When I began writing this piece, I thought the economic turmoil of the last fortnight demanded a change in government strategy – perhaps a reversal of certain elements of the mini-Budget. Did I expect Liz Truss to perform a dreaded U-turn? Of course, I didn’t. Not only had the prime minister spent her entire active premiership doubling down on her new economic agenda, but a U-turn would run counter to everything her hero Margaret Thatcher, and by extension Liz Truss herself, believes in.
Or so I thought. Then came the news notification on my mobile phone: ‘Kwarteng scraps 45p tax rate cut’. I was speechless. But by late last Sunday it had become patently clear, the mini-Budget was at risk of being voted down – by Tory MPs. Tax cuts for millionaires during a cost-of-living crisis was a step too far for too many in the parliamentary party – a view I entirely sympathise with.
Now it seems likely the prime minister will perform a second screeching U-turn (you can almost smell the burning tarmac) and cave into backbench MPs who want her to commit to uplifting benefits with inflation.
The prime minister it is understood, had favoured linking benefits to wage growth, which currently sits below inflation. Plainly speaking this option would see millions of welfare claimants receive a real terms pay cut. While the prime minister says she is still yet to decide either way, pressure from cabinet and her colleagues on the backbenches makes it all but certain she will about-turn on this planned policy as well.
It is somewhat confusing why Liz Truss would have mustered such an idea to begin with. The entire rationale behind the reversal of the national insurance increase was that it ‘honoured a manifesto commitment’. Surely the PM hasn’t forgotten that uplifting benefits with inflation was a manifesto commitment also? It would be cruel and misguided to slash welfare payments, having just tried to reduce taxes for the wealthiest.
Make no bones about it, Liz Truss has had a calamitous start to her premiership. At the end of her first active week on the job, the economy was tanking, and the Tory poll ratings were in freefall.
The long-term effects on the economy were and continue to be unknown, as the Chancellor Kwasi Kwarteng rejected an independent Office for Budget Responsibility (OBR) forecast. This rebuff of independent scrutiny was in part responsible for the faltering markets. “Nature, and indeed markets, abhor vacuums”, a source told The Sunday Times. “The market wants surety on a fiscal path and the credibility that comes from having an institution like the OBR commenting on it independently.”
The only reasonable conclusion that can be drawn from the rejection of an OBR forecast is that the Chancellor had little faith in the viability of his policies. Prior to the mini-Budget, in an article for this site, I wrote: “A refusal to publish the OBR report suggests the government has limited confidence in its own economic policy, and this being the case, why should we – the voters – have any confidence either?”
It is now clear the voters have answered this question without ambiguity. Last week a poll conducted by YouGov and published in The Times, revealed Labour had a 33-point lead over the Conservatives – the largest since the 1990s. Successive polls have failed to prove better reading for the prime minister. This is wipe-out territory for a party that just three years ago, seemed destined to dominate the decade and beyond.
In her rash effort to slash taxes for the wealthiest, the prime minister failed to establish recognition for her massive energy support package. This must be an unprecedented situation in which a government spends tens of billions to aid families with fuel bills, cuts national insurance and lowers income tax to 19% and in turn is met with the lowest poll ratings in a generation. What an embarrassing spectacle.
Now there is talk of Liz Truss being ousted by her colleagues, after just three weeks in the job. Ousting their third party leader in three years would be a disaster for the Conservatives, but given the alternative of electoral carnage, can backbenchers be forgiven for entertaining such a notion?
The government has shattered confidence in Tory economic competence and placed Keir Starmer within touching distance of Number 10. This was a needless, self-inflicted wound that has potentially locked the Tories out of power for a generation. Will there be more U-turns to come? I wouldn’t bet against it. Though one thing is certain, Liz Truss’ future in Downing Street hangs in the balance – she is a prisoner of her own party.