Truss warned of ‘bigger problem’ looming after mini budget ‘headache’
Liz Truss squirms as Nick Ferrari slams refusal to raise benefits
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Liz Truss has been warned she ”needs to bank a few wins” after an ”utterly shambolic” start to her Premiership. Mark Littlewood, director general at free market think tank the Institute of Economic Affairs, compared the last few days to a “horror movie” – but said the situation was still recoverable for Britain’s recently appointed Prime Minister.
Ms Truss, who makes her speech at the Conservative Party conference in Birmingham tomorrow, is already under enormous pressure after Chancellor Kwasi Kwarteng ditched plans to cut the top rate of income tax from 45 percent to 40 percent after widespread criticism.
To compound matters, she was today faced by the prospect of a possible Cabinet rebellion after Leader of the House of Commons Penny Mordaunt claimed it “makes sense” for benefits payments to rise in line with inflation – in contrast to Ms Truss, who has refused to say whether this will happen.
Mr Kwarteng’s abrupt U-turn, the day after Ms Truss insisted the Government would be sticking to its guns, has prompted widespread criticism and, in some quarters, derision. Mr Littlewood said: “I don’t know if it’s been like a comedy, a tragedy or a horror movie.
“I think we should acknowledge that you don’t need to put all of that on the shoulders of the Prime Minister.
“One thing that I’ve noticed is they’ve not been wheeling out other Conservative spokespeople, which could be other Cabinet ministers, or sympathetic backbenchers, they’ve been very low profile across the board.
“You don’t need the Prime Minister to be the person who’s always taking to the airwaves, defining and defending the narrative, you need a whole plethora of people.
“The Government has not explained its case. I consider both Liz and Kwasi to be highly intelligent, but they may be so highly intelligent that they think that all of the electorate instinctively understands complex economics, and they need to explain it in a much more straightforward fashion.
“They’ve failed to do that and that’s what’s forced them to do a U-turn – they haven’t even been able to explain it to their own party.”
“Mr Littlewood stressed: “I like the vision of Trussonomics but its execution has been utterly shambolic, both in political terms and in media narrative terms.
“I think actually the Institute of Economic Affairs has had more spokespeople on the airwaves in the last week or two explaining Trussonomics than the Conservative government has.”
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Stressing he was coming at the situation from an economic as opposed to a political perspective, Mr Littlewood added: “I think what the PM conceded in her interview with Laura Kuenssberg was that they had not, I think she said, prepared the ground for tax cuts, you could say they hadn’t ‘rolled the pitch’ for tax cuts. They need to be far better amplifying their message amongst their colleagues.”
Referring to Mr Kwarteng’s fiscal statement in the House of Commons last month, which spooked the financial markets and saw the pound crash to a record low against the dollar, he said: “The impression I’ve been given, and it’s only an impression, is that the mini-budget was sort of, half a dozen people sort of drafting it and then just the hope that the shock and awe would wow everybody into a standing ovation.
“We need to have a much better way of explaining the thought process and the rationale behind any fiscal event, certainly your own party, but I’m not sure they did a very good job of explaining it to the money markets either.”
Mr Littlewood emphasised that in actual fact, the proposed income tax cut would have been fairly insignificant in financial terms.
He explained: “It might actually be that its abolition would lead to similar revenue coming in. So in economic terms this a rounding error – when you’re talking about energy bailout packages of £150 billion it’s very small beer.
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“I would prefer for reasons of economic good sense to have a much simpler tax system, just two rates of income tax, 20 and 40, but unfortunately, we’ve got ourselves into a position that we’ve been in for some time, that British tax policy is now set at least as much by political optics as it is by sound economic thinking.
“Sound economic thinking would be to drop this rate but it’s not a hill worth dying on.”
Mr Littlewood continued: “The bigger problem they’ve actually got once they’ve overcome this headache is how are they going to signal that there is spending restraint to the money markets.
“They don’t need to balance books this year or even next, but they do need to persuade the markets that they have a plan over the medium term to do so.
“They’re presently saying that plan will be rolled out on November 23, I don’t know if they’ll stick to that or feel they need to roll it forward somewhat but that that’s the real issue.”
With polls showing the Tories now trail Labour by as much as 33 percent in recent days, Mr Littlewood said Ms Truss is in a precarious position.
He said: “The Government needs to bank a few wins. They need to show the markets that they have got measures that the markets and forecasters agree will genuinely bring about economic growth.
“If you can relax some of our more absurd rules around financial services, if you can relax planning rules, not just around house building, but around the use and deployment of commercial property and how you can have change of use more easily, if they can start to get these plans through then I think you might give some market confidence that growth is going to kick into the system.
“They are going to have to show some spending restraint, they can’t just say, ‘here’s some deregulation, our guess is that 2.5 percent growth will emerge’.
“They also need to show that they’re going to keep some sort of lid on the public spending side. So they’ve got to find some ways of making cuts and that’s not going to be easy.
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“Supposedly the mini-budget was the popular part, the tax cut part. They’ve got an unpopular side of the narrative that they’ve got to face, the spending cuts part and obviously rising interest rates.”
Mr Littlewood said Ms Truss had “burned through a lot of political capital” in recent days but stressed the situation was not yet disastrous.
He said: ”I don’t think that but I don’t think that the new Prime Minister is likely to be punching the air about what a good week she’s had.
“She’s clearly had a very bad week although my view is nothing in politics is ever quite as good or as bad as it looks at first blush.
“Clearly the Chancellor and the Prime Minister have lost political capital here, they’ve spent political capital to try and get this over the line and they have U-turned but I don’t think that’s the end of the story.
“They’re going to have to now show a steady hand. They need to show that they can steady the ship after what’s been an extraordinary wobble, but they need to also show that they can put some more credible policy on the table.
“They need to convince the money markets, their own party and the public and finding a package that can hit all three of those bull’s eyes is not easy, but it needs to be done.
“And where I think people have some sympathy for the Prime Minister, although she may have chewed up quite a bit of that sympathy, is that she has she’s been dealt a very difficult hand.
“We are coming off the easy credit and low interest rates, that’s a global phenomenon.
“The fiscal position is bad, it is difficult to pilot one’s way out of this and I think most people know there’s going to be a number of months of difficulty at least that long.
“But the challenge for politicians is to find some credible economics that is politically viable and at the moment that’s a challenge that they have been found wanting to put it mildly.”
Asked whether leadership rival Rishi Sunak, or even predecessor Boris Johnson, would be eyeing the situation with a view to a making a comeback, Mr Littlewood said: “I think that’s getting a bit over the top.
“The Prime Minister’s made some missteps in the first tricky three weeks of her premiership and I don’t think she can afford to make many other mistakes.
“But my guess would be that the country probably want some degree of stability and certainty.
“Now number 10 Downing Street has not been providing that and also Number 11 In the past couple of weeks, but they’ve got to stop providing it now.
“I don’t think there’s an appetite for a complete revolution or a turnaround anything like that.”
Using a football analogy, Southampton fan Mr Littlewood said: “She’s probably come into a match already 2-0 down and she’s been thrown on with 20 minutes to go and has now managed to score an own goal.
“It’s recoverable but you’ve got to slot the ball in the other team’s net pretty fast.”
Explaining the decision to reverse the income tax plans in Birmingham today, Ms Truss said: “What we’ve done is we’ve listened to what people said on this issue.
“It wasn’t a core part of our growth plan, what our growth plan is focused on is helping people with energy bills, getting business moving and we’re here at this fantastic new development in Birmingham, creating jobs for the future, that is what the plan is about.
“It was becoming a distraction, that is why we immediately changed that policy and that is the kind of Government we are. We do respond when there are concerns and we act quickly.”
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