October 20, 2022
Welcome to the second part of our two-part series explaining the recent economic turmoil in the U.K. To read our previous article, please go here.
Meanwhile in Parliament, Ms Truss was under attack from all sides. She defended the mini-budget and answered any and all questions by saying that she would not make any changes, or ‘u-turns’ as they are known, and also that the energy price guarantee was proof of her unspeakably successful agenda. Her friend, Ms Coffey, ostensibly a close advisor, barely featured as she sank into a quagmire of her own scandals.
Labour saw a spike in the polls last seen prior to their landslide 1997 victory and became positively euphoric, needling Ms Truss and Mr Karteng at every chance they got.
This came at the same time as party conferences commenced. At Labour’s conference in Liverpool, the mood was one of victory and jubilation, as party members were convinced that they only had to maintain their massive leads, growing by the day, for a maximum of two years, by time which the next general election will have to be held. Party members sang the national anthem and spoke about their plans for improving Britons’s futures, contrasting their platform to that offered by the Tories. The former ‘red wall’ seats which had been unexpectedly picked up by the Tories were sure to flip back to their ruby-red status now.
“There’s only two years or so, but this is a long time in politics,” cautioned Mr Hübner. Yet, “The Conservatives could lose dramatically, because the coalition that has been formed by Boris Johnson, in the poorer regions of the U.K., they’re usually the voters who would go for Labour but they voted last time for Boris Johnson and for the Conservatives. They are gone [from the Conservatives] and rebuilding this will be very difficult.”
This explains why the Tory conference, on the other hand, was blue in more than party colour. It got so bad that lobbyists who were booked to speak to influential cabinet ministers asked for refunds, since the ministers were not showing up or, if they did show up, paid no attention.
Moreover, Ms Truss “had not even half of the support of her fraction of Parliament,” said Mr Hübner.
Internationally, criticism came in from a rare corner – the International Monetary Fund. They issued an unusual statement that critiqued the mini-budget as increasing inequality. Then, analytics firm Moody’s came out swinging and hinted that the mini-budget could permanently damage the U.K.’s economy and viability in bond markets.
Ms Truss still stood by her budget, saying that it was the right thing to do and blaming the U.S. Federal Reserve’s interest rate hikes for increasing the global cost of borrowing, and turning again and again to her energy price guarantee, which was still unpopular. The prime minister vowed to stay the course, no matter the consequences.
On Oct. 3, the plan to abolish the top income tax rate was scrapped in the first policy u-turn of Mr Karteng’s tenure. He tried to spin it as a successful example of Tories listening to the public, but that did not stick.
Already, Labour was calling for him to go, but he and Ms Truss both said he was not going anywhere.
Then, Mr Karteng moved up his date to present a medium-term budget, complete with the O.B.R.’s forecast, from Nov. 23 to Oct. 31. This caused the opposite effect as intended and caused the City to tank again.
Mr Karteng proved an adept player of the blame game and tried to pin responsibility on the dead Queen, while a rare Tory ally (most were in open revolt at this point) blamed Vladimir Putin, president of…Russia.
And, at the party conference, Ms Truss, speaking to parliamentarians that had not supported her from the start, vowed to keep forging ahead with the rest of the mini-budget to reshape the British economy.
It is then no surprise that on Oct. 14, the day the Bank of England’s emergency package was set to wind down, Ms Truss summoned Mr Karteng from a Washington meeting of G7 finance ministers and gave him a redundancy notice. He was out. After 38 days, Mr Karteng became the shortest-serving chancellor ever in the 801-year history of the office not to die on the job.
“It was necessary but not sufficient, there’s no question of that, in order to calm down and on the one side the markets but also the uproar in her own party,” explained Kurt Hübner, professor of political economy and interim director at the Institute for European Studies at the University of British Columbia.
“It was clear, he was the face of this policy, even though they seem to have developed it jointly, but he was, so to speak, victimized. But this was the first step that she needs to do.”
In a last ditch attempt to save herself, Ms Truss appointed fixer Jeremy Hunt, a Remainer and as close to a one-nation Conservative as one can get in the post-Cameron era, to be chancellor. He hit the ground running.
He started off by lambasting Mr Kwarteng’s failed policies, comparing them to “flying blind.” Make no mistake, Mr Hunt took Trussonomics out to pasture. After meeting with Ms Truss on Oct. 16 at Chequers, the prime minister’s country estate, he presented his vision to Parliament on Oct. 17, and yanked the vast majority of the mini-budget in the largest u-turn ever seen. Even Ms Truss’s prized energy price guarantee was downsized to help make up for the gaping hole in public finances.
“This whole project was done in a very incompetent way,” observed Mr Hübner. “It’s, in economic terms, a project of neoliberalism that, in many other parts of the world, has been given up.”
Ms Truss gave an eight-minute long press conference in which she answered only four questions and showed no emotion, even as members of her own party plotted to remove her, with some calling for the 1922 committee to change the rules to allow for leaders to be removed before their first year was up. At this point, even U.S. President Joe Biden was criticising the mini budget. After the press conference, the City suffered again.
The new chancellor was widely seen as the de facto prime minister and, as some started a contest to see if a piece of lettuce would last longer than Ms Truss as prime minister, as a potential replacement, along with Mr Wallace and Penny Mordaunt, leader of the House of Commons.
Ms Truss said she would not resign and later said she would contest the next general election (Labour was already calling for snap elections, but those do not seem likely), but Ms Truss’s promises do not seem to be worth much these days. It was not lost on many that Ms Truss would be forced to go even further than her rival Rishi Sunak had promised in order to try to save the economy.
Moreover, the mortgage rate crisis brewed. “There will be a lot of British households who got flexible rates; they will be confronted, not immediately but in the short term, with enormously high mortgage rates,” said Mr Hübner.
“So, there will be a kind of two-branched approach on living costs for the majority of the British people and this will be a huge political challenge,” he said.
The public does not like any of this. Polls show that the Conservatives would lose over 80% of their seats if the election was held on Oct. 17 – finishing in third place, behind the Scottish National Party, which only contests elections in Scotland.
Back on Oct. 17, Mr Hunt described the changes he would present on Oct. 31 as “eye-watering,” leading many to fear of a return to austerity. Under his steady hand, gilt markets and the pound slowly recovered. Ms Truss, however, was nowhere to be seen for much of that Oct. 17 session, even though Mr Starmer had put forth an urgent question for the prime minister.
Ms Mordaunt answered the question instead and claimed Ms Truss was away on “urgent business,” prompting Mr Starmer to taunt, “The lady is not for turning – up,” a play on Margaret Thatcher’s famous quote. He also quipped, “Everyone gets to be prime minister for 15 minutes” with Tories in power. Ms Mordaunt had to clarify that Ms Truss was not hiding under a table somewhere. The “urgent business” turned out to be a meeting with the head of the 1922 Committee – scarcely a pressing matter.
Eventually, Ms Truss did turn up. She sat in silence, staring into the void as she watched Mr Hunt continue to demolish her prized agenda.
Then came the chaos of Oct. 19.
During Prime Minister’s Questions on that fateful day, an upbeat Mr Starmer asked, “Why is she still here?” of Ms Truss and described his opposition as a “government in waiting,” while the unusually quiet Tories were described as an “opposition in waiting.” Mr Starmer then read out the list of policies that Ms Truss had u-turned on, with his raucous M.P.s shouting “gone” after each policy.
Contrastingly, Ms Truss was in a sticky wicket. Her approval rating, measured at 9%, is now lower even than the British inflation rate at 10.1%. This is the lowest in history. Meanwhile, her disapproval rating is 70%. To make matters worse, letters of no confidence have started trickling in to the 1922 Committee.
That same day, one of her senior advisors was suspended for referring to M.P. Sajid Javid in a denigrating manner.
Home Secretary Suella Braverman then resigned after 43 days in a searing letter to the prime minister, ostensibly for minor breaches of the ministerial code, in which she excoriated the government for making mistakes and pretending that everything was proceeding according to plan. This was a major blow to Ms Truss.
Mere hours later, the chief government whip, Wendy Morton, and her deputy, Craig Whittaker, were the focus of complete pandemonium, as members did not even know if a vote on fracking was a confidence vote or a standard vote and rumors of their resignations abounded. After this supposedly victorious vote, as allegations of “manhandling” were levied upon senior ministers who cracked the whip, according to Chris Brown, a Labour M.P. An investigation will take place.
After this unqualified disaster, a subsequent night and morning of decisions ensued. In the end, Ms Truss resigned as prime minister. After 44 days, her resignation came after meeting Graham Brady, chairman of the 1922 Committee of Tory parliamentarians.
A new prime minister should be in place by Oct. 28, but the logistics still must be figured out. There is also the critical Halloween fiscal statement coming up.
They will be the second consecutive unelected Tory prime minister, and the fifth Conservative prime minister in six years. Potential candidates include Mr Sunak, Ms Mordaunt, Mr Wallace, Mr Johnson and more. A possible solution for this rapid election involves a unity candidate to eliminate the need for putting the question to the general Conservative Party selectorate.
The constant political chaos has led the Labour Party, the Scottish National Party and the Liberal Democrats to all call for an immediate general election. The Conservatives have been in power since 2010.
The revolving door of prime ministers has led to economic chaos and volatile markets as the U.K.’s international reputation goes up in smoke.
Perhaps the future of the Tories is best summed up with lettuce. A 60p Tesco lettuce head, set up mere days ago as a gag to see if the lettuce of Ms Truss would last longer, ended up winning.
A fire alarm. Charles Horowitz for Policy Reform Now
By Charles Horowitz
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