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  • The specter of Liz Truss still haunts Britain

    The specter of Liz Truss still haunts Britain

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    LONDON — A year is a long time in politics — but the reverberations of the surreal fall of 2022 are still being felt across the U.K.

    Wednesday marks the first anniversary of Liz Truss’ ill-fated appointment as prime minister — a year on from that rainy day in September when she stood outside No. 10 Downing Street and vowed to “transform Britain” with free market shock therapy. 

    Truss’ £45 billion package of unfunded tax cuts — with the promise of more to come — instead sunk the pound, sent interest rates soaring, caused chaos on the bond markets and forced the Bank of England to prop up failing pension funds.

    Humiliated, Truss had little choice but to junk her entire economic program and less than four weeks later she was gone — the U.K.’s shortest-ever serving prime minister, famously outlasted by a supermarket lettuce.

    The legacy of the period still is fiercely debated among Britain’s left and right-wing commentariat. In Westminster, some Tory factions still push for Truss’ successor Rishi Sunak to embrace her brand of free market economics.

    But the period sticks in the memory of most ordinary Brits as one of high farce and incompetence and significantly, it’s a view shared in boardrooms across London and beyond.

    “It was such a short, sharp, weird time. It had such a febrile sense of impending doom,” said one partner at a Big Four accounting firm who was granted anonymity — like other figures quoted below — to speak candidly about Truss for this article.

    The money men

    Senior employees of major financial and professional services firms say Truss’ brief period in office still taints Britain’s reputation around the globe.

    Annual Foreign Direct Investment (FDI) into the U.K., already down significantly since the 2016 Brexit referendum, fell further — behind France — last year, according to an EY survey.

    Britain has also been the second-worst performing G7 economy post-COVID, despite an upgrade in GDP growth figures by the Office for National Statistics last week.

    The U.K.’s stuttering economic growth since the pandemic always was going to put a dent into Britain’s prospects for international investment. Experts give a myriad of reasons for Britain’s decreasing international competitiveness.

    But a director at one U.S. investment bank said: “The No. 1 issue I hear from clients is that the U.K. is still un-investable because of what happened last year in Westminster, particularly with what happened during Liz Truss’ time in office.”

    Senior employees of major financial and professional services firms say Truss’ brief period in office still taints Britain’s reputation around the globe | Leon Neal/Getty Images

    A managing director at another investment bank agreed. “This stuff matters for clients who are looking at the U.K., seeing three different prime ministers and four different chancellors in a matter of a few months, and saying ‘why on earth would we choose that place to build our new factory?’ The results of that will still be felt today.”

    Such views are confirmed in a recent survey by transatlantic lobby group BritishAmericanBusiness and management consulting firm Bain and Co. 

    The survey found U.S. business confidence in Britain has sunk for the third straight year, with political instability cited as a key factor.

    BritishAmericanBusiness’ chief trade and policy officer Emanuel Adam said: “The instability in No. 10 last autumn, coupled with ongoing concerns over Brexit, growth prospects and taxation have led to a drop of confidence in the U.K. for a third year in a row.

    “The message from U.S. investors is clear. They are calling for a stable political environment and business friendly policies from the U.K. government.”

    But if foreign direct investors have been put off, the pound’s stronger-than-expected performance since Truss left office suggests they may have compensated with other forms of inward flows.

    The Big Four partner quoted at the top of the article says Truss’ disastrous premiership was one of several factors making the British economy less competitive on the world stage.

    “Trussonomics plus Brexit plus political uncertainty plus a misplaced sense of British exceptionalism are all contributing to making Britain a less attractive place than we ought to be,” they said.

    “I’m aware of real-life examples of decisions being made to invest elsewhere, because they couldn’t be confident about the stability of their return on investment.”

    Gloom in Westminster

    But even more than the U.K. economy, it is Truss’ Conservative Party which is haunted most by the specter of her brief tenure.

    Polling from Ipsos shows the British public’s trust in the Conservatives to manage the economy fell off a cliff during Truss’ time as prime minister, and has never recovered.

    With an election looming next year, their Labour opponents — now 18 points ahead in the polls — cannot believe their good fortune.

    “The two most important things for an opposition are to be able to show people that they can be trusted to protect the economy, and trusted with the defence of the realm,” said one Labour shadow Cabinet minister. “Liz Truss did a lot of the heavy lifting in allowing us to get a hearing on the economy from the public.”

    One moderate Tory MP, and Sunak supporter, said “the damage done by the 49 days of Truss could still be the thing that loses us the next general election.”

    “At least part of the party’s problem at the moment is that although the economy is starting to improve, no one is going to give us the credit for that because of the seismic events of last year,” they said.

    Julian Jessop, an independent economist who acted as an informal adviser to Truss during her leadership campaign, agreed that the public became infuriated once mortgage rates began to surge during last September’s financial meltdown, but said “it is a bit much” to continue to blame the Tories’ poor polling on the former PM.

     “If that were the big problem, then confidence should have recovered,” he said. “We have a new prime minister in place.”

    A different view

    Indeed some economists — and Truss defenders — see the past 12 months in a very different light.

    Even more than the U.K. economy, it is Truss’ Conservative Party which is haunted most by the specter of her brief tenure | Ian Forsyth/Getty Images

    They point to bond yields which recently have hit similar levels to the worst moments of the Truss era, thanks to successive Bank of England rate rises.

    Truss’ prediction that inflation would help the U.K. eat through some of its debt pile — used as justification for funding her tax cuts through borrowing — has also been borne out in reality. And tax receipts have come in higher than expected this year, thanks to larger than expected growth and inflationary pressures.

    Truss’ former Chancellor Kwasi Kwarteng, speaking on a forthcoming episode of POLITICO’s Westminster Insider podcast, insisted that while he and Truss admittedly pushed it “too much, too far,” their overall policy direction was sound.

    “I think there’s a big lesson in life,” he said. “It’s all very well thinking you’ve got the right answer, but you’ve also go to have a staged, methodical approach to getting to the answer.”

    Russell Napier, author of The Solid Ground investment report, added the unexpectedly strong performance of sterling against the U.S. dollar and other major currencies this year indicates capital inflows into Britain must be stronger than expected.

    “Is there something that’s unique and dangerous about the U.K.? No there isn’t,” Napier added. “Our bond yields are at a dangerously high level, but so is the bond yield of Sweden and France, and Canada and South Korea and Australia.

    Some of Truss’ closest supporters on the Tory backbenches have now set up pressure groups to fight for the type of low-tax policies advocated in her time in office.

    Truss, for her part, is writing a book which aides suggest will be “more manifesto than autobiography.” She is also giving a keynote speech on the economy this month — just five days after the anniversary of her ill-fated “mini-budget.”

    But for many Tory MPs still feeling the political repercussions of her tenure and fearing a brutal defeat at next year’s election, a period of silence would be welcome.

    “It could be worse,” notes one Tory MP, a minister under Sunak. “It could have been a lot worse if she’d stayed.”

    Izabella Kaminska contributed reporting.

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    Stefan Boscia

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  • So Rishi Sunak is the UK’s next prime minister. What happens now?

    So Rishi Sunak is the UK’s next prime minister. What happens now?

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    LONDON — It took one bruising campaign defeat and six weeks of exile — but on Tuesday, Rishi Sunak will finally become U.K. prime minister.

    He faces the toughest in-tray of any British leader since World War II, entering No. 10 Downing Street as the country hurtles into winter with energy bills, hospital waiting lists, borrowing costs and inflation all soaring.

    The challenge has been magnified by Liz Truss’ brief crash-and-burn premiership. As a result of her now-infamous mini-budget, which was scrapped almost in its entirety after causing chaos in financial markets, the Conservatives are trailing the opposition Labour Party by over 30 percentage points in opinion polls.

    On Monday, Sunak told MPs he was ready to hit the ground running as he addressed them for the first time since becoming Tory leader. Over the days and months ahead, he will need to carry out his first ministerial reshuffle without further fracturing his party; oversee the first budget since the last one wreaked havoc on the economy; and determine what support to offer voters with their energy bills past this spring.

    Prime ministers tend to think of their first 100 days as a way to set the tone for their premierships. For Sunak, who has just over two years to govern before he is required to face a general election, that first impression is going to be particularly important.  

    October 25 — Meeting with the king and first speech outside No. 10 Downing Street

    Sunak will become the prime minister Tuesday after an audience with King Charles III, where he will ask the monarch for permission to form a government.

    Sunak will then address the country for the first time as prime minister from the steps outside No. 10 Downing Street at around 11.35 a.m.

    To much of the British public, the former chancellor is a familiar face who announced the wildly-popular furlough scheme during the coronavirus pandemic in 2020.

    His task now will be to reassure people that the government will support them during another difficult economic period — only this time he is in a much tougher position. The popularity he gained during the pandemic has waned, and he is taking over after a major government crisis — the third Tory prime minister to hold office within three months.  

    October 25 — First reshuffle

    The first big political test for Sunak will be his Cabinet reshuffle. Tory MPs believe he will learn the lesson from Truss’ first and only one, where she divvied up roles between her allies and left almost everyone who didn’t back her out in the cold.

    “I think his reshuffle will be more unifying, bringing in people from all wings and will not be as destabilizing as Liz’s,” an MP who did not back Sunak predicted.

    Sunak’s leadership rival Penny Mordaunt is expected to be handed a major Cabinet position | Dan Kitwood/Getty Images

    Sunak is likely to make at least his major Cabinet appointments Tuesday afternoon, so they are in place to line up alongside him on the House of Commons’ front bench when MPs grill him during so-called prime minister’s questions (PMQs) on Wednesday.

    His biggest decision will be whether to keep Jeremy Hunt — who was drafted in by Truss in a last-ditch effort to save her premiership — as chancellor. He is also likely to hand a big job to his leadership rival Penny Mordaunt.

    Close Sunak allies who are likely to get promotions include Mel Stride, the current chairman of the Treasury select committee, Craig Williams, Claire Coutinho and Laura Trott. Tory big beast Michael Gove could see a return to Cabinet.

    October 26 — First PMQs

    Sunak will go head-to-head as prime minister with Keir Starmer, the Labour leader, for the first time on Wednesday.

    Unlike his predecessor, Sunak won’t have much to worry about from his own side — Tory MPs have largely rowed behind him since he became their leader on Monday, with many expressing relief that the perpetual state of crisis of the Truss government has ended.

    But MPs will want him to demonstrate that he can land blows against Starmer at a time when Labour is streets ahead in the polls. Sunak told Tory MPs on Tuesday that their party faced an “existential threat” as a result of its low poll ratings.

    October 28 — Deadline to form a government in Belfast

    If a power-sharing arrangement is not in place at Stormont by Friday, a fresh set of elections to the Northern Irish assembly will have to be triggered.

    Calling these elections — the second set in seven months — could be one of the Sunak government’s first acts and an indication of successive Tory prime ministers’ failure to deal with the political crisis in Northern Ireland.

    The Democratic Unionist Party issued a fresh warning on Monday night that it would not participate in the assembly unless Sunak takes action on the post-Brexit Northern Ireland protocol agreed with the EU.

    October 31 — First budget

    The next budget was penciled in for October 31 by Kwasi Kwarteng, the Truss-era chancellor who wanted to use it to reassure financial markets still reeling from his last one.

    The timing of the budget — widely derided by Tory MPs because of the optics of holding it on Halloween — was intended to give the Bank of England time to react before its own key meeting on November 3, where it will set interest rate levels for the weeks ahead.

    In its biggest test so far, Sunak’s government will have to decide whether to stick with that date; what actions to take to reassure the markets; and how to fill the enormous hole in the U.K. public finances.

    Carl Emmerson, deputy director of the Institute for Fiscal Studies, said: “If his chancellor is Jeremy Hunt and Sunak is comfortable with the way things are proceeding for next Monday, then going ahead has lots of advantages.

    “You get the announcement out before the Bank of England makes its next inflation figure, and you get the Office for Budgetary Responsibility forecasts out there, which helps show the markets you are serious about them.

    “The case for changing that date is much stronger if Sunak says, ‘Actually, I want to do something different to what Jeremy Hunt has been planning, and I need more time,’” Emmerson added.

    November 3 — Bank of England rates meeting

    The Bank of England’s monetary policy committee is expected to raise interest rates at its meeting on November 3, triggering a fresh hike in people’s mortgages.

    This is the point when many people will realize for the first time that they will have to make much larger mortgage repayments once their current fixed-rate deals come to an end.

    Sunak made combating inflation and keeping mortgages low a central theme of his leadership campaign over the summer. Reacting to the rates decision and ensuring the government works closely with the Bank of England to combat inflation will be a key test of his premiership.

    November 6 — COP27 summit in Egypt

    Sunak made a point of telling Tory MPs on Tuesday that he is committed to the U.K.’s goal of achieving net-zero carbon emissions by 2050.

    The question now is whether he attends the COP27 climate summit in Sharm El Sheikh, Egypt. Truss reportedly planned to go, despite her skepticism of aspects of the net-zero agenda.

    If Sunak does go to Egypt, it could be his first foreign trip in office (unless he decides to make a quick visit to Ukraine beforehand) and his first opportunity to present himself on the world stage.

    November 8 — Boundary changes

    The Boundary Commission for England will publish its new constituency map on November 8.

    At this point, some Tory MPs will know with near certainty that their constituencies are being carved up between neighboring areas, with some forced to jostle with colleagues over who will get to stand where.

    It will be a political headache for Sunak to deal with, and any MPs whose safe seats become marginal will sense their political careers coming to an end — and will have less of an incentive to support him in key votes in the months ahead.

    November 13 — G20 meeting in Indonesia

    The next big foreign trip coming down the track is the G20 summit in Bali, Indonesia.

    The meeting will be an opportunity for Western powers to present a united front against Russia following its invasion of Ukraine and against China’s increased aggression toward Taiwan, but also to hold talks behind closed doors. There have been reports that both China’s Xi Jinping and Russian Vladimir Putin will attend.

    Sophia Gaston, the head of foreign policy at the Policy Exchange think tank, said this was shaping up to be “one of the most extraordinary summits of modern history, with a violent war raging in Ukraine and the leading protagonist, Vladimir Putin, on the guest list alongside other autocratic leaders and outraged democratic allies.”

    “As well as promoting free trade and the rules-based international order, Sunak would likely see the G20 as an opportunity to build support for his proposed ‘NATO-style’ technology alliance,” Gaston said. “He may well also debut a new U.K. message on the net-zero transition.”

    Late November or early December — Chester by-election

    Labour whips are preparing to trigger a by-election in the city of Chester in late November or December.

    The by-election is taking place because the city’s MP Christian Matheson resigned after a parliamentary watchdog recommended he be suspended for sexual misconduct.

    Matheson sits on a 6,164-vote majority, and the seat has traditionally been a swing seat flipping between the Tories and Labour. It was Conservative up until 2010.

    Based on current polling figures, Labour should win a significantly larger majority than it currently has, though by-elections do suffer from small turnouts and so unexpected results are not uncommon. A dramatic Tory defeat would set alarm bells ringing in the party.

    Another by-election could be triggered in the coming months if, as expected, Boris Johnson elevates his ally and MP Nadine Dorries to the House of Lords in his resignation honors. That would likely be the first by-election in a Tory-held seat fought with Sunak as party leader.

    December 31 — U.K. deadline for joining trans-Pacific trade bloc

    The U.K. government has said it hopes to conclude negotiations on joining the CPTPP — a trade agreement signed by 11 countries including Australia and New Zealand — by the end of the year.

    Securing this deal was one of Truss’ priorities. For Sunak it would represent both a concrete foreign policy achievement and an indication that the U.K. is successfully building closer diplomatic ties with countries in the Indo-Pacific after Brexit.

    Talks around the partnership have thrown up some diplomatic obstacles, with China reacting angrily to U.K. trade officials meeting Taiwanese counterparts. Both China and Taiwan have applied to join the CPTPP.

    December or January — Johnson’s probe concludes

    The Commons privilege committee’s probe into whether Johnson misled parliament over the so-called Partygate scandal will begin taking evidence in November and is expected to conclude in December or January — though it could drag on longer.

    There have been suggestions that the evidence against him is so damning that Johnson could face temporary suspension from parliament or even be kicked out as an MP. The inquiry may have formed part of Johnson’s decision not to stand for the Tory leadership contest.

    If the privileges committee says Johnson should be sanctioned once it concludes its inquiry, Sunak will have to judge his response and decide whether to whip Tory MPs to back its recommendations even if that provokes Johnson’s ire. There is also the risk that Sunak himself will be dragged into the probe, given he too was fined over the Partygate scandal.

    Early January — COVID inquiry takes evidence

    The independent inquiry into the government’s handling of the coronavirus pandemic could begin gathering evidence at the start of next year.

    Among other things, the probe will examine the impact of the economic policies that Sunak designed as chancellor during the pandemic, putting his decisions under scrutiny.

    His “Eat Out to Help Out” scheme — which encouraged people to dine in restaurants during the post-lockdown summer of 2020 — could become a focus, with critics claiming it drove up coronavirus-related infections and deaths.

    February — Energy support nears its end

    By the time Sunak’s first 100 days are up, there will be pressure on the government to explain how it will support people with their energy bills past the spring if wholesale gas prices haven’t drastically fallen. Hunt has already rolled back the Truss government’s two-year guarantee and instead capped people’s energy bills at an average of £2,500 for just six months. That policy ends in April.

    The Institute for Fiscal Studies’ Emmerson said: “We’ve got a big generous offer from the government through this winter — although prices are still a lot higher than they were last year, they will be nowhere near as high as they would have otherwise been.

    “The prime minister and chancellor will spend a lot of time thinking about how they replace that scheme. In some ways, it’s very similar to the kind of furlough scheme that Sunak had during the pandemic — very generous, big scheme with lots of crude edges to it,” he said.

    “It’s understandable wanting to get in place quickly to support people, but how do you get out of it? Do it too quickly and that’s too much pain for too many people — keep it in place for too long, and that’s very expensive to the government.”

    It’s just one of so many enormous decisions the new PM faces in his first 100 days.

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    Eleni Courea

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  • The Brexit cult that blew up Britain

    The Brexit cult that blew up Britain

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    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.

    On Thursday morning, after a disastrous attempt to force her MPs to vote against their own manifesto pledge not to re-start fracking projects around the U.K., she accepted the game was up.

    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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  • ‘Beaten by a lettuce’: 44 glorious days of Liz Truss

    ‘Beaten by a lettuce’: 44 glorious days of Liz Truss

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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.

    This article was updated to correct a date.

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    Matt Honeycombe-Foster

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  • Family Offices Could Teach UK Banks A Thing Or Two About Uncapped Bonuses

    Family Offices Could Teach UK Banks A Thing Or Two About Uncapped Bonuses

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    As the UK’s mini budget, second mini budget and upcoming full budget come under fire from all directions, there is one thing that everyone is talking about and that is bankers bonuses.

    Despite tax reductions being reversed, another chancellor being removed from Cabinet and a two-year energy cap, being uncapped, one thing staying firmly on the agenda is the decision to reverse a regulatory cap on bonuses in the UK banking sector and the rest of the Kingdom is questioning why.

    While the UK tries to answer that question, we explore how uncapped bonuses already work in Family Offices and the lessons that could be learned for banks once passed.

    The move was proposed by former chancellor Kwasi Kwarteng in a bid to make London more attractive for global banks and for workers amid what is being widely described as a talent shortage. It is also thought to offer more long-term incentives to critical banking professionals, something Family Offices know a thing or two about.

    Family Offices are not regulated, therefore, nor is their compensation. This allows some Family Office professionals to walk away with extraordinary amounts of wealth every year and in return, it keeps Family Offices alive.

    82% of Family Office Executives receive a performance bonus. While this will differ from Family Office to Family Office, there is no regulatory cap in place and based on our annual research, we have found the average Chief Investment Officer receives 31% – 50% of their salary as a bonus in the UK while in the US, this often sits at the 100% mark. For Chief Executive Officers and Managing Directors, this figure sits between 51% and 75% of annual salary. This means CIOs often walk away with more than $792,000 in the US while CEOs in the UK earn around $612,500 a year.

    These figures might not appear to be as high as those you see in Investment Banks today but in Family Offices, money isn’t everything. Despite boasting some of the world’s greatest wealth, working for a Family Office is very rarely about the compensation you receive. While compensation must be benchmarked and standardised and is very rarely low, it is often more about being able to make a greater impact – working in an intimate team with unlimited liquidity to achieve a shared long-term objective.

    Working in a Family Office also offers unrivalled security which we saw following the pandemic when Investment Bankers pulled 100-hour weeks in an attempt to claw back any hope of a bonus in a time broadly referred to as ‘bonus backlash’ while Family Office Professionals walked away with 100% if not 200% of their annual salary as bonus season closed a successful year for Family Offices.

    This is also not to say the average figures given above are representative of every Family Office. We work with a Family Office where the Chief Investment Officer receives a basic salary of over £2M a year without any additional bonus or incentive. He has a very meritocratic bonus structure in place to reward his entire team.

    He said: “Our bonus structure is simple. It is not dependent on the success of an individual asset class nor does it differ based on the liquid/ illiquid nature of the asset. Each employee is able to take home 100-200% of their salary as a bonus each year, dependent on the upside return and their own personal performance. We say it is discretionary as we frequently boost the figures to ensure they walk away with more than the matrix suggests. This year every single employee has walked away with 150-200% of their annual salary and we believe it is this ‘share the pot’ mentality which has awarded us a loyal and motivated team.”

    Ultimately, uncapped bonuses are used to motivate, engage and embed critical professionals into the Family Office but they are not used in isolation. The most important instrument, and one that banks can learn from, is a Long-Term Incentive Plan (LTIP
    TIP
    ) and how above any type of traditional bonus, when implemented effectively can engage staff, align interests and incentivise them to stay within your organisation for as long as they can – something Family Offices require to survive and something that would banks could benefit from. One of the reasons in fact cited by Kwarteng to push ahead with this move as high-base salaries and low-bonuses are creating a churn of workers and driving up costs for British banks.

    LTIPs were traditionally delivered in the form of a performance share but have evolved in the world of Family Offices to incorporate a whole host of rewards including Carried Interest, Stock Options, Co-Investing Opportunities, Forgivable Loans and Matched Investment. Professionals with longer term reward structures are most content and driven to succeed within their Family Office and according to a recent Agreus survey, believe that LTIPs are far more important than any monetary annual compensation as it helps them to feel valued.

    LTIPs also proved to be particularly useful during the pandemic when a variety of factors made rewarding bonuses alone extremely difficult.

    COVID-19 alongside the push to IPOs in some of the emerging markets, a new generation of wealth, a focus on ESG and a heightened awareness of digital assets such as cryptocurrency have all forced Family Offices to further diversify. While making the Investment Space a whole lot more interesting, it further complicated how Family Offices reward Investment Professionals, especially when it comes to bonuses.

    Family Office Investment Professionals broadly led by Chief Investment Officers are responsible for a broad range of assets under management. Each of these assets necessitate a unique set of requirements from the length of time, commitment and contribution involved, the skill set and specialism required and the level of risk it calls for. They also carry unique factors impacting level of return and ability to measure that return from holding period yields, inflation and interest to demand and economic growth. Each asset class also requires a different benchmark, which as we now know is more than half of the time based on different indexes, industries, regions and countries.

    All of these idiosyncrasies make valuing assets an individual and laborious task but awarding a bonus based on those valuations is near impossible and has only been exacerbated by the move to further diversify as well as recent Investment hiring trends.

    All of the above have further complicated the conversation around bonuses and as a result, Family Offices adopted three new rules during the pandemic. These include:

    1) The move to increase discretionary bonuses based on overall fund performance

    2) An introduction of LTIPs for critical members of staff, not just on the investment side of the business

    3) An emphasis placed on preserving as well as generating wealth

    While banks cannot follow the exact guidelines set out by Family Offices, so long as they embed LTIPs and uncapped bonuses with clear and correlating key performance indicators, they can use this reward structure to engage and retain staff while creating a successful and meritocratic organisational culture which is inherently more competitive and guarantees every employee is striving to reach the same goal.

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    Paul Westall, Contributor

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  • Liz Truss apologizes to UK as she tries to keep troubled premiership on track

    Liz Truss apologizes to UK as she tries to keep troubled premiership on track

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    LONDON — Is it too late now to say sorry?

    After weeks of market turmoil and countless U-turns, British Prime Minister Liz Truss apologized late Monday for what she called “the mistakes that have been made” during the opening weeks of her already imperiled premiership.

    “First of all, I do want to accept responsibility and say sorry for the mistakes that have been made,” Truss said in an interview with the BBC.

    “I wanted to act, to help people with their energy bills, to deal with the issue of high taxes, but we went too far and too fast,” she added.

    Truss also insisted that she would “definitely” lead her Conservative Party into the next general election, which is expected in 2024.

    The new PM is already fighting to maintain her post after roughly six weeks in Downing Street. A growing number of Conservative MPs are openly plotting ways to oust the prime minister, who was forced to sack her close friend Kwasi Kwarteng as chancellor following a furious market response to her tax-cutting agenda.

    Earlier Monday, Jeremy Hunt, Truss’ hastily-appointed replacement chancellor, used a television address to essentially tear up the manifesto which Truss ran on to ultimately win the summer’s Tory leadership contest.

    “Growth requires confidence and stability,” Hunt said, in a clear admission Truss has been unable to provide either since her appointment as prime minister on September 6.

    The struggling prime minister later dodged a request from the opposition Labour Party for her to appear in the House of Commons and explain the thinking behind her replacement of Kwarteng with Hunt.

    Her stand-in for that parliament appearance, Commons leader Penny Mordaunt, was forced to deny that Truss was hiding from scrutiny.

    “Well, the prime minister is not under a desk, as the honorable lady says,” Mordaunt said.

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    Andrew McDonald

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  • Liz Truss’ new chancellor signals he could junk more of her economic plan

    Liz Truss’ new chancellor signals he could junk more of her economic plan

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    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.

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    Annabelle Dickson and Matt Honeycombe-Foster

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  • Joe Biden brands Liz Truss’ shelved tax-cut plan a ‘mistake’

    Joe Biden brands Liz Truss’ shelved tax-cut plan a ‘mistake’

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    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.

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    Matt Honeycombe-Foster

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  • Furious Tories conclude that Liz Truss is finished

    Furious Tories conclude that Liz Truss is finished

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    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.”

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    Eleni Courea and Esther Webber

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  • UK’s Liz Truss fires Chancellor Kwasi Kwarteng in a bid to save her premiership

    UK’s Liz Truss fires Chancellor Kwasi Kwarteng in a bid to save her premiership

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    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.

    This article has been updated.

    Matt Honeycombe-Foster contributed reporting.

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  • Truss’ jittery Tories blame Bank chief over market meltdown

    Truss’ jittery Tories blame Bank chief over market meltdown

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    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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  • Liz Truss panics as markets keep plunging

    Liz Truss panics as markets keep plunging

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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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  • Liz Truss has U-turned. Will it be enough?

    Liz Truss has U-turned. Will it be enough?

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    BIRMINGHAM, England — So in the end, Liz Truss was for turning. But the damage to her faltering administration may already have been done.

    On Monday, Truss’ Chancellor Kwasi Kwarteng bowed to pressure from Conservative Party colleagues and dumped his flagship cut to the top rate of tax from 45p to 40p — a central component of last month’s so-called mini-budget.

    “We get it, and we have listened,” Kwarteng said as he announced the dramatic U-turn on Twitter.

    Later it emerged he will also bring forward an announcement on how the tax cuts will be funded, having initially insisted the public — and the markets — must wait until November 23.

    A parliamentary insurrection, which was rapidly gaining pace as MPs met for their annual party conference in Birmingham on Sunday, appears to have been quelled, for now.

    Asked if he would now support the mini-budget in parliament following the abandonment of its most controversial measure, rebel ringleader Michael Gove said: “Yeah I think so, on the basis of everything that I know. There were lots of good things that they announced … The debate over the 45p tax increase obscured that.”

    The market reaction was also mildly positive, with the bond and currency markets rallying somewhat following the announcement.

    But most MPs and delegates in Birmingham believe it will take significantly more than a single U-turn to rebuild the political and fiscal credibility of the fledgling Truss administration, with some MPs fearful a revival is already out of reach.

    “She started very poorly, and in my experience, what you see is what you get. People aren’t mysteriously really shit, and then become really good,” one senior Tory MP said. 

    Pissed-off

    While a Tory rebellion appears to have been averted for now, few MPs believe it will be the last Truss faces in the difficult weeks and months ahead.

    Even before Kwarteng’s now-infamous ‘fiscal event,’ Truss had plenty of detractors on Conservative benches. Only around a third of her own MPs backed her in the leadership contest, and after taking office she almost exclusively chose loyalists for her ministerial ranks. Those who backed her opponent Rishi Sunak were left out in the cold. 

    “Her party management has pissed people off,” the senior Tory MP quoted above said, with many of what they described as talented MPs questioning whether it was even worth backing the government in the long-term. 

    But while the “lightning rod” of the 45p tax rate had now been “neutralized,” according to one minister, backbenchers could soon find another hot topic and “push on that next.”

    Chancellor Kwasi Kwarteng | Ian Forsyth/Getty Images

    Two potential major flashpoints will be the new government’s approach to welfare payments, and funding public services. Ministers are currently undecided over whether to uprate benefits in line with inflation — as pledged by Boris Johnson’s administration — while also dropping heavy hints that cuts to the state are on their way. 

    The opposition Labour Party, now surging ahead in the polls, see political capital too in Truss’ stated plans to lift the cap on bankers’ bonuses and abandon a hike to corporation tax.

    “They’ve still got a totally unfunded £17 billion [corporation] tax giveaway for the wealthiest businesses at a time when people and businesses are struggling with the cost of living.” one Labour official said, in a taste of the messaging Tory MPs will likely be up against at the next election.

    Few Tory MPs are optimistic Truss can turn things around.

    “Politics works as a pendulum. If it swings towards the middle it’s possible to pull it back. But if it swings too far it can become irreversible,” the minister quoted above said.

    Writing for POLITICO, Boris Johnson’s former No. 10 comms chief Lee Cain said it was “unlikely” Truss’ reputation would ever recover.

    “It didn’t need to be this way,” he wrote. “Many of the unforced errors could have been avoided if the PM had understood how to talk to the audience that matters most — the electorate.:

    Benefit of the doubt

    But voters may yet be more forgiving than some of Truss’ critics in the party, according to pollsters and focus group experts keeping a close eye on public opinion.

    “We consistently find voters don’t mind a U-turn on an unpopular policy,” said Luke Tryl, director of the More in Common consultancy, which regularly hosts focus groups across the country.

    “In fact one of the things we found during the leadership contest was that people quite liked the fact that Liz Truss changed her mind, because they felt that’s what normal people do,” he said.

    But he cautioned that while voters don’t mind U-turns as one-offs, “a series of them starts to look chaotic and will worry voters about whether the government knows what it is doing to see the country through the turmoil.”  

    Fiscal credibility

    Crucially, reversing just £2 billion of the proposed £45 billion of unfunded tax cuts seems insufficient, in isolation, to restore trust in the U.K. economy and bring down spiraling interest rates.

    “When market trust has been shattered, as we saw last week, the uphill task of restoring credibility is extremely hard and even harder when strategies shift,” Charles Hepworth, investment director at GAM, said.

    “The market currently has little faith that the prime minister and chancellor can restore credibility in the short term, and this puts further renewed pressure on U.K. risk assets.”

    Neil Birrell, chief investment officer at Premier Miton Investors, agreed the U-turn would not solve the turmoil in financial markets.

    “High inflation and high interest rates are not going away quickly, and economic growth is under severe threat,” he said.

    “Markets still need to hear how the package will be funded,” added Iain Anderson, executive chairman at H/Advisers Cicero, who said the next fiscal statement planned for November 23 must be brought forward as a matter of urgency. 

    The first senior Tory MP quoted above lamented that the market turmoil following the mini-budget meant the Tory party would now “own interest rate rises — a lot of which were going to happen anyway.” 

    “I cannot remember in my life when any politician has recovered from such a savage self-inflicted wound,” Giles Wilkes, a senior fellow at the Institute for Government and partner at Flint Global, said. 

    “Gordon Brown recovered somewhat from the multiple slip-ups of 2007-08 with his commanding response to the global financial crisis, but even that wasn’t enough.”

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  • UK Scraps Tax Cut For Wealthy That Sparked Market Turmoil

    UK Scraps Tax Cut For Wealthy That Sparked Market Turmoil

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    BIRMINGHAM, England (AP) — The British government on Monday dropped plans to cut income tax for top earners, part of a package of unfunded cuts unveiled only days ago that sparked turmoil on financial markets and sent the pound to record lows.

    In a dramatic about-face, Treasury chief Kwasi Kwarteng abandoned plans to scrap the top 45% rate of income tax paid on earnings above 150,000 pounds ($167,000) a year.

    He and Prime Minister Liz Truss have spent the last 10 days defending the cut in the face of market mayhem and increasing alarm among the governing Conservative Party.

    “We get it, and we have listened,” Kwarteng said in a statement. He said “it is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country.”

    The pound rose after Kwarteng’s announcement to around $1.12 — about the value it held before the Sept. 23 budget announcements.

    The U-turn came after a growing number of Conservative lawmakers, including former ministers with broad influence, turned on the government’s tax plans.

    “I can’t support the 45p tax removal when nurses are struggling to pay their bills,” Tory lawmaker Maria Caulfield said.

    It also came hours after the Conservatives released advance extracts of a speech Kwarteng is due to give later Monday at the party’s annual conference in the central England city of Birmingham. He had been due to say: “We must stay the course. I am confident our plan is the right one.”

    Truss defended the measures Sunday but said she could have “done a better job laying the ground” for the announcements.

    Truss took office less than a month ago, promising to radically reshape Britain’s economy to end years of sluggish growth. But the government’s announcement of a stimulus package that includes 45 billion pounds ($50 billion) in tax cuts, to be paid for by government borrowing, sent the pound tumbling to a record low against the dollar.

    The Bank of England was forced to intervene to prop up the bond market, and fears that the bank will soon hike interest rates caused mortgage lenders to withdraw their cheapest deals, causing turmoil for homebuyers.

    The package proved unpopular, even among Conservatives. Reducing taxes for top earners and scrapping a cap on bankers’ bonuses while millions face a cost-of-living crisis driven by soaring energy bills was widely seen as politically toxic.

    Truss and Kwarteng insist that their plan will deliver a growing economy and eventually bring in more tax revenue, offsetting the cost of borrowing to fund the current cuts. But they also have signaled that public spending will need to be slashed to keep government debt under control.

    Kwarteng has promised to set out a medium-term fiscal plan on Nov. 23, alongside an economic forecast from the independent Office for Budget Responsibility.

    Axing the top-earners tax rate would have cost about 2 billion pounds, a small share of the government’s overall tax-cutting plan. Kwarteng said Monday that the government was sticking to its other tax policies, including a cut next year in the basic rate of income tax and a reversal of a corporation tax hike planned by the previous government.

    Tony Danker, who heads business group the Confederation of British Industry, said he hoped the government U-turn would bring stability to the markets.

    “None of this growth plan will work unless we have stability. Let’s hope this is the beginning of it,” he told broadcaster LBC.

    Opposition parties said the government should scrap its whole economic plan.

    “UK gov U-turns on top tax rate abolition because it’s a ‘distraction,’” Scottish First Minister Nicola Sturgeon of the Scottish National Party wrote on Twitter. “Morally wrong and hugely costly for millions is a better description. Utter ineptitude.”

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