Liz Truss: my part in her downfall

Now that the final curtain has fallen on Liz Truss’s brief and tumultuous premiership, it is time for reflection. A chance to set the record straight and also to own up to mistakes – especially for those of us who tried to advise her. What went wrong? Yes, the tipping point was Kwasi Kwarteng’s mini-Budget. But three problems were by then already brewing.

First, the leadership campaign over the summer had become very focused on tax cuts. Even Rishi Sunak ended up saying he would cut the basic rate of income tax from 20 per cent to 16 per cent by the end of the next parliament, while Jeremy Hunt (now Chancellor) would not settle for cancelling the planned increase in corporation tax to 25 per cent, but instead wanted it cut to 15 per cent. The push for lower taxes helped set the fiscal agenda for the new government. But the format of the debates – essentially an exchange of soundbites – meant there was little serious discussion about which taxes to cut, why and when.

Second, Truss pitched herself as a ‘disruptor’, eager to challenge the old orthodoxies and institutional ‘groupthink’ that have held the economy back. But this was widely interpreted as ‘trashing’ the institutions themselves, including the Treasury, Bank of England and the Office for Budget Responsibility. This meant that knives were out for her in most of the media, as well as the markets.

Finally, time that should have been spent fine-tuning her tax reforms was eaten up by the energy crisis. In August, there was a very real threat that the crisis would turn into a catastrophe, with some estimates that the average household bill would jump to £6,000 a year, driving inflation to 20 per cent. Mitigating this was obviously necessary – but hugely expensive.