The past three years in British politics have largely been shaped by a single event. The “mini”-Budget announced three years ago today, on 23 September 2022, was the original sin of modern British politics. It reduced the Conservative Party’s chances of winning the following general election to near-zero. It handed a broad but shallow majority to Labour, and created a narrative that has stalked Westminster ever since – a sense that there is a button which can be pushed, a tipping point that can be reached that will precipitate a “Liz Truss moment”. Fiscal policy is now made with a fearful eye on the Office for Budget Responsibility (OBR) forecast and the bond market. No leader wants to be named in the same breath as our briefest and most humiliated prime minister, to have their political career reduced to an answer in a pub quiz.
I’m told that Truss now lives by three words: never back down. Deprived of power, she clings to her anger, and to her conviction that what happened three years ago was all somebody else’s fault. She has been left with only one story to tell: that her plan for the country was stopped, before it could begin, by an economic establishment that felt threatened by her. This means there is really only one question to ask about Liz Truss.
What if she has a point?
Some politicians arrive at an interview with a real sense of occasion, briefed on every detail, surrounded by a busy entourage, a machine running on charisma. Liz Truss is not one of these people. A police officer from the Met looked briefly around the building. She arrived ten minutes later, accompanied only by her PR man. She gave me a brittle smile: “And you are… Tom?”
She wanted a black coffee. I recalled from a book on her time as prime minister – Out of the Blue by Harry Cole and James Heale – that a former adviser, admiring Truss’s work ethic, had said that she drank “about 42,000 espressos a day”. Was it still in that range? “That book was all lies,” she declared.
This set the tone for our conversation, in which Truss’s answers were mostly defensive and occasionally fairly angry. But within this cloud of grudges and paranoid ideas there is an unanswered question about who holds power in Britain.
To get to that question, we do have to briefly discuss the bond market. The omnishambles which began three years ago today was the result of three events, two of which were decisions made by Truss’s government. First, the energy support plan: on 8 September, Truss capped the amount the British public would pay on their energy bills for two years. This was effectively a commitment to spend an unknown amount of money – and therefore to sell an unknown, but effectively unlimited, amount of government debt. This began to push the price of UK government bonds (known as gilts) down, which pushes borrowing costs up. The second event was the “mini”-Budget itself, which was anything but mini. Truss’s plan to make significant tax cuts without large cuts to public spending was, as far as investors were concerned, another flood of gilts into the market – £72bn in 2022 alone, according to the Treasury.
These two events were in themselves enough to cause a steep rise in borrowing costs (the “yields” on gilts). But there was a third event. The Bank of England also made its own announcement, that it was to begin its programme of “quantitative tightening” (QT) – reducing the more than £840bn bonds that it had bought to stimulate the economy after the 2008 crash. The day before the “mini”-Budget, the Bank notified that it was going to reduce its stock of government bonds by £80bn over the following year, using about £40bn of active sales.
You might think that a government planning to sell £72bn of investments in a year and a central bank planning to sell £40bn of the same product, to the same market, in the same year, would have had serious discussions about what effect this might have on the cost of government borrowing. But Truss and her chancellor, Kwasi Kwarteng, say this did not happen.
Truss, who had warned in her leadership campaign that she was reconsidering the independence with which the Bank had operated since 1997, said the meetings Kwarteng had with Bank officials were “frosty”. She told me her only communication with the Bank’s governor, Andrew Bailey, was through messages conveyed by the cabinet secretary. When I asked what messages Bailey sent before either the Bank’s notice to the market on 22 September, or before the mini-Budget the following day, she told me: “There weren’t any.”
“I certainly didn’t know that they were going to announce the gilt sales the day before the mini-Budget,” she said. “I don’t know if Kwasi did. I suspect he didn’t know that.”
Kwarteng also told me that Bank officials did not alert him to the date on which their QT plan would be published, nor did they communicate any likely impact that these combined sales would have on a gilt market in which yields had already been rising. “They didn’t at all,” he said. “They kept very quiet about what they were doing.”
For Truss, this is the smoking gun. The Bank, she says, was “at the very least unhelpful, and verging into deliberate sabotage”.
The Bank, unsurprisingly, does not agree. A spokesperson told me that “the Bank was in frequent contact with the Treasury” in the run-up to its announcement of gilt sales. Truss and Kwarteng do not seem to have read the minutes of the Bank’s Monetary Policy Committee meeting, published on 4 August, which detailed the Bank’s plan to reduce its assets by £80bn, and which predicted £10bn of sales every three months.
However, there is a real question about whose policy should have been held to be more important. “It was very clear what our plans were. They were heralded during the Conservative leadership campaign,” Truss said. Her view is that the Bank should have actively avoided anything that might have got in the way of fiscal policy. “They should have been going out of their way to not make problems in the market.”
In this she does seem to have a point. Truss was the prime minister of an elected party of government. Her plans for taxation and spending were why she was picked as Conservative leader (by 81,326 party members). It’s easy to imagine that Truss and Kwarteng were not sufficiently aware of the risks they were taking; less probable is that the Bank’s officials had no idea, or that they never considered events might have been better timed. It’s entirely possible that had they tried harder, Truss and Kwarteng would simply have ignored them. If unelected officials can, even by omission, allow the policies of elected politicians to collapse, then we don’t live in as much of a democracy as we thought we did.
This is a problem that she says now afflicts Labour, which she says is caught in the same fiscal trap: “They simply cannot deliver their policy agenda.” I asked if she agreed with Stanley Baldwin’s assessment of the civil service – that it is “always in office and always in power”. Unexpectedly she quoted Tony Benn’s final speech to the Commons, in which he asked questions of those in power: “What power have you got? Where did you get it from?… And how can we get rid of you?”
Had this happened to another prime minister, there might have been a real conversation about who holds power in Britain, when the government is £3trn in debt. But it happened to Liz Truss, and so instead there were a few weeks of jokes about salad.
What is it like to be Liz Truss today? “I get all kinds of reactions. I get people saying, ‘really supported what you did. Wish you were back in No 10.’ I get people, you know, shouting abuse at me.”
The night before our interview she had been at a party where she spoke to Nigel Farage. She says they didn’t discuss the idea of a move to Reform – “I’m not thinking about those things” – but both must have considered the political possibilities. On the one hand she is a former Conservative prime minister who was popular with her party, winning only slightly fewer votes in the 2022 leadership election than Boris Johnson had in 2019. On the other hand, she’s Liz Truss.
She does not speak affectionately of her own party, which turned on her so quickly. “Kemi Badenoch and Mel Stride [the shadow chancellor] have shown no sign of understanding why the Conservative Party lost the election,” she declared, before explaining that it lost the election because Tony Blair created an unelected bureaucracy that has prevented every prime minister since from implementing their policies. That’s one way of looking at it, though it could also be argued that they lost the election because of what happened when Liz Truss was in charge.
Of her short time in power, she has bitter memories. She would be in a meeting with civil servants and read a leaked story about it half an hour later. “There were very few people I could trust, very few safe spaces where I could have a conversation.”
In such circumstances anyone might become paranoid, but all the same, her paranoia was surprising to encounter. I told her that I had asked the campaign group Led By Donkeys if it wasn’t rather unnecessary, and cruel, to humiliate her at an event to promote her book (they lowered a banner above her head on which was printed a picture a lettuce, and the words: “I crashed the economy”). “These left-wing activist groups are funded by the Soros organisation,” she responded. “They are there to try and undermine Western civilisation… These people are the enemy. They, their acolytes, are the people who are ruining Britain.” (Led By Donkeys responded by email to say they are “entirely funded by the public, the average donation is about £5 a month, we have a maximum donation limit of £1,200 a year and LBD has taken no money from George Soros or his foundation”.)
But Truss’s allegations of corruption reached far higher than activist groups. “Where’s the questions about Andrew Bailey’s personal finances?” she asked. The implication that Bailey, who took a £165,000 pay-cut when he was appointed the Bank’s governor, is somehow using monetary policy to line his own pockets is unfounded and utterly ludicrous. But for Truss it fits into a picture of a world against her: “Treasury officials go from the Treasury to the Bank of England, to the OBR to the Resolution Foundation. They go to Goldman Sachs, they… it’s the same people.” She accused the Bank of England of “using its influence with newspapers” and of lowering interest rates, “I believe, to help Rachel Reeves, because she is a supporter of their unaccountable, independent power”.
She is comfortable talking about the “deep state”, and again, unelected power is a real issue that deserves debate, but Truss has taken to debating it in the more paranoid reaches of the online right. Last year, while still an MP, she appeared in an interview with Steve Bannon in which she did not challenge Bannon’s description of the far-right agitator “Tommy Robinson” as a “hero”. Nor does she challenge that view now: “I think he raised issues about the grooming gangs, which have proved to be right. And I think the left try and demonise him in a way that they just wouldn’t demonise figures on the left… He’s an activist. I believe in free speech.”
I wonder if she would also apply this to the media who took such pleasure in her downfall, whom she describes as “completely unserious”. She can hardly be blamed for despising the people who turned her humiliation into a party. As she sees it, she got too close to the truth: “It was because I actually understood what was going on. I tried to take it on. That’s why I was attacked, and that’s why I’m continually attacked and that’s why there isn’t a proper analysis in the corporate media of this, because they are part of the problem.”
Again, the important question to ask here is not “what on Earth is Liz Truss going on about now?”, but why someone who was intelligent and capable enough to become prime minister would come to believe these things. In the past three years, the phrase “crashed the economy” has been used 238 times in the Commons (it can be found just three times in the records before then). This despite the fact that the economy did not crash: there was no immediate recession, no mass unemployment, no wave of insolvencies. The story is Liz Truss’s bitter legacy, but who is the joke really on? If a guiding principle of Labour in government is that it must avoid repeating her disaster, then we must confront an awkward fact: that Liz Truss is still, in some sense, running the country.
[Further reading: Has Donald Trump become woke?]
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