Why Liz Truss failed

The markets did not crash, so there was not a Black Friday in the way some had envisaged. But this certainly was Black Friday for the Tories, a new low in the party’s history, a debacle to rival Black Wednesday but with none of the economic dividends. A new Prime Minister sacks a Chancellor for doing exactly what she told him to, then declares she will implement every single one of the corporation tax rises that she had spent the summer promising to stop. So it now emerges that Liz Truss stood for leader on a false prospectus, promising an agenda she has quickly proved unable to deliver.

Her plan during her campaign was £30 billion of unfunded tax cuts – in a government that takes almost £1,000 billion a year in taxes, this was doable. But at a push. She’d have to prove that the £30 billion would be stimulatory and (most of all) transitionary. Like an entrepreneur asking for a massive loan, investors would need to be persuaded that it was well thought-through and would work.

She’d have had her work cut out to pull off her £30 billion package. But in her mini-budget she upped it to an undoable £110 billion – via a staggering, needlessly expensive £10bn-a-month energy bill bailout. So: a borrow-and-spend splurge, dressed up language of supply-side tax reform. She then tapped the markets for an extra £60 billion and dared them to defy her – at precisely the time when those markets had started a worldwide, long-delayed rebellion against fiscally incontinent governments. When a storm was raging through world bond markets, Truss made Britain the lightning conductor – running atop the hill and calling it bravery. She went from daring to crazy then seemed to revel in the craziness, as if the implausibility of her plan was in itself proof of her courage. 

The Sunakite campaign criticism was even an £30 billion cut in National Insurance was financial suicide. This was overdone. Had she constrained herself to original plan, she might have succeeded. But her untargetted, uncapped energy bailout plan saw her reach in a panic for a ruinously expensive solution which, when added to her tax cuts, made the whole package unworkable. Not, of course, that we ever saw the whole package: the spending-restraint part of it was dangled, but never delivered. It probably never existed.

I’m no fan of Trussonomics – and think even the word gives her agenda greater coherence than it ever had. What we just saw was just bungling, of an epic and historic nature. A first-time skier went off-piste, with Bond themes in her headphones, picked up speed – then hit a tree quickly. But it’s not just her: this pile-up involves much of the Conservative party. That doesn’t mean it was futile to try to get down from the mountain of big-state conservatism: just that you need a careful plan and a good bit of skill to do so. Truss shouted out ‘who dares wins,’ disappeared over the edge and that was the end of that. Sunak’s refrain – who dares loses – was not much more inspiring. 

My own thoughts now haven’t moved on much from The Spectator’s verdict of Truss during the leadership campaign:-

‘The debacle [over her regional pay u-turn] underlines the main criticism of Truss’s campaign: that it all unravels fairly quickly once you begin to ask hard questions. This is why many low-tax Tories worry: if she fails, it risks making a mockery of the idea that there is an alternative to big-state conservatism. [She offers] more triple-lock pension spending, more economic distortion. And more cakeism: promises of tax cuts, without any serious discussion about the painful choices ahead if Britain is to make government more affordable. To attempt reform without a proper plan is to guarantee failure.’

The failure happened in weeks, rather than months or years. She won’t last very long in office now: she’s a busted flush, a simulacrum. The Tories will now try to work out what happens next: a unity candidate, or civil war? We’ll see. But don’t think things can’t get worse. Adam Smith once observed that there is a lot of ruin left in a nation and I suspect the same is true for the Tories. Lucky old Starmer.