Morally bankrupt: Liz Truss is out of touch and out of her depth
In the hours after delivering a “fiscal event” which would crash the pound, cause an implosion of the mortgage market and force the Bank of England to step in to help shore up pension funds, Chancellor Kwasi Kwarteng attended a cocktail party at the Chelsea home of a financier and Conservative Party donor.
Despite Kwarteng’s mini-Budget causing sterling to fall to its lowest level against the dollar since 1985, there was still a good deal of hubris around that evening about the Treasury’s plan for growth. Former Brexit negotiator Lord Frost called it “an excellent statement delivered with huge intellectual confidence,” while one-time Ukip leader Nigel Farage tweeted: “Today was the best Conservative Budget since 1986.” The markets disagreed.
The hedge fund managers quaffing champagne alongside Kwarteng, many of whom are understood to have gained from the crash by shorting the pound, had another analysis. According to The Sunday Times, some of those in the City had begun referring to the new chancellor as a “useful idiot”.
The suggestion that the government didn’t entirely have a grip on the situation carried on into the following week when the pound continued to tank and the Bank of England was forced to buy £65bn of bonds to prevent pension funds from collapsing. A rebuke from the International Monetary Fund (IMF), which said the government’s tax-cutting measures were likely to “increase inequality”, was followed by a disastrous round of local radio interviews where Prime Minister Liz Truss appeared simultaneously out of touch and out of her depth.
As the Tory party conference got underway in Birmingham, Michael Gove, the man once responsible for the levelling-up agenda under Truss’s predecessor, went on TV to denounce the decision to cut the 45p tax rate for the highest earners, telling the BBC’s Laura Kuenssberg it was “a display of the wrong values”.
Gove suggested he would not be able to vote for the measure, raising the prospect of the mini-Budget turning into a de facto confidence vote in the new prime minister. Within 24 hours the policy was gone. An idea which had sent markets into a tailspin and caused homebuyers to find themselves suddenly priced out of the mortgage market, unceremoniously dumped. Hours later, in an otherwise underwhelming speech, Kwarteng told the conference he was aware there had been a “little turbulence”.
It all felt so unnecessary – an unforced error, a pointless exercise in economic self-harm. To many inside the party it represented their reputation for fiscal prudence going up in smoke like a £50 note being used to light a fund manager’s cigar. To those on the outside, it appeared as if a clique of ideologues had seized control and begun virtue signalling to their pals in right-wing think tanks and the City.
But economics aside, the chancellor’s mini-Budget was notably lacking in another, harder-to-measure quality: decency.
The mood music had begun within days of Truss’s appointment as prime minister when following the Queen’s death and official period of mourning, she used one of her first TV interviews to signal her intention to remove the cap on bankers’ bonuses. Followed by the decision to scrap the top rate of tax for those earning over £150,000 a year, it appeared the new prime minister was either singularly lacking in empathy or harbouring an electoral death wish.
“I am prepared to be unpopular,” Truss had said within days of taking up post as she sought to wager everything on economic growth. But the PM can’t have been prepared for just how quickly that unpopularity would take hold or how deeply felt it would be.
According to the latest polls, Labour now has a near-30 point lead over the Tories which if it were to be converted in a general election result, would lead to a sizeable majority.
“Tory MPs who are sitting on slender majorities or even good majorities and seeing these polls are going to be worried,” says James Mitchell, a professor of public policy at the University of Edinburgh. “If they believe it’s in their self-interest to remove the prime minister, they will. The Conservative Party is ruthless – they will dispatch her as quickly as possible if they think it will help them win an election.
“Once you lose your reputation for economic competence, you only really regain it once your opponent has lost it.”
During the Tory leadership contest, Truss made no secret of her admiration for Margaret Thatcher while simultaneously decrying the inequality she had witnessed while growing up in Paisley and Leeds, a strange form of doublethink which avoids making a causal link between the former Tory prime minister and the toxic legacy she left behind in many parts of Britain.
It was a theme she returned to in her conference speech, which felt designed to avoid further spooking the markets more than anything else.
“I know what it’s like to live somewhere that isn’t feeling the benefits of economic growth,” Truss told delegates. “I grew up in Paisley and Leeds in the 80s and 90s; I’ve seen the boarded-up shops; I’ve seen people left with no hope, turning to drugs; I’ve seen families struggling to put food on the table. Low growth isn’t just numbers on a spreadsheet. Low growth means lower wages, fewer opportunities, and less money to spend on the things that make life better.”
Since taking up occupancy of Number 10, Truss has shown a willingness to tack to the right, hedging growth on the supply-side economics of lower taxes and deregulation. She thought nothing of borrowing billions to hand an income tax cut to some of the wealthiest in society while baulking at the prospect of increasing benefits in line with inflation, something the Joseph Rowntree Foundation has described as a “harmful act of historic proportions” which would see the poorest losing around £200 a year.
These supposedly trickle-down policies, which first came to prominence in the US during the Reagan era, have since been discredited by even those who worked within that US administration. And during Truss’s recent visit to New York, President Joe Biden tweeted that he was “sick and tired of trickle-down economics” which had “never worked”.
Figures published recently by the Financial Times show why, with income inequality in the UK and US among the widest in the developed world. While the top 10 per cent earn about three times as much as those in the bottom 10 per cent in most developed nations, the difference in the UK is five-fold and six-fold in the US. The poorest people living in countries such as France, Germany and Norway all have a better standard of living than those in the UK.
With real concerns over people’s ability to feed themselves and heat their homes this winter, Truss has even found herself on the wrong side of the argument from the outgoing boss of Shell, Ben van Beurden, who backed a windfall tax on the profits of energy firms.
All this has made life very difficult for the Scottish Conservatives and their leader, Douglas Ross, who initially backed the decision on scrapping the top rate of tax, calling for the Scottish Government to do likewise, before performing his own volte-face and welcoming the chancellor’s U-turn.
“Douglas Ross is in the same position as every other past leader which is that the Scottish Conservatives are effectively the first line of defence for London Tory policy in Scotland,” says Andy Maciver, a political strategist and former head of communications for the Scottish Conservatives.
“But the Scottish Tories are not actually seen as being important in London. You end up with the worst of both worlds where you’re having to defend what’s going on even when you don’t really know what’s going on.”
Amid talk of attempts to oust Ross as leader of the party at Holyrood, Maciver says the party needs to reset its expectations, with another leader unlikely to do any better.
“This is not a party which is a fulsome supporter of devolution – it’s just not. There’s an instinct in the Tory party – whether it’s north or south of the border – to oppose devolution. It’s a centralising party. It doesn’t believe in devolution; it didn’t believe in it in the 90s, it doesn’t believe in it now.”
But if Truss’s unpopularity and Labour’s resurgence poses difficulties for the Tories, they could also signal trouble ahead for the SNP. This week, the Supreme Court will hear Lord Advocate Dorothy Bain’s reference on whether the Scottish Parliament can legislate for an independence referendum.
Despite the unknowns, and most believe the legal case will fail, First Minister Nicola Sturgeon has already named the date – 19 October 2023. Failure in the courts will leave the SNP no other option but to turn the next general election into a de facto referendum on separation, according to the first minister.
“There’s a perception that Labour are now going to win the next election,” says Mitchell. “One of the problems the SNP now has is they can no longer say the Tories are going to rule Scotland forever under the Union.
“Having invested so heavily in telling us Labour can’t win, now that we start to see that Labour can win…it really removes a major plank in the SNP’s message.”
Mitchell says a Labour victory without an overall majority could leave the SNP in an invidious position.
“The SNP is not in a strong position if that happens. Will they say, ‘we won’t support you unless we get an independence referendum’ and risk bringing down a Labour government and letting the Tories in?
“I was never very sure that fighting a general election on the issue of getting a referendum was very sensible. The de facto referendum is a function of understandable frustration but [Sturgeon] did not think this through – even before the most recent events. It’s a massive headache for them.”
Former SNP communications director Kevin Pringle is among those who believe that supporters of independence should welcome the prospect of a Labour government at Westminster, arguing that, for now, it’s better to “help save the ship than head for the lifeboat”.
But Maciver says an election triumph for Keir Starmer’s party could help sink the case for a second referendum.
“That’s the biggest question in Scottish politics right now,” he says. “Let’s assume they lose in the Supreme Court, the SNP needs that election in 2024 to be about nothing else apart from independence. If it becomes about the economy, then only Labour wins. Douglas Ross loses out, Nicola Sturgeon loses out because they’re not able to frame the election solely around independence...
“I think Starmer’s upswing potentially destroys the SNP’s strategy for that election and that’s an existential problem for the SNP.”
Analysis of polling carried out last week by YouGov suggests Truss has already made her mark, with the Tories facing electoral oblivion in Scotland at the next general election. But while the party would lose all its MPs north of the border, according to Sir John Curtice, the SNP position remains strong. The nationalists would have 49 MPs to Labour’s seven.
Finishing up his speech at the Tory party conference, Kwarteng said his economic interventions were the only way of arresting a path of “slow, managed decline”. That’s quite an admission from someone whose party has been in government for 12 years, he himself spending much of that time in cabinet.
In truth, there are similarities between the Tories and the SNP: both look tired and bereft of ideas after long periods in power.
Scotland is now saddled with two governments, one at Holyrood and another at Westminster, which both appear intellectually exhausted and unable to respond to a series of unprecedented challenges. A long winter stretches out in front of us all.