LONDON (AP) — Former British Prime Minister Boris Johnson says he will not run to lead the Conservative Party, ending intense speculation about a comeback.
Johnson, who was ousted in July amid ethics scandals, was widely expected to run to replace Liz Truss, who quit last week.
He has spent the weekend trying to gain support from fellow lawmakers, and said he had amassed more than 100 votes, the threshold to run.
But he was far behind former Treasury chief Rishi Sunak in support. Johnson said he had concluded that “you can’t govern effectively unless you have a united party in Parliament.”
THIS IS BREAKING NEWS. The previous story follows below:
Former British Treasury chief Rishi Sunak was the frontrunner Sunday in the Conservative Party’s race to replace Liz Truss as prime minister. Sunak garnered the public support of over 100 Tory lawmakers to forge ahead of his two main rivals: former Prime Minister Boris Johnson and ex-Cabinet minister Penny Mordaunt.
But widespread uncertainty remained after British media reported that Sunak held late-night talks with Johnson on Saturday. Speculation mounted that the pair could strike a deal to unite the fractured governing party after it was left reeling from Truss’ rapid downfall following Johnson’s ouster.
The Conservative Party hastily ordered a contest that aims to finalize nominations Monday and install a new prime minister — its third this year — within a week.
Sunak, 42, was runner-up after Truss in this summer’s Tory leadership race to replace Johnson after he was forced out by a string of ethics scandals. On Sunday, he confirmed he was running again in the latest leadership contest.
Sunak has the backing of at least 124 Conservative lawmakers, according to unofficial tallies compiled by British news organizations. That’s well ahead of the 100 nominations required to qualify.
“There will be integrity, professionalism and accountability at every level of the government I lead and I will work day in and day out to get the job done,” Sunak said in a statement.
Johnson, who has not yet declared if he is running, has public support from about 50 lawmakers so far, while Mordaunt had support from about 23, according to the unofficial tallies.
U.K. Business Secretary Jacob Rees-Mogg told the BBC on Sunday that he spoke with Johnson and “clearly he’s going to stand” after flying back to London Saturday from a vacation in the Dominican Republic.
Mordaunt and Johnson — if he confirms he is running — have until Monday afternoon to garner 100 nominations. If all three meet the threshold, lawmakers will vote to knock out one and then hold an indicative vote on the final two.
The party’s 172,000 members would then get to decide between the two finalists in an online vote. The new leader is due to be selected by Friday.
A possible return to power for Johnson, 58, who officially quit only in early September, has deeply divided the Conservatives and alarmed many others. Supporters say he is a vote winner and has enough support from lawmakers, but many critics warn that another Johnson government would be catastrophic for the party and the country.
Northern Ireland minister Steve Baker, a former backer of Johnson and an influential politician within the Conservative Party, warned a Johnson comeback would be a “guaranteed disaster.” Baker noted that Johnson still faces an investigation into whether he lied to Parliament while in office about breaking his government’s own coronavirus restrictions during parties at Downing Street.
If found guilty, Johnson could be suspended as a lawmaker.
“This isn’t the time for Boris and his style,” Baker told Sky News on Sunday. “What we can’t do is have him as prime minister in circumstances where he’s bound to implode, taking down the whole government … and we just can’t do that again.”
But Johnson won the backing of several senior Conservatives, including Nadhim Zahawi, another former Treasury chief.
“He was contrite and honest about his mistakes. He’d learned from those mistakes how he could run No 10 and the country better,” Zahawi said.
Truss quit Thursday after a turbulent 45 days, conceding that she could not deliver on her botched tax-cutting economic package, which she was forced to abandon after it sparked fury within her party and weeks of turmoil in financial markets.
Sunak, who was Treasury chief from 2020 until this summer, steered Britain’s slumping economy through the coronavirus pandemic. He quit in July in protest of Johnson’s leadership.
In the summer contest to replace Johnson, Sunak called promises by Truss and other rivals to immediately slash taxes reckless “fairy tales” and argued that climbing inflation must be controlled first.
Tory voters backed Truss over Sunak, but he was proved right when Truss’ unfunded tax-cutting package triggered chaos in the markets in September.
Dozens among Britain’s 357 Conservative lawmakers have not yet publicly declared whom they are backing to replace Truss.
LONDON — It was a revolution 11 long years in the making.
For a small but vocal band of right-wing libertarians, Liz Truss’ appointment as U.K. prime minister on September 6 seemed the triumphant end point of an epic and improbable march that led them from the fringes of British politics to Whitehall’s grandest corridors of power.
In the course of just over a decade, a group of little-known politicians, fringe think tanks and outspoken media figures had helped drag the Tory Party, and the nation it led, from David Cameron’s vision of so-called compassionate Conservatism — hugging huskies and all — to a Brexit-backing, free-market embracing, low-tax juggernaut.
It took them four Tory prime ministers, four general elections and an era-defining referendum to do it — but with Truss in charge, they were finally living their dream. The country was to be remade in their image.
It lasted 44 chaotic days, and no more.
“They felt their moment had come at last,” said Tim Bale, professor of politics at Queen Mary University London. “This would prove that Brexit hadn’t been a ghastly mistake, but a fantastic opportunity. But of course, as it was always based on fantasy, it was always bound to collide with reality.”
Truss was elected Conservative leader — and so U.K. prime minister — last month on the votes of just 81,000 party members, a group large enough to defeat her more centrist opponent, Rishi Sunak, but still small enough to fit comfortably inside Wembley stadium, home of the England football team.
This band of true-blue believers had been wooed by her heady promises of a low-tax, low-regulation state that would embrace the opportunities provided by Brexit.
But as soon as PM Truss started to put her promises into action — via a ‘mini-budget’ on September 23 which included tens of billions of pounds in unfunded tax cuts alongside a massive energy subsidy scheme — the markets began sliding into turmoil. Within days it was clear Truss had triggered an economic crisis — and one that sent the Conservative poll ratings tumbling along with the value of the pound.
Her MPs, facing electoral oblivion, were terrified.
In the weeks that followed, Truss was forced to sack her Chancellor Kwasi Kwarteng and U-turn on most of their economic program in a desperate bid to stabilize the markets. This week her home secretary, Suella Braverman, followed Kwarteng out the door. Her MPs became mutinous, some publicly demanding her head. Support rapidly drained away.
Truss was forced to sack her Chancellor Kwasi Kwarteng and U-turn on most of their economic program in a desperate bid to stabilize the markets | Jeff J Mitchell/Getty Images
Truss’ disastrous six weeks in power were an abject humiliation for the prime minister herself, of course — but also for the libertarian right of the Conservative movement that had fought its corner for years.
Winners and losers
“I’m pretty distraught about it,” said Mark Littlewood, director general of the Institute for Economic Affairs (IEA), one of the right-wing Westminster think tanks that inspired the Truss agenda. (He, like most of the interviewees for this article, was speaking after the abandonment of Truss’ economic program earlier this week, but before she finally resigned Thursday afternoon.)
“It did actually appear as if we had a new government that, in very broad terms, shared the IEA analysis of the problems with our economy, and it not being market-oriented enough.”
But Truss botched the “political execution” rather than economic thinking, Littlewood insisted, lamenting that “if the execution goes badly wrong, it has a rebound effect on the ideas.”
Indeed, Conservative libertarians explain the Truss debacle in various ways: She was not clear enough about what she was doing and the reasons for it; she made the announcements in the wrong sequence; she refused to match her tax cuts with spending restraint; and she failed to produce independent proof that her plans would work. There is certainly little sign of remorse.
“The position we’re in now is that these reforms basically have not been tried,” Littlewood insisted. “Her attempts to implement change were too hurried; too rushed; not thought through; naïve in some regard.”
Former UKIP leader Nigel Farage was another right-wing libertarian who had been advocating for low-tax, small-state ideals for decades.
“I think the hope was that the Kwarteng budget was going to mark a very significant moment,” Farage said. “That now appears to be dead. And I would have thought dead for a very, very long time. The people in the Conservative Party that I talk to, who think on my wavelength … have pretty much given up.”
But Tories opposed to the libertarian agenda are delighted at its failure — if not the disastrous fallout, for country and party alike. “The mild flirtation with Tea Party libertarianism has been strangled at birth, and I think for the general good fortune of the Tory Party that has to be seen as a good thing,” Tory backbencher Simon Hoare told the BBC.
One serving Cabinet minister added: “[The libertarians] are going to have to adjust to reality like the rest of us. They can’t buck the market.”
Former UKIP leader Nigel Farage was another right-wing libertarian who had been advocating for low-tax, small-state ideals for decades | Peter Summers/Getty Images
Nicky Morgan, a former Cabinet minister who previously co-chaired the centrist ‘One Nation’ caucus of Tory MPs, said her party must now return to its former broad-church approach.
“The task for the ‘One Nation’ wing of the party is almost to ignore the libertarian right and get on with reasserting one-nation politics, and prove to everyone from Liz Truss downward that if we want to stay in power, then being sane and sensible in the middle ground is a much stronger place to be,” she said.
The long march
For some on the conservative right, so-called Trussonomics was the inevitable end point of a march toward deregulation that began with the Brexit movement in the early 2010s. Farage was one of a number of Brexiteer thinkers who wanted the U.K. to leave the EU in a bid to drive up business competitiveness.
Bale said the libertarian strain in the Conservative Party had in fact been present for decades, but that the Brexit cause emboldened it and brought it to the fore.
The turning point came in 2011, when a number of right-wing Conservative MPs — many of them newly-elected the previous year — rebelled against then-Prime Minister David Cameron and voted in support of a referendum on EU membership. “That was the first time they realized their strength,” Bale said.
Across the country, anti-EU sentiment was rising, fueled by the eurozone crisis and soaring levels of immigration.
“There was a ‘push me, pull you’ going on,” Farage said. “The stronger UKIP got, the more emboldened the Tory Brexiteers got. 2011 was the moment when UKIP suddenly started coming second in by-elections. This group in the Tory Party, and this group outside the Tory Party — namely my group — always had very similar policy goals.”
Cameron was spooked, and the pressure from within and without his party forced him to agree a referendum on Britain’s EU membership. It was won by the Leave-supporting side in 2016, cheered on by a highly vocal section of the right-wing U.K. press which also supports low taxes and deregulation.
“The referendum allowed them all to coalesce around a single issue,” said David Yelland, a former editor of the Rupert Murdoch-owned, Brexit-backing Sun newspaper, who now speaks out against the influence of right-wing media.
“The right of the Conservative Party and their supporters in the media and the think tank world knew they had one go at this. They had to win Brexit, otherwise they were finished. And they did. And since then that has emboldened them.”
Keep pushing on
With Cameron forced from office, the group’s next battle was with his successor Theresa May, a euroskeptic Remainer who tried to negotiate a less drastic form of Brexit which would have left Britain tied to many of Brussels’ rules and regulations.
Farage said the “loose relationship” between pro-Brexit libertarians inside and outside the Tory Party maintained its hold over the new Tory leader, ultimately blocking her proposed Brexit deal in Parliament and forcing her resignation.
Theresa May was a euroskeptic Remainer who tried to negotiate a less drastic form of Brexit | WPA pool photo by Henry Nicholls/Getty Images
Boris Johnson then emerged as the next prime minister, a genuine ‘Vote Leave’ campaigner who was able to push through the hard-nosed form of Brexit the group had dreamed of. But his personal brand of domestic politics was less to their taste — a sort of high-spending boosterism which appealed to millions of Tory and pro-Brexit voters, if not to the libertarian right.
“The core Brexiteers were not ultra-libertarians,” explained former Tory MP Stewart Jackson, who lost his job as a ministerial bag carrier to vote with the pro-Brexit rebels in 2011.
“There were a few that wanted [London to become] Singapore-on-Thames … but the bulk of Brexiteer MPs and definitely Brexiteer voters were much more what I would call communitarian.”
But Jackson said the vacuum of ideas about how best to respond to Brexit, even among many Brexiteers, left space for the libertarians to fill. “They were the only game in town in terms of a new intellectual concept that the U.K. could consolidate on, being outside the European Union,” he said.
With Johnson’s departure in July following a series of personal scandals, the likes of Littlewood — as well as his brothers in arms at neighboring think tanks the Taxpayers Alliance and the Adam Smith Institute — found themselves in the ascendance.
Their ideas found favor with Truss — who despite not being a Brexiteer at the referendum, was a follower of the libertarian cause — and her Chancellor-to-be Kwarteng. The ambitious pair were among colleagues who wrote a now infamous 2012 pamphlet named “Britannia Unchained” offering radical right-wing solutions to Britain’s economic problems.
Less than two months after Johnson’s departure, their economic prospectus was finally put to the test — and exploded on impact.
The arc of history
As Truss and Kwarteng look back at the ashes of their brief Downing Street careers, the pro-Brexit right is licking its wounds and wondering where it goes next.
Shanker Singham, another libertarian thinker who is close to Truss and the IEA, insisted it was too soon to tell whether the low-tax, ultra-competition agenda is too damaged by the Trussonomics experiment to resurface in the near future.
Brexit supporters march in Fulham in the final leg of the March To Leave Rally on March 29, 2019 | Dan Kitwood/Getty Images
“It’s a very febrile atmosphere, and things have to settle down,” he said. “There’s a big arc of history here, and Liz Truss’ mini-budget does not suddenly transform the arc of history.”
Littlewood insists there will be another chance to implement libertarian policies in less than a decade, given the structural economic problems Britain faces.
“Had this [mini-budget] gone as smoothly as I had imagined it in my dreams, rather than as badly as it has gone in my living nightmare, I think we could have got quite a lot of this done now,” he said. “Unfortunately, a large amount of it is off the table now, but I think it will have to be returned to.”
Brexiteers of a different persuasion — of which there are many — are hoping for an urgent change of direction, however.
“The vision of Brexit as ‘Davos on Thames’, only ever held by 10 percent of the Conservative electorate, is dead,” wrote Matthew Goodwin, an academic who has charted the rise of the populist right. “The only way forward for the Conservative Party now is to get back to what Brexit was really about for the 90 percent, and to reconnect with their 2019 electorate.”
But Bale, of Queen Mary University, believes the libertarian strain among Conservatives will forever lurk just beneath the surface, insisting their radical solutions to the nation’s ills have still not been properly tried.
“When the spaceship doesn’t arrive,” he said, “the cultists simply say ‘we got the date wrong’, and that it will be coming in two years’ time.”
Additional reporting by Annabelle Dickson.
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LONDON — Westminster is in turmoil, the U.K. economy is floundering, and Tory MPs are about to pick their fifth prime minister in just over six years.
But in a sign of total normality in this fully-functioning Western democracy, Brits have instead spent much of the past week fixated on a livestream of a head of iceberg lettuce, wearing a wig.
Set up by tabloid the Daily Star, the paper’s newshounds bet big that a 60p supermarket lettuce would outlast Prime Minister Liz Truss, after her fledgling regime was gripped by unprecedented chaos in its first few weeks.
And they were right. Truss finally resigned Thursday, just 44 days into the job, making her the U.K.’s shortest-serving prime minister. The Daily Star broke out the Champagne, declaring: “The Lettuce Outlasted Liz Truss.”
So how did Truss put her salad days behind her, and why did she wilt under the public gaze?
Let POLITICO take you on a whirlwind tour of Truss’ 44-day premiership — but be warned, there are more than a few icebergs ahead.
Smashing the orthodoxy
September 6: It all started so well. After seeing off suave-but-dull rival Rishi Sunak in a rancorous Conservative leadership contest, Truss looked triumphant as she took the reins at No. 10 Downing Street and vowed to “transform Britain into an aspiration nation.” She had good reason to be cheerful, too, vacuuming up support from thousands of grassroots Tory members, getting the key Conservative-backing newspapers on side, and confidently brushing off the fact that the majority of her own Tory MPs had doubts about her competence. What did they know, after all? They’d only worked with Truss in Westminster for the past decade.
September 8: Upon taking office, Truss picked her close friend and neighbor Kwasi Kwarteng as her top finance minister, and immediately tasked him with taking on the stale “orthodoxy” at the Treasury. In a savvy first move, Kwarteng immediately sacked the most senior civil servant in the ministry — a man so clever his name is literally Tom Scholar — and so ensured that outmoded, orthodox qualities like “experience,” “credibility” and “economic literacy” were expunged at just the right time … amid a global economic crisis.
Also September 8: A busy day this one, what with Britain’s longest-reigning monarch dying that same afternoon. As the country mourned Queen Elizabeth II, Truss faced her first big communications test on the job: How to capture the nation’s deep sense of grief? She duly rose to the occasion, ripping up lines painstakingly prepared by career officials to deliver a heartfelt tribute with all the enthusiasm of a Q4 sales report. The country wept, for at least one Liz.
September 23: The queen’s death put normal politics on ice for a couple of weeks. But the pause allowed Team Truss to put the finishing touches on their very own Mona Lisa: the mini-budget. A sleeker, more aerodynamic budget than the normal kind, this mini version did away with tired conventions like “independent fiscal scrutiny by the government’s own watchdog,” and “making the sums add up.” Instead, Truss and Kwarteng pressed ahead with debt-funded tax cuts and a multi-billion pound plan to subsidize energy bills. Kwarteng also showed he retained a populist touch with crowd-pleasing measures such as cutting taxes for the U.K.’s super-rich and removing a cap on bankers’ bonuses, all in the middle of a cost-of-living crisis — before heading off to a Champagne reception with hedge fund bosses to party the night away. Cheers!
Woke markets cancel Truss
September 26: Eek. Then came the backlash. Financial markets — famously stuffed with tofu-munching lefties who hate conservatism and everything it stands for — failed to understand the mini-budget’s genius, while the unruly pound, which probably voted to Remain in the EU, crashed to its lowest-ever level against the U.S. dollar. Kwarteng, sounding a little shaken, promised he would publish all his fully-worked-out sums in, oooh, November? That sound OK?
September 28: The pound’s reign of terror continued, and, as U.K. borrowing costs soared and British pension funds teetered on the brink of collapse, those radical communists at the Bank of England were forced to step in with an unprecedented emergency bond-buying program “to restore market functioning.” Their hippie best mates at the International Monetary Fund also got in on the act, saying Kwarteng’s plans would “likely increase inequality” and urging the government to “re-evaluate” its tax measures. Chill out, guys!
Prime Minister Liz Truss is seen returning to Downing Street | Rob Pinney/Getty Images
October 3: Phew — she made it through to the Tory party conference. Political party conferences, after all, are normally a glorious victory lap for newly-crowned leaders, but Truss again decided to smash the status quo by turning hers into a deeply embarrassing few days of U-turns, backpedaling and noisy Tory infighting. Less than 24 hours after insisting she was sticking by her economic plan, Truss suddenly junked her centerpiece proposal to cut taxes for the rich. Kwarteng admitted the idea had “become a distraction” from the government’s “overriding mission.”
October 4: Indeed, the U-turn allowed the real “overriding mission” of the government — to needlessly piss off its own MPs — to shine through. No sooner had the tax cut been ditched than Truss’ ever-loyal Cabinet ministers were onto their next target, publicly pressuring the PM not to impose a real-terms cut to social security payments. One minister even capped off the day by telling a room full of drunk communications professionals that the government’s own comms strategy was “shit.” And who could argue?
October 10-11: A week after ditching their flagship policy, Truss’ government had another go at calming the still-spooked markets. Kwarteng’s new idea? Bringing forward the publication of his next fiscal plan to a date in no way guaranteed to be, erm, spooky: October 31. The Bank of England loved the cut of his jib, again stepping in with a major market intervention to prevent what it called a “fire sale” of U.K. government bonds. Which sounded worrying.
Actually, we really love the orthodoxy, please come back
October 14: After weeks of economic turmoil, Kwarteng was dragged home from a trip to Washington D.C. so that he could be sacked on the spot while still jet-lagged — a bad day at the office by anyone’s standards. Finally free of a chancellor who had repeatedly defied her by *checks notes* implementing her exact policy wishes to the letter, the PM then ripped up her long-standing pledge to ease taxes on big business, admitting in an epic eight-minute-long press conference that she’d gone “further and faster than markets were expecting.” We’ve all been there. Reaching out to the center of the Tory party, Truss appointed former Health Secretary Jeremy Hunt as her new chancellor, shoring up her faltering premiership for a full 36 hours.
October 16: Team Truss’ strenuous efforts to build bridges with her now-mutinous party ramped up another notch over the weekend, as a No. 10 insider branded her former leadership rival and ex-Cabinet colleague Sajid Javid — who had reportedly just been sounded out by Truss’ team itself about the chancellor job — “shit.” It didn’t go down too well with him, or his mates.
October 17: A biggie, as Hunt put a bullet in the entire Truss agenda, live on TV. In an astonishing move, the new finance minister issued a televised statement in which — by his own admission — he ripped up “almost all” the mini-budget pledges the Truss government had announced just a few weeks earlier. Even the energy support plan, clung to by Truss supporters as one of the few remaining positives of her premiership, was to be significantly pared back — although hard-pressed voters should be able to warm themselves this winter by standing near the giant “dumpster fire” that’s been Westminster the past six years. Truss capped another glorious day by avoiding an urgent question in the House of Commons and sending a junior Cabinet minister to reassure angry MPs that the British prime minister was not, in fact, “hiding under a desk.”
October 19: Very much the End Times. A rollercoaster of a day — if rollercoasters only went downhill — as an under-pressure Truss first offered up yet another U-turn, this time on pension payments; then a senior Truss aide was suspended as that clever “shit” quote to the Sunday newspapers got investigated by No. 10; then her home secretary was sacked and posted what was essentially an extended anti-Truss sub-tweet as a resignation letter; and then the government somehow turned a really boring House of Commons vote into a bitter row about “manhandling” its own MPs, as one of them literally cried on live TV. For those watching from abroad — this is why people in the U.K. drink a lot.
October 20: With the game finally up and her authority shot to pieces, Truss bowed to the inevitable and resigned Thursday, reeling off all her achievements in an 89-second statement on the Downing Street steps. Yet all is not lost. Tucked away in a newsroom in London, there’s one little lettuce who never lost hope. And in its still-crisp and delicious center lies the promise of national renewal. We can but dream.
LONDON — Jeremy Hunt, the man brought in to save Liz Truss’ floundering premiership and calm spooked markets, is “not taking anything off the table” when it comes to rethinking the government’s economic policies.
In a round of broadcast interviews Sunday, Hunt — appointed as the U.K.’s top finance minister Friday after Truss sacked Kwasi Kwarteng — left the door open to fresh about-turns on the debt-funded, tax-cutting promises that helped Truss become Conservative leader just weeks ago.
“We are going to have to take some very difficult decisions, both on spending and on tax,” Hunt told the BBC’s Laura Kuenssberg. “Spending is not going to increase by as much as people hoped, and indeed we’re going to have to ask all government departments to find more efficiencies than they had planned, and taxes are not going to go down as quickly as people thought, and some taxes are going go up,” he added.
Hunt — a former Cabinet minister and two-time leadership contender drawn from the center-left of the Conservative Party — is now in an extraordinarily powerful position, having been drafted in to salvage Truss’ premiership amid collapsing poll ratings and economic turmoil.
Conservative MPs have been openly criticizing her leadership, amid fevered speculation in Westminster that the party will try to oust her — a move that would likely require a change to the party’s internal rules and could put the U.K. on its third prime minister this year.
As well as sacking her chancellor, Truss was on Friday forced to abandon a totemic pledge from her leadership campaign, and she will now increase corporation tax as had originally been planned by the man she defeated in the Tory contest, Rishi Sunak. It followed a humiliating climbdown over plans to cut taxes for Britain’s top earners, unveiled in a so-called mini-budget in September that was not subject to the usual scrutiny by Britain’s independent fiscal watchdog and prompted an emergency intervention from the Bank of England and a sharp rise in mortgage rates.
Hunt went armed to his BBC interview with a message to voters and nervous MPs. “One thing I want to reassure families who are worried at home is that our priority, the lens through which we’re going to do this is as a compassionate Conservative government, and top of our mind when we’re making these decisions will be struggling families, struggling businesses, the most vulnerable people and we will be doing everything we can to protect them,” he said.
Pressed on the scope of his revised tax-and-spend plans ahead of a fiscal announcement slated for October 31, Hunt told the BBC: “I’m not taking anything off the table.”
But he warned Conservative MPs against trying to oust Truss, saying a further leadership contest was “the last thing that people really want.”
Elsewhere on Sunday, Tory MPs expressed their anger at the Truss administration. Senior backbencher and education committee chairman Robert Halfon said he was not calling for Truss to go “at this time,” but demanded a “dramatic reset” of her premiership.
The government, he told Sky News, had looked like “libertarian jihadists” who had treated the country like “laboratory mice.” Crispin Blunt, a former minister, became the first to publicly call on Truss to step aside, telling telling Channel 4 News: “U think the game’s up, and it’s now a question as to how the succession is managed.”
Amid efforts by some government ministers to paint the U.K.’s economic woes as entirely global, former Bank of England Deputy Governor Charlie Bean told Sky’s Sophy Ridge show: “Frankly, I think it’s disingenuous to say it’s all a global phenomenon; it’s not.”
On interest rate rises now facing the U.K., Bean argued that around two-thirds is down to global factors, with the rest a U.K.-specific phenomenon that’s developed since the mini-budget. “Basically we’ve moved from looking not too dissimilar from the U.S. or Germany as a proposition to lend to, to looking more like Italy and Greece,” he said.
U.S. President Joe Biden laid into beleaguered U.K. Prime Minister Liz Truss’ tax-cutting agenda Saturday, calling it a “mistake” and warning that a lack of “sound policy in other countries” could hold back the United States.
Truss, just weeks into the job, is fighting for her political life after proposing — and then being forced to abandon — debt-funded tax reductions for Britain’s top earners and businesses that roiled the markets.
The U.K. leader on Friday sacked her top finance minister, Kwasi Kwarteng, and junked a totemic commitment to reduce corporation tax.
Speaking on a campaign stop in Oregon, Biden claimed it was “predictable” that Truss would have to row back on her agenda, which was also openly criticized by the International Monetary Fund.
“I wasn’t the only one that thought it was a mistake,” the U.S. president said of Truss’ plans. “I think that the idea of cutting taxes on the super-wealthy at a time when […] I disagree with the policy, but that’s up to Great Britain.”
With inflation expected to play a major part in the upcoming U.S. mid-term elections, Biden said the American economy remained “strong as hell,” but that he is “concerned about the rest of the world.”
And he added: “The problem is the lack of economic growth and sound policy in other countries. It’s worldwide inflation, that’s consequential.”
Biden’s swipe at the Truss agenda is an unusual move, given that presidents tend to avoid commenting on the domestic policy of allies.
It came as Truss’ newly-appointed chancellor, Jeremy Hunt, signalled further fiscal U-turns could be on the cards.
“We have to be honest with people and we are going to have to take some very difficult decisions both on spending and on tax to get debt falling but the top of our minds when making these decisions will be how to protect and help struggling families, businesses and people,” Hunt said in a statement issued overnight.
Truss and Hunt will on Sunday hold talks at the prime minister’s country retreat, Chequers, the BBC reported, ahead of a fresh economic plan due to be unveiled October 31.
LONDON — In six short weeks, Liz Truss has succeeded in angering all wings of her party. Most now agree she can’t fight the next election.
Britain’s latest prime minister, who won a Tory leadership contest with promises of tax cuts and “growth, growth, growth,” by Friday had driven supporters on the Tory right to send furious WhatsApp messages bemoaning her latest U-turn on corporation tax as more of her planned budget crumbled.
“I’ve never known the atmosphere to be as febrile as it is at the moment,” one veteran Tory MP who backed Truss in the leadership contest said. Another MP who supported her said: “It feels like the end. I think she’ll be gone next week.”
Tory MPs began casting around wildly for mechanisms to oust Truss and candidates to replace her. While party rules make that complicated, rules can be changed and Truss’ removal is fast becoming a question of when, not if. Her only strength at this point, insiders say, is that there is no obvious successor.
With markets showing little signs of being placated by the prime minister’s decision to sack her friend and Chancellor Kwasi Kwarteng, the latest in a series of steps that have tried and failed to calm the turmoil in the three weeks since her budget was announced, there were whispers that some of her former leadership rivals were testing their level of support should they decide to mount a challenge.
A tense, hastily-arranged press conference in which Truss took just four questions and left after 10 minutes did nothing to improve the mood. Her weakness was underlined by the appointment of Jeremy Hunt to the Treasury, a veteran Cabinet minister of the Cameron and May years who backed her rival Rishi Sunak. Steve Brine, an ally of Hunt’s, told the BBC that while Truss would be the “chairman” Hunt would be the government’s “chief executive.”
Craig Mackinlay, a Tory backbencher, messaged colleagues saying of Kwarteng’s departure: “This is a double U-turn with the handbrake on. Never U-turn. Others will smell the blood in the water knowing they can take bites out of your backside & dictate the agenda. No, No, No!”
Tory WhatsApp groups descended into open warfare. One MP messaged colleagues urging them to “show backbone” and claimed the maelstrom had been an invention of the press. A colleague responded to say they were “living in a fantasy world.”
Thérèse Coffey, the deputy prime minister and Truss’ closest ally, held a call with a supportive group of Tory MPs in an attempt to calm the waters at 2:15 p.m. and a second call with to which all Tory MPs were invited later in the afternoon. One attendee at the first meeting said she appeared “emotional” and “very down”.
Andrew Griffith, a Treasury minister, spoke in support of Truss on the 2:15 p.m call and told colleagues that asset managers were “pumped” by the government’s policies, according to one MP present.
Another MP, asked if she had done enough to steady the ship, replied: “Ship’s fine. It’s the crew!”
How badly can we lose?
Truss’ most strident critics now argue that removing her is a matter of national rather than political interest — they are resigned to losing the next election but view her premiership as a threat to the U.K. economy.
Truss’ weakness was underlined by the appointment of Jeremy Hunt to the Treasury | Leon Neal/Getty Images
Some Tory rebels believe there is nothing Truss can do to regain the confidence of the markets. “They want to know that the government understands its parliamentary party and the two are aligned rather than constantly in battle,” one former Cabinet minister said. “Otherwise, why do you trust anything the government says publicly?”
For many MPs, it’s also a question of limiting the damage done to the Tory brand. “A bunch of libertarian entryists have taken over the Tory party,” one rebel MP said. “It’s our Corbyn problem. We now have a choice between landslide and annihilation. You can’t destroy the economy and our reputation for economic competence and expect anything less.”
Truss’ biggest flaw has been her rigidity. She has insisted that the market reaction to her mini-budget was the result of a communication failure rather than a policy error. Her decision to stick to that line and refusal to admit fault at a meeting Wednesday with the organizing group for backbench Tory MPs, the 1922 committee, infuriated MPs.
One well-connected Tory strategist said the prime minister was unfazed by the dire polls. “She doesn’t care about the polling. She says something to the effect of ‘we’re not populists, we need to do what’s right.’ She just doesn’t accept that she needs people to buy into her plans.”
A group of Tory MPs have settled on the idea of a joint ticket of Penny Mordaunt and Rishi Sunak to take over from Truss. “Rishi and Penny got over two-thirds of the parliamentary party between them on the final MPs ballot,” one Tory rebel organizer said. “You have a critical mass already backing them.”
In a message leaked to POLITICO, Crispin Blunt told colleagues in a Tory backbench WhatsApp group on Friday afternoon: “Enough. Emergency repair needed for our party and our country. Step forward Rishi and Penny, with our support and encouragement in the interests of us all.”
But it is unlikely that other leadership hopefuls will be content to give the pair a free run.
What now?
Ousting Truss this year would make her the shortest-serving prime minister in British history.
But orchestrating her exit is easier said than done. One mechanism under discussion is changing party rules to allow for Truss to be challenged — ordinarily she is immune for the first year of her premiership — and for Tory MPs to choose her successor without a vote by the grassroots membership.
One member of the 1922 committee executive, which oversees leadership rules, said no change had been discussed and that none was currently anticipated.
Another mechanism being mooted in some quarters is getting a majority of Tory MPs to agree on her replacement and installing the new prime minister via a majority vote in the Commons. Such a move might be technically possible but would drag the King into a constitutional row, with opposition parties demanding an election if Truss cannot command a parliamentary majority.
Labour leader Keir Starmer called for a general election to be triggered | Oli Scarff/AFP via Getty Images
And getting all Tory MPs to agree on a candidate would be no easy feat, particularly at a time when the party is so viciously divided.
Truss’ defenders are strident in their criticism of those plotting to get rid of her. A Tory MP who backs Truss said “a lot of people are getting really rather overexcited.”
“The wild talk about replacing her as a unity candidate at this particular stage is not going to go down very well,” the MP said. “Colleagues who do this sort of thing ought to start to think about the impression that they give to their own associations. The Conservative Party doesn’t like what it perceives as disloyalty.”
When former Prime Minister Boris Johnson won an 80-seat majority — which has now been whittled down to 69 seats — the general assumption was that the Tories would govern for at least two terms.
The electoral challenge facing Labour — winning back enough seats in the north and in Scotland while also gaining ground in the south — was seen as too great. But Tory MPs point out that on current polling figures, those calculations are blown out of the water.
Both the Labour leader Keir Starmer and the Liberal Democrat leader called for a general election to be triggered on Friday. If Labour’s current lead in the polls were to be replicated in an election, the party would win more than 400 seats, dwarfing even Tony Blair’s landslide 1997 victory.
Labour’s lead will almost certainly narrow when an election comes. But many Tory MPs believe the damage of the past months will take a long time to repair — and that Labour is certain to win the next election as a result.
“We don’t know whether it goes on for three months, six months, or another year,” said a former Cabinet minister, “but the thing is bust.”
LONDON — British Prime Minister Liz Truss has fired her finance minister, Kwasi Kwarteng, as she fights to hang on as prime minister after her budget crashed the markets.
In a hastily-arranged press conference, Truss defended her “mission” to deliver a “low tax, high wage” economy that prioritizes growth. She announced that she will reverse her proposal to halt a planned rise in corporation tax and tighten public spending, conceding that parts of her budget went “further and faster than markets were expecting.”
Downing Street announced Jeremy Hunt, who has previously served as health secretary and foreign secretary, would replace Kwarteng as chancellor.
Despite several attempts to calm the markets, including reversing a plan to cut tax for the highest earners and bringing forward a more detailed budget statement, Truss has struggled in the face of sustained economic and political pressure. The decision to call an audience with the press — generally taken in exceptional circumstances — underlines the precariousness of her position little more than a month after she took office.
Truss’ team hopes that in firing her chancellor she will save her premiership, though that looks doubtful given a lack of support among Tory MPs in part because the plan to cut taxes was central to her campaign for the Conservative party leadership this summer.
Chancellor Kwarteng cut short a trip to Washington for meetings with the International Monetary Fund as his recently announced plans for major tax cuts came under increasing strain in the face of market turmoil.
In a letter to the prime minister, Kwarteng wrote: “We have been colleagues and friends for many years. In that time, I have seen your dedication and determination. I believe your vision is the right one. It has been an honour to serve as your chancellor. Your success is this country’s success and I wish you well.”
The Times reported that ministers would now increase corporation tax whereas they had previously planned to freeze it, in line with suggestions made to POLITICO earlier this week.
Truss “must come up with a credible tax policy and that will involve some retrenchment from the announced position,” a senior government insider told POLITICO’s London Playbook.
Kwarteng had been due to announce a “medium-term fiscal plan” with full details of how the government plans to balance the books on October 31.
Rachel Reeves MP, Labour’s shadow chancellor, said: “Changing the Chancellor doesn’t undo the damage that’s already been done. It was a crisis made in Downing Street. Liz Truss and the Conservatives crashed the economy, causing mortgages to skyrocket, and has undermined Britain’s standing on the world stage.”
“We don’t just need a change in Chancellor, we need a change in government,” she added.
As Britain’s central bank boss, tasked with managing inflation and setting interest rates, Andrew Bailey likes targets. Now he is one.
Markets are dumping U.K. assets amid chaotic policymaking from Liz Truss’ new government — but Bailey’s rocky stewardship of the Bank of England is getting a growing share of the blame. His harshest critics include some of Truss’ most senior Conservative Party colleagues.
At stake are home loans for 2 million households coming due for renewal amid cripplingly high interest rates in the next two years and the viability of pension funds managing more than £1 trillion worth of assets. Failure to quell a “fire sale” of U.K. bonds and currency risks a financial meltdown that could spread far beyond British shores.
The current bond market pressure began after U.K. Chancellor Kwasi Kwarteng announced a vast package of unfunded tax cuts, stoking investors’ fears about the long-term sustainability of the government’s debt.
The dramatic selloff of government bonds sparked a panic at U.K. pension funds, which couldn’t handle the price falls, and has huge knock-on impacts for mortgage rates and borrowing costs.
The political fallout has so far landed on Truss’ government’s shoulders — prompting U-turns on key policies as opinion polls showed cratering support.
Yet before the U.K.’s self-inflicted turmoil, Bailey was feeling political pressure over the central bank’s handling of double-digit inflation and the rising cost of living that comes with it.
While No. 10 refuses to be drawn on the Bank’s decisions, Business Secretary Jacob Rees-Mogg suggested a failure to raise interest rates quickly was at the root of the turmoil in financial markets.
He dismissed it as “commentary” to draw a direct link between the government’s mini-budget and concerns over the U.K.’s financial stability that led to emergency intervention from the Bank, adding that pension funds’ “high-risk” activities had played a role.
“It could just as easily be the fact that the day before, the Bank of England did not raise interest rates by as much as the Federal Reserve did,” he told the BBC’s Today program.
In another apparent swipe at the Bank, Rees-Mogg added: “The pound and other currencies have been falling against the dollar because interest rates in the U.S. have been rising faster than they have in other markets.”
In the immediate aftermath of Kwarteng’s disastrous mini-budget, the Bank seemed to be in command of the situation when it stepped in to calm the pension fund crisis and refused to be pushed into an early interest rate rise by markets. But two further interventions this week and confusion over stark comments from Bailey himself risk undermining that impression.
The governor on Tuesday issued a rare ultimatum to beleaguered pension funds struggling to meet cash calls in the government bond market. “You’ve got three days left now. You’ve got to get this done,” he warned at an event in Washington.
The bank has effectively bailed out pension funds since the U.K. government’s mini-budget roiled the markets. The bond-buying intervention is intended to offer temporary relief and give the affected funds time to raise enough cash to handle historic surges in yields.
Bailey’s message appeared to be aimed at upping the pressure on funds to sell assets in time rather than expecting an extension beyond Friday’s deadline. “We will be out by the end of this week,” he said.
Yet the remarks seemed to backfire instantly, sparking a sharp fall in the pound, although it has since recovered.
U.K. government borrowing costs also increased again on Wednesday, with the yield on 30-year gilts moving above 5 percent — the level that first sparked the bank’s intervention — before dropping back after the Bank used its firepower to buy £4.4 billion of gilts.
Financial market experts think the governor’s comments were a mistake that will force the bank into following the government’s recent U-turns.
Mike Howell of CrossBorder Capital described Bailey’s words as the “shortest suicide note in history,” and said the governor will have to change course.
“Andrew Bailey’s insistence that emergency support will end on Friday is an unsustainable position that we expect to be reversed quickly,” said Oxford Economics chief economist Innes McFee.
If the Bank loses credibility, its ability to rescue the economy from market disruption will be severely hampered. Increasingly costly interventions will yield ever more limited results if investors lose faith in the U.K.’s most important financial institution.
Before Bailey’s comments on Tuesday, one markets strategist said the Bank could “test the water” by stopping the program on Friday and then restarting if necessary — but that would be risky because it’s unclear how much yields would have to rise before triggering the same problems at pension funds.
“While a very able central banker, he has spent most of his career outside the BoE’s monetary policy and markets areas,” said EFG Bank chief economist Stefan Gerlach, previously a central banker himself.
“He is not the best fit for the job, given the nature of the problems the Bank is facing now. His communications missteps over the last year were damaging,” he said, pointing to Bailey’s confusing guidance on interest rates. “It’s like the fire brigade saying ‘you have to have your fire before Friday because then we are heading home.’”
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LONDON — Try as she might, Liz Truss just can’t calm the markets.
Despite reversing her plan to cut tax for the highest earners, bringing forward a more detailed budget statement by almost a month and halting the appointment of a controversial senior civil servant to oversee the Treasury, the Bank of England was again forced to step in to try to stabilize market turbulence.
Insiders pointed to the surprise appointment of James Bowler to the Treasury top job, passing over Antonia Romeo, who it was widely briefed had got the role, as a sign of No. 10’s anxiety.
“The PM is panicking and reaching for almost anything that she can do to calm the situation. She was so burnt by the fallout from mini-budget that anything that seemed bold, she now wants to massively trim back,” said a senior Whitehall official.
Treasury officials say that Chancellor Kwasi Kwarteng’s tone in the past week has become markedly more conciliatory as he tries to steady the buffs.
But in spite of these U-turns, the current market unease may be out of the government’s hands.
The so-called mini budget came at a particularly fragile time for the economy, caused by high inflation and the Bank of England’s attempts to end a policy that saw it buy up huge quantities of government debt, originally an attempt to stabilize the economy in the wake of the 2008 financial crisis.
Kwarteng’s tax cuts, presented without any detail about how they would be funded, spooked the markets, triggering a crisis at U.K. pension funds because the huge spike in yields forced them to bonds — but that then forced prices down further.
The Bank of England intervened with a £65 billion check book to give pension funds more time to raise cash and stop the so-called doom loop taking hold. Governor Andrew Bailey said Tuesday the Bank’s emergency support will definitely end Friday, prompting fears this may not be enough time.
The resulting crisis leaves Britain’s new prime minister with an intensifying political problem, as support ebbs away the longer it takes to tame the markets.
Jill Rutter, senior fellow at the Institute for Government and former Treasury official, said: “Paradoxically, having said they were the people to take on the Treasury orthodoxy, they are now walking on such thin ice that they are complete prisoners of the most orthodox orthodoxy.”
Staying alive
The race is now on for Kwarteng and his Treasury team to come up with a way to restore credibility by the end of October, when he is due to explain how the tax cuts will be paid for.
“It’s really difficult to see how you can have a vaguely deliverable plan to bring that back under control,” said the IfG’s Rutter, who pointed out that trying to find money from one-off events such as asset sales would not help the underlying fiscal position.
“If you’ve still got a pension fund problem with collateral issues, what [the government] give you on the 31st will probably not be that relevant, because you’ll still be dealing with a bigger problem,” said one markets strategist, speaking of condition of anonymity.
“If you as a government have somewhat stabilized [pension funds] … the currency is going to react based on how [the market] views the overall fiscal long-term sustainability.”
But the government’s dented reputation will be hard to rebuild. “If the root cause is fiscal policy, then the issue probably isn’t going to go away until the markets’ concerns over fiscal policy have eased,” said Paul Dales, chief UK economist at Capital Economics.
“That makes the chancellor’s medium-term fiscal plan on 31 October a very big event for the gilt market, the pound and the Bank of England. Our feeling is that the chancellor will have to work very hard indeed to convince the markets that his fiscal plans are sustainable.”
Ministers originally said their plan for £43 billion in tax cuts would be funded by borrowing and economic growth, but experts now warn it will require reductions in public spending.
The Institute for Fiscal Studies think tank predicted the chancellor would need to spend £60 billion less by 2026-2027, while the International Monetary Fund released a report calculating that high prices will last longer in the U.K. than many other major economies..
Ahead of the mini-budget, the Resolution Foundation’s Torsten Bell spelled out why this could have a lasting effect. “The big picture in a world where interest rates are rising and inflation is high, is that you don’t want to be seen as the one country that everyone decides is a bad bet.”
“Showing how serious you are is important,” he added. “If we are really arguing that our growth strategy is to borrow lots more and then that will pay for itself then they [the markets] don’t believe that.”
One government official speculated that in order to fill the hole in public finances and make the numbers add up Truss and Kwarteng would be forced to U-turn on further aspects of their mini-budget, such as the decision to cancel a planned corporation tax rise.
In the meantime, it’s not just the markets that remain unconvinced by Truss’ and Kwarteng’s approach.
At the chancellor’s debut session of Treasury questions in the Commons Tuesday, senior Tory MPs queued up to openly cast aspersion on his strategy.
Former Cabinet minister Julian Smith asked for reassurance that tax cuts “will not be balanced on the backs of the poorest people in the country” — normally an attack line reserved for opposition MPs.
Treasury committee Chairman Mel Stride warned that if Kwarteng did not seek buy-in from fellow MPs on the next fiscal statement it would upset the markets again.
The PM’s spokesman reiterated Tuesday that Truss is “committed to the growth measures set out by the chancellor” and “the fundamentals of the U.K. economy remain strong.”
While that statement continues to be tested, so will the position of the prime minister and her chancellor.
Annabelle Dickson contributed reporting.
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King Charles III will not be traveling to Egypt for the COP27 climate summit next month, after U.K. Prime Minister Liz Truss advised him to stay away, the Sunday Times reported.
The monarch, a lifelong environmental campaigner, had planned on giving a speech at the 27th United Nations Climate Change Conference, taking place in Sharm el-Sheikh between November 6-18. It would have been his first overseas tour as king.
Truss objected to the plan during a private audience at Buckingham Palace last month, according to a royal insider cited by the newspaper. The person also said the decision was made “entirely in the spirit of being ever-mindful as king that he acts on government advice.”
Last year, both Charles and his mother, the late Queen Elizabeth, delivered speeches at the opening ceremony of the COP26 summit in Glasgow, Scotland. In contrast to his mother, Charles has been throughout his life significantly more vocal regarding his political views, campaigning for such things as organic farming and action on climate change.
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