budget is an economic tragedy’.

Excerpts follow, emphases mine:

The financial and political meltdown of recent weeks has seen Kwasi Kwarteng’s proposals dubbed “radical”, “libertarian” – even “grossly irresponsible”. But that’s demonstrably untrue.

Back in September, the then-Chancellor proposed lowering the top rate of income tax from 45pc to 40pc – the level it was for almost the entire period New Labour was in office under Tony Blair and then Gordon Brown – hardly “libertarian” Prime Ministers.

Kwarteng also pledged to reverse former Chancellor Rishi Sunak’s 1.25 percentage point rise in national insurance contributions – allowing 28m people to keep, on average, an extra £330 of their earnings each year. This largely non-controversial proposal was also endorsed by Keir Starmer’s Labour party.

His Majesty’s Opposition backed Kwarteng’s mini-Budget plan to cut the basic rate of income tax from 20p to 19p in the pound from 2023, a year earlier than Sunak proposed but, again, hardly a radical move.

That means Labour fully agreed with two of the three main measures tabled by Kwarteng, amounting to £24bn out of a tax-cutting package worth around £43bn. But Starmer’s party did oppose Tory plans to keep corporation tax at 19pc, rather than increasing it to 25pc next April – a rise previously enacted by Sunak.

So the only major “irresponsible Tory tax cut” Labour didn’t support wasn’t an actual cut, but a freeze in taxation. Yet that didn’t stop Starmer relentlessly referring to “a Tory crisis, a crisis made in Downing Street”. Labour’s Treasury team, in fact, having backed almost all Kwarteng’s main measures, now wants “this entire mini-budget to be reversed”.

Well, Labour got its wish.

Since mid-October, Labour have repeatedly accused Truss and Kwarteng of ‘crashing’ the economy.

Halligan readily accuses Truss and Kwarteng of poor communcation in presenting and defending their short-lived economic plan, which they called a ‘fiscal event’, as it was not a full budget. However, he says that the policies themselves were responsible.

Halligan says:

… what was a bold, but far from irresponsible set of policy proposals has – through a combination of bad timing and woeful communication – sparked serious financial turmoil, roiling the UK gilts market, pushing up broader borrowing costs and spreading mortgage and pension panic.

It’s vital to grasp, though, that this chaos was triggered by the Government’s inept handling of its policy measures, not the measures themselves.

He makes it clear that the fiscal event was not in itself the underlying cause of the economic turmoil which followed:

while the Truss government’s actions as a whole – the policies and their disastrously botched presentation – were the catalyst behind recent gyrations of sterling and the upward movement of borrowing costs, they were not the underlying cause. To suggest otherwise is politically disingenuous. It is also fundamentally to misunderstand what is happening across global markets and why.

This mini-Budget, in total, amounts to an attempt – after a two-decade upward trend of rising UK taxation – to lower the Government’s tax take from 36.5pc to 36pc GDP.

With the state’s share of national income heading for sustained levels not seen in the 70 years since World War Two, Kwarteng and Truss were trying to put that tax share back where it was in 2021.

Halligan rightly blames the worldwide excess of QE, quantitative easing, so prevalent over the past 15 years:

What we’ve actually seen over recent weeks is just the latest stage in the long-term global shift away from a decade and more of ultra-low interest rates and excessive quantitative easing (QE). Many of the major economies, not least the UK and US, have indulged in irresponsibly loose monetary policy since the 2008 financial crisis. Initially necessary emergency measures were allowed to ossify into a lifestyle choice.

Endless QE juiced up stock and bond markets, making the rich richer while pushing the price of assets such as housing further out of reach for ordinary families. Such “extraordinary measures”, cheered on by groupthink economists, kept state borrowing costs low, paying for lockdown and allowing governments to gorge themselves on debt.

Now we are finally paying the piper for the always obvious excesses, dangers and utter stupidity of these policies. Interest rates are starting to spring back, with indebted governments, households and firms forced painfully to retrench.

Just days after Kwarteng said that the top tax rate of 45% — introduced by Gordon Brown around 20 years ago — would be removed, the media and ‘experts’ said it had to stay. Truss announced a U-turn just before the Conservative Party conference began:

That set up the chance of generating a lucrative “doom loop”, selling the pound short, then turning more profit as media outrage caused the currency to fall even more.

Halligan takes Kwarteng and Truss to task for not explaining where their economic growth would come from, which made matters worse. Recall the noise from their opponents about ‘unfunded tax cuts’.

Unfortunately, sterling is vulnerable at this time:

Britain has a big balance of payments deficit and is a significant energy importer with scant storage capacity at a time of geopolitical peril.

We have only to look at what then-Chancellor Rishi Sunak spent during the pandemic and the war in Ukraine which followed just as we thought we’d get a breather.

Halligan wrote his article the day after Truss sacked Kwarteng and replaced him with the Establishment-minded Jeremy Hunt, who immediately began rolling back Kwarteng’s reforms:

Jeremy Hunt’s tour of the TV studios on Saturday morning was a further attempt to pour oil on troubled waters as the new Chancellor raised the prospect of further tax increases and spending cuts. Its effectiveness remains to be seen.

It’s also alarming that the latest policy sacrifice has been to go ahead with a previously scrapped rise in corporation tax from 19pc to 25pc.

For tens of thousands of small and medium-sized enterprises, this is disastrous.

These companies account for over half of Britain’s GDP and two thirds of employment. They’re the engine of our economy. They were hammered during lockdown and Truss has just taken 6pc off their often thin profit margins. Many will struggle to survive.

By hiking corporation tax, Truss is harming the prospects of small businesses and alienating millions of them, many run by and employing natural Conservatives. She is also scuppering the best chance she has of rapidly achieving her “plan for growth”.

A ‘very British coup’

On Sunday, October 17, the Telegraph‘s Tim Stanley wrote ‘I resent this “very British coup”. Any Tory who welcomes it is a fool’.

Any true conservative should keep this in mind when they watch Hunt deliver his budget next week. Stanley’s subtitle reads:

Deviate from orthodoxy, and you’ll be crushed by the Remainer, ‘expert’-driven establishment

He is not wrong.

Although he did not approve of Kwarteng’s plan for its ‘policies and philosophy’, we face a perilous time ahead, especially with regard to Brexit:

Reputationally, the Conservatives are sunk. Labour will win the next election; Brexit is imperilled. Hitherto the argument against Brexit was emotional, but watch as it becomes technocratic: “in light of our political and economic turmoil”, the grey men will say, “it’s not something we can afford.”

Truss was made a whipping girl for what happened after Kwarteng’s fiscal event. Cast your minds back over the past month. What Stanley predicted happened:

… make no mistake, those hollow-men are back in charge. The imposition of Jeremy Hunt as chief executive to Truss’ chairman of the board – the language is theirs, not mine, and tells you everything you need to know about their ghastly worldview – is a reassertion of orthodoxy, revenge of the Remainers, capture by experts. British policy, you see, must always operate within certain parameters; anyone who dares to step an inch too far to the right or the left will feel the full force of the establishment. Not by sending in the army, that would be unBritish and, besides, we haven’t got an army to send – but by the removal of confidence, via the markets, the Bank, the IMF or our good friend, Uncle Sam.

Stanley rightly blames Andrew Bailey, who heads the Bank of England:

The Bank kept interest rates ridiculously low while pumping our economy with cheap money, fuelling an inflationary spiral that it now believes is the sole job of the Treasury to cure. It was Andrew Bailey, widely criticised for poor judgement, who finished off the arrogant Mr Kwarteng when, last Tuesday, he informed pension funds that he’d stop bailing them out on Friday.

Stanley perceives an anti-democratic trend that emerged in 2022:

After a few, bright years of grassroots activism and open debate – the essence of Brexit – there is pushback against democracy. This year, the Conservatives have kicked out a PM who won a landslide and then effectively imprisoned a second PM who, for all her faults, was at least elected by the members. Mr Hunt, by contrast, was beaten solidly by Boris in 2019 and didn’t even make it past the first round against Truss. He has no popular mandate.

… Comrades, we’re in for two years of painful austerity …

At least two years. I predict more.

Stanley concludes:

I am not saying there is a conspiracy afoot. There’s no need. Our system is ancient, sophisticated and surprisingly transparent. We have a way of doing things, old bean, and we make it gently inconceivable to do it any other way. This is the dictatorship of consensus.

The Establishment view

Writing for the Telegraph on the day that Truss sacked Kwarteng, October 15, Jeremy Warner said, ‘Project Fear was right all along’.

He began with this condemnation of Brexit:

Call it revenge of the Remainer Establishment, if you like. The revolution in the British economy promised by Leave campaigners six years ago finally seemed to go the way of all revolutionary movements this week: it ended up eating itself.

Downbeat predictions by the Treasury and others on the economic consequences of leaving the EU, contemptuously dismissed at the time by Brexit campaigners as “Project Fear”, have been on a long fuse, but they have turned out to be overwhelmingly correct, and if anything have underestimated both the calamitous loss of international standing and the scale of the damage that six years of policy confusion and ineptitude has imposed on the country …

Perhaps I exaggerate, but not since the humiliation of the International Monetary Fund bailout in 1976 have we seen an unravelling quite as spectacular. This too from a Tory Government with a substantial overall majority. It is scarcely believable.

Hmm …

Warner blamed ‘unfunded tax cuts’, saying that a cut in corporation tax was derisory and that, ultimately, Liz Truss would have to go:

… the fact is that Truss was in lockstep with Kwarteng in challenging “economic orthodoxy” and the institutions that were its standard bearers. On the campaign trail she was, if anything, even more of a zealot for economic radicalism than Kwarteng.

In any case, she plainly didn’t understand the sometimes destructive way markets interact with policy. It’s been a rude awakening.

Warner is grateful that Andrew Bailey intervened:

In the end, it was Andrew Bailey, Governor of the Bank of England, who brought matters to a head, by insisting that there would be no extension to the bond buying programme he had initiated to counter forced selling by UK pension funds.

This has been widely portrayed as another foot in mouth episode by a Governor with something of a reputation for gaffes. Having failed, despite all the warning signs, to see the surge in inflation coming, the Bank fully deserves whatever criticism is thrown at it. The Bank has failed to conduct itself well in recent times.

Even so, the Governor had little option but to say what he did. It makes no sense at all for a central bank, which is supposed to be tightening policy to fight inflation, to be simultaneously loosening it through resumed asset purchases …

By making the programme time-limited, the Bank was able just about to pass its intervention off as justified on financial stability grounds. It would have been game over had Bailey made the programme open ended.

Warner was clearly glad the Establishment was in charge again:

“Economic orthodoxy” is back in the saddle. But then it never really went away. Instead we had a brief aberration in which the Government, having dispensed with all sensible advice, thought bizarrely that it could defy gravity.

If it had been done differently it might have succeeded, but it was not. We’ll be paying the consequences in reduced standing and prosperity for years, if not decades, to come.

He blames Truss and Kwarteng for a short-lived plan that was never given a chance.

Note that he has nothing in his article about QE, which really will make us pay the consequences for many years to come.

The Bank of England gets revenge

The Bank of England was offended that Kwarteng never consulted them before his fiscal event.

He probably should have done so.

Perhaps he thought they would have said ‘no’.

On Thursday, October 20, The Times reported that Sir Jon Cunliffe, deputy governor for financial stability of the Bank of England, appeared before Parliament’s Treasury Select Committee:

Sir Jon Cunliffe told a hearing of MPs that Kwasi Kwarteng, the former chancellor, did not brief Bank officials before the September 23 fiscal statement, in which he announced more than £40 billion in tax cuts.

Cunliffe said the Bank had been aware of some measures that were pre-announced, but added: “We did not get the normal briefing we would get for a budget . . . This wasn’t a budget. The process was rather different.”

That’s the polite British way of saying that they were miffed.

Cunliffe also said that there were no figures from the OBR — the Office for Budget Responsibility — to back up Kwarteng’s plan. This is the same OBR that cannot predict anything accurately. The OBR were not due to make a projection until November, as I recall:

“When [the Treasury] briefs us normally on the budget, we see the Office for Budget Responsibility costings and that is what we take into account for monetary policy. But there were no OBR costings. It was a different sort of event in many respects,” he told the Treasury select committee.

However, all is well now that Jeremy Hunt is Chancellor:

Cunliffe said he expected the Bank to get a full briefing on the contents of the upcoming medium-term fiscal plan from Jeremy Hunt … The plan is expected to lay out new tax-raising measures, cuts to public spending and the government’s new fiscal rulebook, along with the OBR’s assessment …

It all sounds rather scary. This is a long-term plan to make the middle class poorer, make no mistake.

Meanwhile, global turmoil in world markets

When these articles were written, Western economies were in turmoil.

This had nothing to do with Kwasi Kwarteng or Brexit.

On Thursday, October 14, the Japanese yen had hit a 32-year low against the US dollar and mortgage rates were rising in the US:

On October 15, Germany’s inflation rate reached a 70-year high. We cannot blame Brexit, Kwarteng or Truss for that:

We are in for years of obfuscation ahead.

I am not looking forward to Jeremy Hunt, with his supercilious smile, mansplaining to us the ‘difficult decisions’ he will have to take. He is a successful businessman. He has no idea how ordinary Britons live.

Worst of all, he will lie and lie about the costs of Brexit, of this we can be sure.

As for Rishi? I don’t trust him an inch. He’s already promised billions in climate change reparations this week at COP27. Those won’t be one-off payments, either, even though they’ll be billed as such.

What about the British taxpayer? Answer there came none.

Prime Minister Liz Truss resigned early in the afternoon of Thursday, October 20, 2022.

She will remain Prime Minister until a new Conservative Party leader is elected — details to be announced — in a week’s time.

She will have seen the shortest tenure of any British Prime Minister. If she serves another week, that will be a total of 52 days.

More to follow next week.

She met the King this afternoon to tender her resignation. It is, after all, His Majesty’s Government.

Her penultimate meeting with him was last Thursday, immortalised here:

———————————————————————

Yesterday’s post discussed Liz Truss’s sacking of Kwasi Kwarteng as Chancellor on Friday, October 14, 2022.

A day is a long time in politics

Kwarteng’s defenestration illustrates that one day is a long time in politics, never mind a week.

However, days are eras in Truss’s government, if one can call it that.

On Wednesday, October 19, Home Secretary Suella Braverman was out and, by the end of the evening, the Speaker of the House decided to investigate an unrelated incident at a Commons vote on fracking, during which it was unclear whether the Conservative Whip and Deputy Whip had resigned. More about that in another post.

Returning to Kwarteng, on Thursday, October 13, he said he would be going nowhere. This was The Telegraph‘s headline on the morning of Friday, October 14:

By the time that headline appeared, Kwarteng was on his way back to London on a red eye flight from the annual IMF meeting in Washington DC.

Shortly after 11:00 a.m., by which time Kwarteng would have returned to London, Guido Fawkes tweeted that Truss would be holding a press conference that afternoon:

An hour later, Guido followed up with a tweet saying Kwarteng was about to be sacked:

Guido’s post said (emphases his):

Kwasi has just arrived at No.10 for a showdown with Liz Truss. The FT, the Times, the Spectator and the Sun are all reporting he’s about to be sacked. A Boris-era insider texts Guido to say “It’s just getting silly now.” Liz is up in front of the cameras at 2pm. Will she have a new Chancellor by her side?

Just before 12:30, he tweeted that Kwasi was out …

commenting:

Kwasi Departeng…

Twenty minutes later, Guido posted runners and riders for Chancellor:

His post had eight names with a summary about each candidate. Personally, I would have liked to see one of these two:

Simon Clarke: A key and prominent supporter of Liz. Chief Secretary to the Treasury under Rishi, though with some major disagreements with the former Chancellor reported during his time there. A very likely candidate.

Steve Barclay: Widely reported to have been Rishi’s choice for Chancellor had he won the leadership contest.

In the event, we got Jeremy Hunt, as I stated yesterday:

Jeremy Hunt: The centrist, ‘party unity’ candidate that may placate backbench opponents. Would be an admission that the Truss economic programme is DOA. Currently out of the country.

At 1:05 p.m., Guido posted Kwarteng’s gracious resignation letter:

Guido has a better copy here. Kwarteng was most gentlemanly:

You have asked me to stand aside as your Chancellor. I have accepted.

… your vision of optimism, growth and change was right.

As I have said many times in the past weeks, following the status quo was simply not an option.

… I look forward to supporting you and my successor to achieve that from the backbenches.

We have been colleagues and friends for many years … I believe your vision is the right one. It has been an honour to serve as your first Chancellor.

Your success is this country’s success and I wish you well.

This was Friday afternoon’s headline from London’s Evening Standard:

Kwarteng had been Chancellor for 39 days, the second shortest in British parliamentary history.

Iain Macleod lasted one month, before dying of a heart attack in 1970. The Prime Minister at the time was Ted Heath.

What happened behind the scenes

On Friday evening, The Sun‘s Political Editor Harry Cole posted ‘Inside story of Liz Truss’ first 40 days in power that ended in biggest political meltdown for 300 years’.

Excerpts follow, purple emphases mine:

Caught between the rock of mercenary traders in the City and the hard place of mutinous Tory MPs in Westminster, it began to dawn on the Prime Minister that her sticking to her plans risked her becoming the shortest ever serving PM.

But it was an email from the Office of Budget Responsibility to the Chancellor last Friday set in motion the most spectacular collapse in Government authority in modern political history.

The independent scrutineers of tax and spending were brutal in their assessment: A £60billion black hole in the nation’s finances was the direct result of Ms Truss and Kwasi Kwarteng’s mini-Budget.

The scale of the spending cuts that would be needed just to stop debt interest bankrupting the country were not just eye-watering but politically impossible to even a strong government.

But having junked the 45p rate, Truss was barely treading water as PM, let along one strong enough to take a toxic axe to the size of the state.

The extra £18billion Britain will be paying in interest on government borrowing alone was more than the entire Home Office budget

And when she claimed at PMQs on Wednesday there would be no cut to public spending, the clock was ticking on a spectacular U-turn.

Even as she told the MPs that a rise to corporation tax “would be wrong at a time when we are trying to attract investment into our country”, privately work was underway to do just that.

The PM began to make preparations to climb down on Wednesday evening, as her Chancellor — her closest friend and ally in politics — flew to Washington to meet global financial watchdog the IMF.

While he was there they openly criticised the Government’s plans in a humiliating dressing down on the world stage.

With inflation rampant, the global experts held up Britain as an example of how not to handle it.

“We were becoming a laughing stock,” one minister admits

With Kwarteng out of the country, Simon Case the Cabinet Secretary and James Bowler, the new head of the Treasury, turned the screw on Ms Truss to jettison the plans.

And the news was grim from political advisers, too.

This was the second time that Sir Graham Brady from the 1922 Committee had to step in over Kwarteng’s and Truss’s economic plan. The first was Sunday, October 2, during the Conservative Party conference, which caused a U-turn on scrapping the 45% tax rate.

Cole tells us:

Away on holiday, the all-powerful boss of the backbench 1922 Committee, Sir Graham Brady, made his disquiet known in a number of calls with Ms Truss on Wednesday and Thursday.

Just as he came to visit Truss during Tory conference to warn the 45p rate had to be scrapped if she wanted to survive, Sir Graham warned the PM the knives were out for the Chancellor and Kwarteng may need to be offered up as a sacrifice if her administration were to remain in any way credible.

However, Truss’s other good friend and Cabinet member, the Deputy Prime Minister (and Health Secretary) was also allegedly on manoeuvres against Kwarteng:

Deputy PM Therese Coffey was also “determined to get Kwasi” according to one senior Government source.

“She put the knife through his shoulder blades while he was still in the departure lounge.”

It seems that Truss wanted to deal with her Chief Whip first:

Ms Truss also briefly considered firing the Chief Whip Wendy Morton, who MPs consider a lightweight totally unable to herd the various factions of the Tory MPs publicly machine gunning each other.

Hmm. Wendy Morton was part of the reason for the chaos at the aforementioned fracking motion vote.

Moving on:

the PM wanted to sleep on the decision to finally fire Kwarteng …

“He had an inkling it was coming and didn’t put up much of a fight”, one source said.

But it is hard to overstate just what a serious blow to Truss and her entire project the decision was.

Her closest friend in politics, this was their budget written together, at times in secret, away from advisers, aides and spin doctors.

When she U-turned on the 45p rate, she misleadingly blamed it on a “decision the Chancellor had made.”

Now in U-turning on Corporation Tax she has thrown that fireguard away – leaving the PM the only target left now.

The Telegraph told us more about Kwarteng’s visit to Washington last Thursday:

the outgoing Chancellor tried to put a brave face on things. Even when he knew his time in Number 11 was up, he didn’t show it.

On the night he departed for London, Kwarteng continued to work the room of bankers and officials at the British Embassy in Washington DC. Rubbing shoulders with the likes of Shriti Vadera, once a Labour minister and now chairman of Prudential; Sir Danny Alexander, vice president of the Asian Infrastructure Investment Bank and former chief secretary to the Treasury; and Axel Weber, chairman of the Institute for International Finance, he stopped for quick chats, and even addressed the crowd.

But while to some it seemed like the troubles 3,500 miles away in Westminster were far away, others said he seemed distracted.

He had reasons to be. At first, the British Airways flight out of Washington Dulles at 10.40pm was full and he struggled to get on board. While he and his special adviser managed to find seats eventually, it was an uncomfortable journey home.

In Kwarteng’s own words, his 38 days as Chancellor were a “baptism of fire”. Investors had already delivered the verdict on his policies, but some of the starkest criticism came from Britain’s strongest allies

But for many observers, it was Kwarteng’s steadfast attitude that surprised. Germany has also been criticised for its €200bn (£174bn) energy bailout. But while their finance minister Christian Lindner adopted a more contrite approach in meetings, saying the spending might not be popular with markets but was nonetheless vital, the Chancellor stuck to his message that the Government was unapologetically pro-growth.

“He just didn’t seem to understand that you can’t just do lots of tax and spending giveaways when the economy is unstable, prices are soaring and borrowing costs are rising,” said one member of the US delegation …

One banker who attended the drinks with Kwarteng said: “We just don’t know what’s coming next from the UK. Which policies are staying? Which are going? Who is staying? Who is going? There’s no certainty any more” …

There was more love for Andrew Bailey, the Governor of the Bank of England, who found friends among the financial establishment in Washington DC. Many have known him for several years. “I just hope they don’t try to hang him out to dry too,” said one US banker.

The Times suggested that Kwarteng had little idea he was about to be dismissed. Yet, motions were in play even during the Conservative Party conference at the beginning of October:

In his suite in the Hyatt Regency hotel at the Conservative Party conference in Birmingham, he told allies: “The idea that a prime minister is going to bullet her chancellor and survive, I just don’t think is feasible.”

Unknown to Kwarteng, his long-term friend had already been sounding out at least one former cabinet minister about the prospect of replacing him.

Intermediaries had begun reaching out to allies of Sajid Javid, the former chancellor, to gauge his appetite for a return to the Treasury in case Kwarteng was forced to fall on his sword. The prime minister’s emissaries asked Javid to name his price but had not bargained on his conditions being too much for Truss to accept.

“Sajid would have only done it if he had complete control,” one ally of Javid’s said

It is unclear whether more horse trading took place but by Thursday last week, Javid was no longer in the running, with Truss’s allies instead pivoting to another big beast as their preferred replacement for the chancellor.

Just hours after Kwarteng left the UK for Washington to defend the prime minister’s fiscal plans to his foreign counterparts at the annual meetings of the International Monetary Fund, senior Truss allies had made contact with Jeremy Hunt, the former foreign and health secretary, who only a month beforehand had backed her rival, Rishi Sunak, for the top job.

Hunt insisted yesterday that when he heard that a “Liz Truss” wanted to talk to him on Friday, he assumed it was a prank call. The twice-failed leadership candidate then cut short a family holiday in Belgium to take charge of the Treasury. By last night — after Hunt’s extensive media round, during which he tore up much of the mini-budgetit felt to many Westminster observers that Hunt, not Truss, was now running Britain. Wiser heads note that the Conservatives appear increasingly to resemble a political death cult, having burnt through four prime ministers in six years and four chancellors in the space of a barely believable four months

Truss arrived at No 10 without a ringing endorsement and faced a faction-driven Westminster.

Last night, a No 10 source denied that Javid had ever been considered for the role now filled by Hunt. “The prime minister laughed out loud at the suggestion,” they said

By Thursday afternoon, Kwarteng knew that his political future might be in jeopardy, despite being 3,700 miles away across the Atlantic. He spent most of his time at the IMF gathering skipping meetings to hold talks with No 10 and his aides in London.

Kwarteng eventually cut short his trip by two days and booked the last overnight flight back to London. By then, however, at least one of his closest allies had already guessed that the game was up. “It wasn’t a massive shock,” they said. “There was nothing to come back for, no major meeting or announcement. The only reason he was coming back was to be sacked.”

If Kwarteng suspected on Thursday evening, as he addressed a room of 200 bankers in Washington at the Institute of International Finance, that the axe was about to fall on his cabinet career, he gave no indication.

He told them there were three important things to sort out: the energy package, growth, and keeping the Bank of England independent

Confirmation that Kwarteng was receiving his marching orders came the next morning. When he arrived at Downing Street after his red-eye flight, he was informed by Truss that she needed to restart her premiership with a “clean slate” — something that would be impossible with him as chancellor. The two had “a warm meeting” in the Cabinet Room.

“The PM felt deep personal sadness at the decision but made peace with it,” an aide said. “Senior party figures had encouraged her to move the chancellor on”

Truss’s decision to demote Kwarteng’s No 2, Chris Philp, who had already been blamed for the policy to abolish the additional rate of income tax, has left some moderate MPs incandescent.

“The most disgusting thing she has done is sack Chris Philp,” one said. “He’s got his faults, he makes mistakes, but he’s a good person and the person she needs around her and they just f***ed him around completely. They used him, sucked the blood dry and then spat him out. They are a real bunch of bastards.”

According to a source in Kwarteng’s constituency of Spelthorne, Surrey, the former chancellor experienced his first taste of the public’s dissatisfaction during a walkabout on his local high street shortly after the mini-budget on September 23. Although his pledge to cut stamp duty had been expected to provide a welcome boost to the housing market, Kwarteng was left in no doubt about the views of a local estate agent who, on being waved at through the shop window, responded with a rude hand gesture.

There were signs the wheels were falling off the Truss bandwagon on Tuesday, when she reiterated her commitment to cutting taxes in a speech at a Conservative fundraising dinner for which guests paid £1,500 a seat. Truss, whose speech was described as “a worse version of the one she gave at conference”, was denied a standing ovation.

“It was embarrassing,” one guest said. “I can’t think of another PM who hasn’t received a standing ovation after addressing the same event — not even Theresa May at the height of her Brexit battles. The only topic of conversation was how the party could get rid of her.”

Tory donors are also understood to have snubbed the PM. “Aides came to our table and asked our host, a prominent Tory donor, if he wanted to speak to the PM, as is customary. He told them bluntly that he would rather not.”

Several miles away, at a separate dinner organised by Mel Stride, a leading Sunak supporter, those present were unanimous in their view that Truss should be replaced.

“The major discussions are no longer about her removal but how to do it,” said one of those present. “It was mainstream, moderate MPs. I’ve never been to a dinner like it in my life. The whole room was discussing how to remove the prime minister.”

On Wednesday, Truss faced the wrath of MPs at the 1922 Committee. The No 10 team have privately pointed the finger of blame at the whips for not preparing a proper operation beforehand. Truss was described as “incandescent” that she addressed the back-benchers without Sir Graham Brady, the committee chairman, leading the meeting. “She was stitched up,” an ally said. “It was the same public schoolboy men attacking her at the 1922 who then went out to tweet about how good her tax cuts were.”

Truss appears to have anticipated that calls for her removal would only grow after Kwarteng’s sacking. Within minutes of the prime minister’s disastrous eight-minute press conference on Friday afternoon, Thérèse Coffey, the deputy prime minister and health secretary, held a phone call with dozens of ministers in an attempt to shore up Truss’s support. Looking “very upset”, according to one person on the call, Coffey acknowledged the government had gone “too far and too fast” in the mini-budget but insisted, despite the severe setbacks, that No 10 was determined to prove the “flipping” Office for Budget Responsibility wrong …

Later, Coffey held a second call with backbench MPs, but it did not take long for the mood to sour. Laurence Robertson, a loyalist, told Coffey that Truss’s supporters had been made to “look like fools”, while Johnny Mercer, Andrew Percy and Steve Double are said to have claimed that the party was hurtling towards “disaster.”

There are reports that as many as 100 letters expressing no confidence in Truss have been submitted to the 1922 Committee, which some backbenchers believe would give Brady a mandate to change the rules and get rid of the year’s grace a new prime minister usually has before a leadership challenge can be launched … 

“I’ve never been more depressed by what has happened in my entire time as an MP,” one former minister said. “She sacked Kwasi out of survival but it actually made it worse for her. I think she will be gone by the end of the week”

Although many of the party are unified in their desire to remove Truss, there is no agreement on who could replace her

Truss’s dire press conference

Truss’s press conference last Friday was one for the history books.

She looked white as a sheet and visibly shaken, as if she were a hostage reading a pre-prepared note in front of a camera.

The Naked Emperor’s Substack post from October 17 might give us an indication of what went on (bold emphasis his):

Alfred Kammer, head of the IMF’s European department said he praised the UK’s “strong institutions” but that the IMF would only deliver its verdict once policymakers’ “process of recalibrating” the policies had been completed.

It sounds like Kwasi was sent to Washington DC to be assessed but he failed miserably. He was asked to change his mind but when he stuck to his guns, the message was sent back to London that this guy must be removed.

With the message received loud and clear back in London, a new Chancellor needed to be chosen. Once again, Liz Truss thought she was in charge and looked to replace Kwasi with Sajid Javid. However, once more, the powers that be had other ideas and she was told to appoint Jeremy Hunt.

But the main question remains – where was Jeremy Hunt? Why was he not by the Prime Minister’s side when she announced his appointment?

The answer is that he was nowhere to be seen because Mr. Hunt had been in Brussels for three days. What was he doing there? Who was he meeting with? Was he being given his orders in case Kwasi couldn’t be turned?

Clearly Liz and Kwasi didn’t want to reverse course. Her extraordinarily short press conference … looked more like a hostage video.

Without further ado, here’s the eight-minute press conference, which includes four questions from the media — Ben Riley-Smith from The Telegraph, Harry Cole from The Sun, Robert Peston from ITV News and a fourth whom I’ve forgotten. It starts a little after the 36:00 point:

It took Truss ages to choose the appropriate reporter:

Umm … ahh … let’s see …

She chose The Telegraph and The Sun first, because those would be the most favourable towards her plight, but it did not turn out like that.

This was The Telegraph‘s front page on Saturday:

On Saturday, Harry Cole wrote:

Weakened and defenceless, when I asked the PM at yesterday’s disastrous press conference why she should remain in office, she could barely muster an answer.

After taking just four questions from reporters, she rushed for the exit – barely eight minutes in.

Last night No10 were scrambling to simply survive in office.

“Tax cuts were meant to be the easy part”, a minister claims.

Here is a clip of him asking his question and Truss’s answer, which is about her taking ‘difficult decisions’:

After Truss took the fourth question, she walked away. That was it.

Cole is in the centre of the next video, looking bemused:

You could not have made this up — any of it.

Truth is stranger than fiction.

More to follow on Friday and early next week.

Yesterday’s post introduced the sad saga of Prime Minister Liz Truss and her first Chancellor Kwasi Kwarteng over their fateful fiscal event of Friday, September 23, 2022.

My post ended with the market turmoil and negativity up to Friday, September 30.

Many of us hoped that his plan would work. After all, the market turmoil is global, for different reasons in different Western countries.

What motivates Kwarteng

On Wednesday, September 28, Rachel Sylvester wrote an interesting profile of Kwarteng for The Times, complete with photos of him and Truss from their earlier days as MPs. One from 2013 shows them together at a book awards event and another from 2018 has them enjoying a picnic at that year’s Hay literary festival.

Excerpts follow, emphases mine.

Kwarteng was pleased with his fiscal event and believed the market’s jitters were temporary:

So sure was he of his plan that he smiled as he announced that he was abolishing the cap on bankers’ bonuses introduced by David Cameron in 2014.

Within hours the pound had tanked, but Kwarteng doubled down, promising that he had “more to come”. As the markets reacted to the UK’s biggest tax cuts in 50 years, the pound fell to a record low against the dollar. One senior figure in the City described the fiscal statement to me as “economically reckless”. Yet the chancellor did not blink, with an ally suggesting that this was just “the City boys playing fast and loose with the economy” and insisting, “It will settle.”

Although it is unclear what Kwarteng thinks today, he and Truss were allies dating back at least a decade:

At 47, Kwarteng is the same age as Liz Truss and is one of her closest political allies. Earlier this year, he moved into a house just down the road from her in Greenwich and now they are neighbours in Downing Street. His appointment as chancellor was one of the first decisions she made when it became clear that she was likely to win the Tory leadership contest. Truss and Kwarteng have been working for weeks on their “shock and awe” shake-up of taxes, including changes to stamp duty and the abolition of the top 45p rate of income tax. The blueprint has been in their dreams for years

His allies say his politics have also evolved. In 2012 the chancellor was one of a group of free marketeers – including Truss – who published a pamphlet called Britannia Unchained, which described British workers as “among the worst idlers in the world” and railed against a “bloated state, high taxes and excessive regulation”. He has since distanced himself from the controversial text.

His parents arrived in England from Ghana. Both received a first-class education and had top-flight careers:

An only child, Akwasi Addo Alfred Kwarteng was born in Waltham Forest, northeast London, in 1975. His parents had come to Britain as students in the Sixties. His father, Alfred, an economist for the Commonwealth Secretariat, was educated in Ghana at an Anglican school with a Winchester-educated English headmaster. His mother, Charlotte, a successful barrister, was an admirer of Margaret Thatcher. “It was a self-reliance thing,” Kwarteng once explained. She instilled in her son a ferocious work ethic and education was of fundamental importance to the family.

When his father was posted to Switzerland, Kwasi was sent at the age of eight to board at the fee-paying Colet Court – now St Paul’s Juniors – in southwest London. He admits it was probably too young to be separated from his parents but he not only survived, he thrived. He won a scholarship to Eton where friends recall a “lanky malcoordinated” but hard-working teenager who was determined to make the most of the opportunity he had been given.

Like Boris Johnson, Kwarteng played the wall game – a brutal mixture of football and rugby. “He’s so tall that he was a great addition to any team,” one fellow pupil recalls.

Kwarteng is not attracted to identity politics:

Kwarteng never expressed his desire to be “world king” in the way that Johnson did. “I was slightly surprised when he went into politics,” says a contemporary from Eton and Cambridge. “He wasn’t in a political activist circle at university. People sometimes think one Etonian is just like another, but Boris and Kwasi are very different. Boris wants to rule the world; Kwasi wants to solve problems, rather than just being in power for the sake of it. He’s not going to go out there to break rules. Kwasi does listen to people and wants to discuss ideas” …

Kwarteng’s 2011 book Ghosts of Empire is a far more nuanced analysis than the rose-tinted version of British history favoured by Tory traditionalists. He rejects the “sterile debate” over whether “empire was a good or bad thing” and concludes, “Much of the instability in the world is a product of its legacy of individualism and haphazard policymaking.” According to those who know him well, the chancellor is uncomfortable with “culture war” politics and describes his own philosophy as “relentless pragmatism”. One aide insists, “He is sometimes lazily pigeonholed as a ruthless, black and white free market ideologue. It is true that he is a low-tax Conservative. He’s a free marketeer, but there are occasions when the state does need to intervene.” In 2019, the chancellor told a Tory party conference event: “There’s nothing [better] to convert someone from being a radical free marketeer to seeing the virtues of government action than making them an energy minister.”

He focused on his studies at Trinity College, Cambridge:

“As a student he was charismatic and a bit chaotic,” says a friend from that time. “He was scholarly. The everyday run of things didn’t worry him. He would be immersed in his books.”

He began meeting the great and the good in the Conservative Party:

… the future chancellor was spotted by Dr John Casey, an English fellow and legendary figure among Conservative thinkers, who invited him to his dining club, the Michael Oakeshott Society. There Kwarteng met Tory politicians and journalists such as Norman Lamont, Geoffrey Howe, Norman Tebbit and Charles Moore. Casey insists it was never a political society: “It is devoted to intelligent conversation and strong views don’t go with that.

“He has a first-rate mind and a first-rate personality,” Casey continues. “He is intellectually and personally equipped to be chancellor. He’s a cultured man, an intellectual – there are very few in politics. He’s not like anybody else; he’s himself.”

After Cambridge, Kwarteng won a Kennedy scholarship to Harvard. When he finished his time there, he returned to Cambridge to earn a doctorate in economic history, after which the City of London beckoned:

He then worked as a fund manager at the bank JP Morgan and at Odey Asset Management, run by the Brexit-backing investor Crispin Odey, as well as chairing the Bow Group, a conservative think tank.

His political career began afterwards:

In 2005 he stood as the Conservative candidate for Brent East, coming third, before being elected as MP for the safe Tory seat of Spelthorne in Surrey in 2010, the same year as Truss entered politics. He spent several years on the back benches after criticising coalition policies including the help-to-buy scheme. “He’s genuinely clever, with a very strong academic, scholarly mind,” one old friend says. “But that academic, scholarly mind meant he was happy to speak out against David Cameron and George Osborne and didn’t really worry about the consequences.”

Kwarteng understands the importance of a Prime Minister and Chancellor working closely together:

For now, Kwarteng and Truss are united on economic policy. The chancellor tells colleagues that his role is to support the PM, explaining: “I will facilitate; I won’t emasculate.” One ally says, “Kwasi was completely disillusioned with the battles between No 10 and No 11 under Rishi and Boris. When No 10 and No 11 are at war, nothing works. Kwasi will deliver what the prime minister wants. She is the first lord of the treasury, Kwasi is the second lord of the treasury. That will change the entire mood and approach of government. The institutions will try to break No 10 and No 11 apart, but they underestimate the strength of the relationship between Kwasi and Liz.”

Hmm. Interesting.

British public gaslit

The last week of September was one of news about unfunded tax cuts, the Bank of England stepping in to calm the UK markets, how Kwarteng and Truss didn’t bother to communicate their economic plan and how awful everything was.

On Friday, September 30, Tom Harwood, GB News’s political correspondent and Guido Fawkes alum, put things into perspective, rightly saying that the media were gaslighting Britons:

That day, The Telegraph‘s Matthew Lynn wrote, ‘There’s no such thing as unfunded tax cuts — it’s our money’:

It is hard to imagine that three simple words could be quite so lethal. But over the last few days “unfunded tax cuts” have been held responsible for the potential destruction of the British economy, and, come to think of it, the global financial system as well.

We are told that the Government’s £45bn package of cuts announced last week have crashed the currency markets, sent mortgage rates soaring, and left the stock market to keel over and die. Any government crazy enough to even attempt unfunded tax cuts can expect to be evicted from office within days if not hours. 

Tosh. Although the phrase has become ubiquitous, we should be a lot more cautious about how we use it. In reality, tax cuts don’t need to be funded, for the same reason that staying home instead of going out to dinner doesn’t need to be ‘funded’, and nor does opting to spend Christmas with your parents rather than flying off to Mauritius need to be ‘funded’ either.

It isn’t spending. It is simply taking less of your citizen’s money. It is state spending that needs to be ‘funded’, and not its opposite – and until we get that straight, and change the language we use, we will never be able to have a grown-up debate about how to manage our economy.

If Kwasi Kwarteng had a grand for every time our broadcasters, newspapers, a think tank, or indeed a growing legion of City analysts, used the term “unfunded tax cuts”, or UTCs as we should probably call them, he’d have enough money to wade into the markets and send sterling back over the two dollar mark. The phrase probably has its own emoji by now, just to make it easier to discuss on WhatsApp (some sort of variant of the scowling face, I’d imagine).

Ever since the pound started falling modestly against the dollar on Monday – because after all “crashing” seems a slightly extreme term for a downwards correction of less than 10pcthe phrase has dominated the headlines.

According to just about every think tank, constant broadcasts from the BBC, dozens of newspaper analysts, the IMF, and just about every major City bank, not to mention a small army of retired central bankers, it was the Chancellor’s decision to cut a few taxes without announcing accompanying decisions on reducing spending that led immediately to a dramatic sell-off in sterling and a rise in bond yields that could only be controlled by emergency intervention by the Bank of England. 

A quick Google search yields 28,000 mentions of the phrase, and that is without even counting social media. According to the credit ratings agency Moody’s “large unfunded tax cuts are credit negative” while according to the former Bank Governor Mark Carney “the message of financial markets is that there is a limit to unfunded spending and unfunded tax cuts in this environment.”

And yet, in reality, we should be a lot more careful about the language we use. We can leave aside the point that the “unfunded” parts of last Friday’s fiscal package amount to no more than a few billion pounds, a trivial sum give the size of state spending, and that by far the largest part of it was made up of the energy support package that all sides of the political spectrum had been calling for. The more important point is this: we shouldn’t ever describe tax cuts as “unfunded”.

By definition a tax cut is not spending any money. It is simply a decision to take less from a particular group of people in one particular way

Next, the term ignores the possibility that tax cuts might pay for themselves

Finally, and perhaps most importantly, it concedes the argument before it has even begun. “Unfunded” is a boo word, and even more so when you put the inevitable “reckless” in front of it. The language deliberately skews opinion against a reform of the tax system. Even worse, it is used by banks and broadcasters who pretend they are staying neutral – when in reality they are anything but. 

fundamentally it is only state spending that needs to be funded – not leaving more money in the pockets of long-suffering taxpayers. If we could be a little clearer about that we might be able to have a slightly more sane debate about how much tax the government should be raising and how – instead of hysterical catastrophizing about UTCs.

On Saturday, October 1, The Sun rightly defended the Truss-Kwarteng plan, citing other Western economies’ woes:

https://image.vuukle.com/c4318e5c-ff26-463e-83e3-1b1398dfdcc3-adfb9f20-c294-49de-8b3e-378a6145c251

On Sunday, October 2, GB News’s and The Telegraph‘s Liam Halligan, formerly of Channel 4 News, was on the money when he said that the market meltdown was the fault of quantitative easing (QE):

… This week of financial turmoil has left millions frightened and angry.

While Kwarteng’s statement sparked last week’s alarming debt repricing, it was by no means the underlying cause. There are far bigger forces at play

what we saw last week was just the beginning of a long-term shift away from over a decade of ultra-low interest rates and quantitative easing. We’ve indulged in ultra-loose monetary policy since the 2008/09 financial crisis – a necessary emergency measure, which ossified into a lifestyle choice.

And now, the obvious excesses, dangers – and crass stupidity – of this policy, are coming home to roost.

Since that financial crisis, the Bank of England has created hundreds of billions of pounds of QE money, as have similarly aligned central banks, which have blown huge asset price bubbles in stocks, bonds and property.

QE has helped governments borrow cheaply, while making the rich even richer – which is why, having begun as a £50 billion temporary measure to inject liquidity into bombed-out banks, it has morphed, thirteen years on, into an £895 billion monster.

The early tranches of QE stayed largely within the financial system – so didn’t cause serious inflation. But the Covid-era variant, funding furlough and an avalanche of business support loans, has fed directly into the real economy – helping to explain today’s inflation predicament.

This is an inconvenient truth that no-one wants to admit – certainly not the likes of the International Monetary Fund and central bankers who oversaw QE. Better to blame an incoming Tory government ­– one led by a politically vulnerable Prime Minister, with only lukewarm support from her own MPs.

the idea that this “unfunded cut crashed the pound” is preposterous. Yet that is now the accepted political narrative – that a greed-driven Tory policy collapsed sterling and sent 10-year gilt yield surging as fears swirled of government insolvency, sending higher borrowing costs rippling across the economy, damaging hard-working families and firms.

What I suspect happened is that global currency traders, understanding the top tax cut was politically tin-eared, could see ministers were in for a kicking. With the Government introducing a potentially expensive energy price cap, the moment seemed right to start shorting – that is, betting against – the pound, knowing the media would pile in.

When that happened on Asian markets on Monday, and we woke to a plunging currency, I was astonished that ministers fell silent – given the strength of the arguments on their side

For now, the Bank of England’s intervention on Wednesday – buying gilts to rein in borrowing costsseems to have worked. By Friday, the pound was back where it was pre-statement, the 10-year yield having retreated from over 4.5pc to around 4.0pc.

But the City and Wall Street moneymen, having loaded pension schemes with billions of pounds of debt, yet again have the upper hand – effectively forcing the UK authorities to restart the QE asset-boosting machine. This cannot end well.

“Tory tax cuts”. It’s such an easy and convenient scapegoat. The truth is we’re in for a sustained period of painful adjustment – one which our political and media class must urgently start to explain.

The Times‘s Robert Colvile pointed out the global aspects of market turmoil, driven in part by the United States:

The markets were already primed to punish the UK, he [Albert Edwards of Société Générale] argues, because of the Bank of England’s decision the previous day to raise rates at a slower rate than the US and to keep trying to dispose of the assets accumulated under quantitative easing. So Kwasi Kwarteng’s decision to throw in a few more tax cuts just gave an extra push to a boulder that was already rolling

Admittedly, the attempts of some in government to blame last week’s rout in the markets entirely on global factors strained credulity. But they did have the core of a point. A year ago the Bank of England believed interest rates would stay below 1 per cent. A month ago they were set to top out at 3 per cent. By the time Kwarteng got to his feet, the expected peak had risen to 5 per cent — soaring over 6 per cent at the height of last week’s panic.

Now, some of that rise in September was probably due to anxieties about the new government. But it was also driven, yes, by global factors — in particular decisions made in Washington. Even if Kwarteng had replaced his planned statement with a lusty rendition of the Marseillaise, mortgage-holders would still be facing eye-popping jumps in interest rates. For example, at that 6 per cent rate a typical UK mortgage would, according to the Resolution Foundation, cost an excruciating £4,800 a year extra — but £3,800 of that was already on the way before Friday’s speech. The age of cheap money is over not just for Britain but for everyone.

Over the past three years, a number of conservatives must have wondered why Boris Johnson never delved deeper into economic policy. A letter to The Telegraph gives a possible explanation — global forces at work:

SIR – It takes great strength of character and conviction to stand up and face a baying mob, especially a political one. Liz Truss and Kwasi Kwarteng have my admiration.

I always wondered why Boris Johnson did not attempt to enact some of his early policies after Brexit, for which he had great public support. Perhaps he understood how the pro-EU and socialist contingents in Parliament and the wider political world would react, and was fully aware of the force that would be against him.

I wish Ms Truss and Mr Kwarteng good luck. They have shown enough courage in their beliefs to see this challenge through.

Conservative Party Conference

The Conservative Party Conference opened on Sunday, October 3, in Birmingham.

That day, The Times reported that Kwarteng had requested Cabinet ministers to cut expenditure in their respective departments:

Kwasi Kwarteng has told ministers to make cuts in their departments and warned them “we have a duty to live within our means”.

The chancellor has asked cabinet ministers to send him their “proposals to support growth” by the end of the month.

He is also launching a reprioritisation, efficiency and productivity review across the public sector, which will re-examine “existing spending commitments” and repurpose budgets to deliver the government’s “core priorities”, including growth.

I wrote about the conference, including Truss’s and Kwarteng’s U-turn on abolishing the 45% tax rate, the prominent Conservative MPs in disarray, the rebels and Truss’s closing speech.

On Monday, October 3, the duo pulled out of a fringe event, which cost £3,000 a ticket:

Nigel Farage, looking on from the outside, predicted a Labour rout in the next general election:

Meanwhile, Guido Fawkes kept us apprised of market movements, which weren’t nearly as alarming as expected that week:

He rightly criticised Labour’s shadow chancellor Rachel Reeves for stirring the pot unnecessarily:

On Wednesday, October 5, as the conference closed, Guido wrote (emphases his):

The Bank of England has been easing off its interventions in the gilt market, leaving Rachel Reeves’s hyperbolic attack lines exposed for their inaccuracies. Julian Jessop points out the fact the Bank did not have to buy any gilts again today, leaving total purchases stable at £3.66 billion. A tad short of the £65 billion she repeatedly claims. This is a further sign market jitters have been effectively mitigated, far from Labour’s claims of an “economic crash”. As a trained economist and former Bank of England employee, Rachel really must know better. Her sums were out by a factor of 17…

At the weekend, while anti-Conservative pundits were still banging on about the 45% tax rate, which Truss and Kwarteng did a U-turn on …

The Telegraph‘s Ambrose Evans-Pritchard pointed out that gas prices were already falling, indicating that ‘Liz Truss may be winning her gamble on the energy price cap after all’:

Plummeting global gas prices have slashed the cost of the UK’s energy price cap and may ultimately reduce the monthly subsidy to zero, greatly alleviating the strain on Government borrowing.

NatWest Markets estimates that the price guarantee would cost approximately £30bn over the first six months based on current futures contracts, half the £60bn figure assumed by the Treasury and the rating agencies …

While NatWest remains wary of gilts after the mini-budget and the bond shock last month, it said pessimism over the UK’s public finances may have gone too far. Gilts may no longer be a one-way bet for traders

Goldman Sachs thinks European wholesale prices may fall a further 40pc by late winter. Average energy bills in the UK would in that case fall to £2,000 or less.

The Government could put its cheque book back in the drawer.

Douglas McWilliams, from the Centre of Economics and Business Research, says that the public finances are in better shape than widely-supposed.

An odd week that began well

By Monday, October 10, things appeared to be looking up for Truss and Kwarteng.

Mel Stride MP, chairman of the Treasury Select Committee and not one of their best friends, was satisfied that the then-Chancellor agreed to review his economic plan on Halloween rather than in November:

Tuesday, October 11, was a red-letter day.

The head of JP Morgan said that Truss deserved a chance:

Guido wrote:

… Speaking last night from London with US broadcaster CNBC, Dimon backed Liz’s tax plans and hammered home the need for laser-like focus on growth – adding he’d “love to hear that out of their mouth every time a president or prime minister speaks”…

It’ll take time to execute the policies and kind of drive growth and what’s important … [but] there’s a lot of things the UK has going for it and proper strategies to get it growing faster … then it can accomplish some of the other objectives it wants to accomplish too […] I would like to see the new Prime Minister, the new Chancellor, be successful […] I think every government should be focusing on growth. I would love to hear that out of their mouth every time a president or prime minister speaks.

Another proud member of the Pro-Growth Coalition. Although he did warn the US will likely tip into recession in about 6 months…

The IMF did an about-face, as The Telegraph reported:

Kwasi Kwarteng’s tax cutting mini-Budget will help Britain to be the fastest growing major economy this year at the cost of higher long-term inflation, the International Monetary Fund (IMF) has said.

Strong momentum at the end of 2021 means UK economic growth will outpace the rest of the G7 this year. Tax cuts announced in the mini-Budget are expected to lift it even higher than the IMF’s current forecast of 3.6pc, which was published on Tuesday but finalised before the Chancellor announced his plans …

The paper‘s Ambrose Evans-Pritchard wrote, ‘Rejoice: we may be very close to Fed capitulation’:

Not only is the Fed rushing through jumbo rises of 75 points each meeting, it is also draining global dollar liquidity with $95bn a month of quantitative tightening (QT). It has never done the two together before. And it does not understand how QE/QT actually works, as admitted cheerfully by one Ben Bernanke, Nobel Prize laureate as of yesterday …

Ben Bernanke flagged the dangers of a strong dollar and the capital exodus from emerging markets yesterday. Without naming the British gilt market, he said financial stress in the international system was building up and posed a threat. “We really have to pay close attention,” he said. 

On Wednesday, October 12, it was noted that a Federal Reserve hike in interest rates took place before Kwarteng’s economic statement:

Furthermore, the US was also experiencing an unusual increase in mortgage rates, meaning that the UK was not the only country with that problem:

On Thursday, October 13, Truss had her weekly meeting with King Charles, who greeted her with ‘Dear, oh dear’ while the press were there:

What did he know?

He would have heard Foreign Secretary James Cleverly defend Truss and Kwarteng on that day’s news round. The poor man.

The Telegraph has a running diary of what went on that morning. This is the summary:

James Cleverly has warned it would be a “disastrously bad idea” to replace Liz Truss as Prime Minister.

Ms Truss is under intense pressure from some of her own MPs to abandon her economic plan following a market backlash to the measures set out in the mini-Budget.

The Prime Minister’s leadership is being questioned after little more than a month in the job, with some Tory MPs already considering who could replace her.

ConservativeHome‘s editor Paul Goodman was also on the airwaves. He told BBC Radio 4 that some Conservative MPs had suggestions for Truss’s and Kwarteng’s replacement:

The former Tory MP told BBC Radio 4’s Today Programme: “All sorts of different people are talking about all sorts of different things because the Conservative backbenchers are casting around for a possible replacement for Kwasi Kwarteng, even for a possible replacement for Liz Truss.

“All sorts of names are being thrown about, Rishi Sunak, even Boris Johnson, Kit Malthouse, Sajid Javid.

“But one idea doing the rounds is that Penny Mordaunt and Rishi Sunak, who, after all, between them got pretty much two-thirds of the votes of MPs, come to some kind of arrangement and essentially take over.”

The King probably also knew that Truss and Kwarteng were going to do a U-turn on corporation tax, which they planned to lower to 19%, as it is in Ireland:

On Wednesday, at PMQs, Truss stood by the cut:

What we are doing is simply NOT putting up corporation tax. It’s not a tax cut, we’re just not raising corporation tax. And I feel that it would be wrong, in a time when we are trying to attract investment into our country, at a time of global economic slowdown, to be raising taxes. Because it will bring less revenue in.  And the way that we are going to get the money to fund our National Health Service… is by having a strong economy with companies investing and creating jobs.

On Thursday, October 13, Guido wrote:

What a difference 24 hours makes: this lunchtime The Sun broke the news that Truss “is considering raising Corporation Tax next year in spectacular mini-Budget U-turn”. A source tells Harry Cole that while the U-turn is being seriously considered, it wouldn’t be back up to the 25% proposed by Rishi before leaving the Treasury.

An unpleasant surprise for Kwarteng

Meanwhile, Kwarteng was in Washington at the annual IMF meeting.

Guido’s post had an update:

Channel 4 doorstepped him on his way in, where he said “I’ll be coming out with a statement on 31st October and I’m not going to pre-empt that. As The Speccie’s James Forsyth points out, if the markets are now pricing in a U-turn, and the government decides against one, they’ll likely be in a worse position than they were 24 hours ago…

On Friday, October 14, we woke up to the news that Kwarteng was summoned back to London, under the guise that emergency budget negotiations had to take place. The IMF meeting was to last into the weekend:

This could mean only one thing — that his time as Chancellor was over.

Guido reported that Mel Stride was happy that Kwarteng’s economic package was about to be shot to bits:

… one source quoted in the Financial Times claims “Almost everything in the Budget is now up for grabs” …

For those who enjoyed the excitement of tracking Priti Patel’s flight back to the UK ahead of her sacking by Theresa May, you can follow Kwasi’s flight in real time here

Mel Stride, Chair of the Treasury Select Committee, spoke on the Today Programme and welcomed a U-Turn. He called it a “powerful” signal to markets and added the government’s “fiscal credibility is now firmly back on the table”. He added the Conservative party should give the government “more time” and space to “rest”. How generous…

Sterling and bond markets had rallied following the first reports of a U-turn, which only adds on the pressure for more reversals. Elsewhere in the markets, today is the final day of the Bank of England’s gilt operations. Although gilt markets appeared steady this morning, the real test will come on Monday…

A Downing Street source tried to downplay Kwarteng’s return:

Kwarteng had scrambled to take the last commercial flight from Dulles Airport to Heathrow:

The next bit of news was that Truss was going to hold a press conference that afternoon.

Guido wrote:

Liz is set to U-turn on the corporation tax freeze at 2pm this afternoon. It’s rumoured she’ll whack it all the way up to 25% in the spring. Kwasi won’t be appearing alongside her…

Speculation began on who the new Chancellor would be. The Sun‘s political editor Harry Cole tweeted the following in the hours before the press conference, indicating Jeremy Hunt:

Cabinet members were correct about Jeremy Hunt:

King Charles approved the following appointments from Truss:

Nigel Farage was rightly furious about a Remainer assuming the post of Chancellor:

Harry Cole got a copy of Truss’s letter to Kwarteng, thanking him for his hard work:

The nation now had a new dream team. This seconds-long video is a must-see. The UK is doomed:

I’ll go into Truss’s press conference tomorrow.

In short, it was absolutely dire and lasted only eight minutes, which included four questions, one of which was from Harry Cole. His face is a picture:

I’ll have more tomorrow on how shocked Kwarteng must have been as well as what this means for Truss’s premiership.

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