The government made perhaps the biggest retreat in economic history yesterday. Jeremy Hunt, the Chancellor, scrapped nearly all of last month’s mini-Budget and went further by cancelling the Boris Johnson administration’s planned cut in the basic rate of income tax.
The energy price guarantee was also reduced from two years to six months. This was the policy Liz Truss had used to shield her tax cuts from criticism and distinguish herself from Labour. It was the biggest part of the mini-Budget, the Prime Minister said. Now that asset has gone. As I wrote yesterday, the humiliation of appointing a Chancellor to gut your own budget has hastened her exit.
Indeed, Truss seemed to be in hiding yesterday, smarting perhaps from her authority-sapping press conference on Friday. Maybe she’d been advised to avoid public speaking as much as possible but her absence allowed her rivals to fill the void. The contest to replace Truss began on the floor of the House of Commons yesterday.
Penny Mordaunt, who came third in the Conservative leadership election over the summer, stood in for the Prime Minister during an urgent question. Her confident, wry appearance threw Truss’s stylistic weaknesses into sharp relief. Mordaunt didn’t try to hide her relish. “I fully appreciate the optics of me appearing at the dispatch box,” she said – tellingly.
Later in the afternoon Hunt assumed the role of prime minister in all but name. Liz Truss sat beside him in the Commons chamber, unmoving, as he decimated the policies the party membership elected her to deliver. Higher taxes and spending cuts have now replaced tax cuts and deregulation. Her government’s mandate has been extinguished.
Nonetheless, the direction of Tory MPs is uncertain. While most accept that Truss’s time is up, there is no agreement on the mechanism for her removal or her replacement: some may want Mordaunt, others Hunt, others Rishi Sunak. The calming of the market turmoil unleashed by the mini-Budget has also made Truss’s exit seem less urgent. Her performance at Prime Minister’s Questions tomorrow could give the rebels momentum but they don’t know what they’ll do yet, so we can’t know either.
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