More good news for Labour. Liz Truss is back. This month was always going to be full of reminders of the Truss premiership (some of us were never going to resist the temptation to reflect upon it) but the former prime minister has decided to get in on the act.
Reflective, self-knowing, demonstrating humility, accepting of responsibility and politically compelling – Truss was none of these things in a speech to the Institute for Government at the start of this week.
This should not come as a surprise. Supreme self-belief has always been one of her most striking attributes, uninhibited by reality. Without it, she would never have become prime minister. With it, she was a disastrous one. As her former closest ally, Kwasi Kwarteng, has commented, she just wasn’t “wired” to do the job.
As ever, it is all everyone else’s fault. If only she had been told about the risks of liability-driven instruments (LDIs) she would never have taken such risks with the public finances, she has briefed. It is possible that Truss would have listened to advice on this point but given that she ignored advice on everything else (and her chancellor sacked Tom Scholar, the most senior Treasury official, shortly before the mini-Budget), this seems unlikely.
She also blamed the “anti-growth coalition”, including sections of the Conservative Party that would not have supported her proposed spending cuts of £35.5bn. Truss spoke of the need to be cautious in what was said about spending because this was politically sensitive. But this is the heart of the matter. She wanted to deliver spending cuts commensurate with her tax cuts, but the markets did not believe that the former were politically deliverable. Truss appears to accept that this was the case. In other words, she is acknowledging that her plans lacked credibility. A prime minister must operate in the world as it is, not as they would like it to be, and if a programme depends on undeliverable spending plans then it is not a credible programme.
Incidentally, some of us find the criticism of the “anti-growth coalition” from a former cabinet colleague who was so enthusiastic about a no-deal Brexit hard to take. Had this outcome happened (and it required parliament to intervene to stop it), economic growth would have collapsed.
But let us return to the present. For five reasons, the return of Truss is good news for Labour.
First, it is a reminder of the chaos of autumn 2022. Mortgage rates were always going to increase (Truss is correct about that) but they rose further and faster than would otherwise have been the case. The entire episode was a devastating moment for the Conservatives’ economic credibility (comparable to the IMF bailout in 1976 and “Black Wednesday” in 1992). The long-term economic reputation of the Tories has been badly damaged.
Second, it exposes Tory splits. Since there is no hiding the difference of opinion between Truss and her successor, Rishi Sunak should lean into the debate and repudiate Trussonomics more unambiguously. Some Tory voices even think he should bar Truss from standing as a candidate at the next general election. This would be provocative but may be the type of risk Sunak needs to take to shift perceptions and put distance between himself and his unpopular predecessor. (I would be very surprised if he were to take it.)
Third, the Truss argument is that public spending is too high. But the voters do not agree. If Labour wants to make the argument that the Tories cannot be trusted with public services, Truss is giving them all the ammunition they need. She claims that the 2016 Brexit vote and the Tories’ 2019 victory gave her a mandate but both those successful campaigns promised higher rather than lower public spending.
Fourth, Truss is explicit that she wants the Republicans to win the next presidential election. Indeed, she increasingly gives the impression that her intended audience is on the other side of the Atlantic. I have written before that there is a good chance the UK and US elections will be held within weeks of each other (in October/November 2024) and that Donald Trump’s anticipated candidacy will be a major issue. A former Tory prime minister backing Trump – who is highly unpopular in the UK – would be a political headache for Sunak.
Fifth, Truss has strengthened the hand of Rachel Reeves as shadow chancellor. Her focus on fiscal responsibility may infuriate her Labour critics but it is necessary to reassure those voters who believe Labour tends to lose control of the public finances. The Truss experience demonstrated that fiscal conservatism is not a whimsical eccentricity but often a necessity to maintain market confidence. Expect Chancellor Reeves to make this point on a regular basis to the public and her colleagues. If one thinks that Reeves is an asset to Labour and that it is in the party’s interests for her to win these arguments (and as a member of the Society of Current, Aspiring and Former Treasury Ministers, I do), the stronger the memory of the mini-Budget the better.
No wonder Conservative MPs and candidates are horrified by Truss’s continued interventions. For Labour, she is the gift that keeps on giving.