Liz Truss's «turn it up to eleven» approach to the mini-budget made her fall all the more dramatic. Photo: Andrew Parsons/No10 Downing Street
Liz Truss cried in the Cabinet Office. Before her there was Kwasi Kwarteng, the chancellor, whom she fired. How quickly everything changed. Just six weeks ago the couple were planning her premiership in the summer sun, with triumph in the Conservative leadership race imminent.
Three weeks before this day, Thruss sat grinning next to Kwarteng. side as he laid out a tax-cutting “mini” budget that fulfilled more than a decade of shared dreams.
But what followed — the fall of the pound, high interest rates, the Bank of England's intervention to save pension funds, the rebellion of the Conservatives — brought Truss to this point. Now, on Friday 14 October 2022, there were dire warnings of chaos when markets opened on Monday if she did not go further. The Prime Minister felt she had no choice but to fire one of her best friends in politics.
Almost until recently, Kwarteng did not believe that such a fate awaited her. He was pulled out of the International Monetary Fund (IMF) summit in Washington, D.C., a meeting that Truss begged him not to attend as the lights began flashing red that week.
Kwasi Kwarteng and Liz Truss started out as best friends in politics. Photo: Geoff Pugh for The Telegraph
The day before, he brushed off speculation, answering: “Absolutely, 100 percent,” when asked in an interview whether he would run. would still be Chancellor in a month.
Even when he landed in London, the Chancellor did not expect to be fired. Then, minutes from Number 10 in his ministerial car, he saw a tweet from The Times political editor Stephen Swinford saying he was being “sacked.”
“I thought it was crazy, I thought that this is complete madness,” Kwarteng said in an interview.
Get the knives
The Chancellor knew that things were bad, the markets were turbulent, and the wing of the parliamentary party was sharpening their knives. . He believed that the Trass administration had a 50/50 chance of surviving until the new year.
And if this could be achieved, who knew? But one sure way to ruin it all is to sack your right-hand man and abandon the policies that brought you the Tory leadership. For 20 tense minutes, sitting at the coffin-shaped cabinet table, Kwarteng tried to convince Truss that the end of his cabinet career would also be the death knell for her.
“They will come for you.” now,” Kwarteng warned. “They are already after me,” replied the Prime Minister. “They will ask you: If you fired him for what you campaigned for, why are you still here?” — the chancellor warned.
Reporters did just that hours later in a painful press conference without giving a clear answer. Kwarteng asked who would replace him. Answer: Jeremy Hunt. «Hunting?! He's going to turn everything around!» exclaimed Kwarteng.
(Hunt, a centrist Conservative, himself would have been no less surprised by the news of his election. Early in the morning, while on vacation in Brussels, he would have received a message from Truss to her new number asking her to call back. Hunt ignored the message, believing it was a prank.)
Kwarteng's pleas fell on deaf ears. The decision was taken. Before leaving the cabinet, the epicenter of British political power, the former chancellor made a prediction: «You have three weeks.» He was wrong, but not by much. Six days later, Truss would announce her resignation.
What made Truss take such a drastic step — abandon the tax cuts that won her the Tory leadership and sack their co-author?
Q There are many plot points to this turbulent story, from her ascension to the prime minister's post in early September to Kwarteng's sacking.
So the mini-budget swelled and swelled, spurred on by Trass’s “turn.” It's getting close to eleven. The package was delivered — the biggest tax cut since 1972, brilliantly presented by Kwarteng. There was a market reaction — a fall in the pound and a rise in bond interest rates — and dramatic intervention from the Bank of England.
Conservative Conference The party has done little to quell concerns about Liz Truss's grand plans. Photo: Daniel Leal, WPA Pool/Getty Images
And at the Conservative Party conference the first change imposed by the Tory rebels occurred: plans to abolish the 45p additional income tax rate were scrapped. And yet it was this step — the dismissal of Kwarteng and the breaking of the mini-budget — that sealed her fate. Interviews with cabinet ministers, Downing Street advisers, Treasury insiders and senior officials, as well as Truss and Kwarteng themselves, for my new book, The Right to Rule, shed light on why she took this step.
< p>This is the first time that the private warnings that forced her action — and ended the shortest premiership in history — can be revealed.
The gloomy mood darkens
The mood following the Tory conference, which ended on 5 October 2022, was already gloomy due to the 45p reversal. The next weekend it got dark. Downing Street had always planned to produce a proper financial report in the autumn. It was clung to like a life raft in choppy waters after the mini-budget.
This will be the moment when spending is cut, when all the supply-side reforms are published, when it is proven that the government has a plan to reduce debt. It was also the moment when the Office for Budget Responsibility (OBR) — having cost itself for the sake of a mini-budget — finally released its assessment of the Thruss-Kwarteng measures.
Quote by Liz Truss + transcript
By the end of the conference week, the OBR had provided the Treasury with its first private assessments. The Conservative Party, which prided itself on sound economic management, had long adopted «fiscal rules» to demonstrate its prudence. At the time, the rules promised that debt would fall within five years of any given date — a claim that the Treasury always wanted to back up with the OBR's five-year forecast, changing policy as necessary to achieve the target.
After a bonfire of taxes and huge guarantees on energy bills, Number 11 realized that this time it would not be easy to achieve the goal.
Officials discussed how much total savings would be needed. They concluded the worst case scenario: £40-50 billion. Then the OBR's first estimate fell: £72 billion. This was much higher than expected. This amount had to be saved through tax increases or spending cuts over five years to comply with budget rules. Violating them, given that confidence in the new management in the markets was already thin, was considered unconscionable. This gap needed to be filled.
That weekend at Checkers, the Prime Minister, the Chancellor and their inner circle discussed options. Perhaps tax thresholds could be frozen for as long as five years? Or has the windfall tax on oil and gas giants been extended? These weren't viable options for a couple of tax cut advocates, but the ideas were on the table. Not discussed in detail that weekend, it cancels more elements of what had already been announced, according to one person present. But the situation will change in the coming week.
By Wednesday, October 12, there was a feeling among economic officials within the government that Truss and Kwarteng did not understand the seriousness of the situation.
The new fiscal exercise, called the Medium Term Budget Plan, was pushed back from mid-November to October 31, with the speed of the reset taking priority over the inevitable Halloween Horror Show headlines.
< p>But now another date loomed, more early and even more important: the moment when the Bank of England ends its intervention and stops buying bonds — a step that was initially taken to stop the sell-off in financial markets.
2110 Truss market
This was just a few days away, on Monday, October 17th. This amounts to removing the stabilizers from the markets, which will then be free to reveal what they really think of the UK's current leadership. Did the Prime Minister and Chancellor realize how difficult it would be to reach £72 billion? And did they know what the traders were planning to release on Monday?
Nervousness is growing
Some inside believed not. This conclusion was drawn from the fact that Kwarteng, despite the uncertainty, decided to travel to the IMF summit in Washington, DC, instead of leading preparations from London.
Truss directly urged him not to go. Kwarteng, believing that the cancellation of the fight itself would cause alarm, left anyway.
The anxiety was now spreading. Two special advisers specializing in economics — Shabbir Merali at number 10 and Adam Memon at number 11 — were increasingly nervous about how markets would react on Monday. They were given permission to interview industry leaders and spent Wednesday afternoon in Board Room 11, talking back and forth with half a dozen CEO-level executives from investment banks and asset managers.
The message they heard was consistent. and terrifying. The end of October was too long to wait for any announcements. Traders will make their moves on Monday. Either scrap the tax cuts Truss has made the centerpiece of her premiership by the end of the week, or risk a “financial crisis”.
They knew what the term theoretically entailed: falling sterling, rising interest rates, rising interest rates, banks struggling to stay afloat, leading to further dire consequences. It was a dark road.
“When people talk about ‘financial crisis,’ that’s what you read in history books,” one participant said. “When you hear serious players say, 'Come on Monday morning, maybe you'll go to one of these,' it puts everything into very close focus. It didn't take us long to act. We had about 48 hours. The situation seemed quite dire.”
Merali and Memon remained in Downing Street until almost 11:00 pm. writing a two-page note for the Prime Minister. It had three sections. The first summed up what they heard, emphasizing that the markets are betting against Britain.
The second explained the broader context: how achieving economic growth, Trace's defining goal as president, was only possible with financial stability. And the third outlined the crudest conclusions. To fill the OBR's £72 billion black hole, the ax had to be taken to the mini-Budget.
The withdrawal of the corporation tax rise, the most expensive tax cut, had to be scrapped. It meant Truss would have to manage a rise in the vote from 19% to 25% — the very policy authored by Rishi Sunak she had been protesting all summer in the Tory leadership race.
Jacob Rees-Mogg quote + transcript
Small tax breaks will also be needed, the note said: getting rid of VAT-free purchases for foreigners and increasing taxes on dividends. The National Insurance cuts could remain: they were so closely linked to Truss that no one wanted to reopen that Tory Pandora's box, given how it split the party when it was announced by Boris Johnson. But now the line has been crossed. On the agenda was the issue of canceling mini-budget measures. And yet Thruss refused to give up.
On Thursday, October 13, the note was discussed in the early morning at a meeting of senior political staff at Number 10. The note's authors wanted it to become an official recommendation.
Prints were soon circulated around the building, knowledge of what was feared , was around the corner, expanded. As is common in Westminster, the gloomy mood led to gallows humor. «We'll be like Venezuela,» a political adviser joked, according to one insider.
Along with fears of sterling falling again — perhaps falling below the psychologically significant dollar parity mark — one worry that stood out most starkly was that the government would not be able to finance its debts. If bonds were issued but not purchased, round after round, the game was over. Just two weeks ago, Truss had dismissed the possibility. Now it was quite likely.
Bet against Britain
James Bowler, the new permanent Chancellor of the Exchequer replacing the sacked Sir Tom Scholar, was called in to tell Truss to her face how difficult the situation was.
James Bowler was reportedly 'held at gunpoint'; inform Truss Credit: David Rose for the Telegraph
One senior No 10 official said he was «brought in at gunpoint», another said he was «brought in on wheels». It was highly unusual for a senior Treasury official to brief the Prime Minister without the Chancellor present — something Bowler noted in his opening remarks. However, after the launch he did not hold back.
One source in the room summed up his message: “He just made it clear that there are a lot of very smart, very rich people who don't do politics, who only look at the numbers, who were absolutely willing to tear Britain apart in the markets. They were betting against us and were going to win. We have lost the confidence of the markets and are in a very weak position. And it all needed to be thrown out.»
A second source in the room said Bowler's tone was more constructive, looking at options for how the £72bn figure could be saved, but confirmed the overall message was gloomy .
It wasn't just Bowler. Senior Treasury officials approached Nadhim Zahawi, the former chancellor who now headed the Truss cabinet, fearing the prime minister could not accept how bad things were and urged him to voice his concerns.
A meeting between the pair was scheduled, but later cancelled. Chris Philp, the chief secretary to the Treasury who has resisted big changes to the mini-budget, felt he was being left out of the cycle as Number 11 mandarins pushed for repeal.
He wanted to propose an alternative savings plan, but senior Treasury officials urged him not to do so. He eventually sent his proposals directly to Truss on WhatsApp, but by this point the pressure was mounting.
The warnings eventually came from the very top of Whitehall.
Simon Case, Cabinet Secretary ministers, saw the Route that day. He also put his official advice in writing. The letter warned the government would struggle to finance its debt on Monday unless Truss reverses his corporate tax cut, according to two sources who have seen its contents.
It made clear that a “major financial crisis” was about to hit Britain unless urgent action was taken. Case is also understood to have reported concerns to Andrew Bailey, Governor of the Bank of England: Truss and Bailey did not speak to each other directly. The message was loud and clear. Britain's most senior civil servant and the head of the central bank have now joined the chorus of concern.
Earlier on Thursday, the prime minister resisted calls for sweeping changes. Then the mood changed, confidence evaporating with each catastrophic warning. She was told that without a market reversal there would be a «serious market collapse» and the UK would struggle to find funds.
Truss eventually agreed to act. She later told others that it was a case of «once bitten, twice shy» given how the mini-budget ended.
The inevitable end
If politics had to go, so did the man who exposed them. So, that same evening, Kwarteng was summoned back to London for political execution.
By this time, the end of Trass was inevitable. Kwarteng left, and just as he finally called back, Jeremy Hunt appeared. Nadhim Zahawi was also briefly considered for the chancellor position before Hunt was chosen. Before markets opened on Monday, almost all of the tax cuts in the mini-Budget, with the exception of the removal of the National Insurance rise and the stamp duty cut to support the property market, had been burned through.
Liz Truss left her post on 25 October 2022, marking the shortest premiership in history. Photo: Dinendra Haria/Anadolu Agency via Getty Images
The two-year energy price guarantee was also reduced to just over six months. Truss, who gave a stilted eight-minute press conference defending the changes that did little to calm nerves, was still in office but no longer in power.
What finally drove her over the edge was the most incomprehensible thing. issues: the Labor Party's attempt to seize control of the House of Commons order, which determines what is debated and usually decided by the government, to vote on fracking. Chaotic scenes in parliament, as party discipline collapsed, were followed by resignation.
Everything fell apart so quickly. Liz Truss's commencement speech at Downing Street took place on 6 September 2022. She left her post after a successor was chosen, on October 25, 2022. David Cameron served as Prime Minister for 2,253 days, Theresa May for 1,106 days and Boris Johnson for 1,139 days. Truss was 49 years old and gone.
The former prime minister defends his economic approach. “I was trying to defibrillate a patient at a very late stage,” Truss told me about trying to overcome two decades of high taxes and regulatory red tape.
«And you might say, Well, maybe I shouldn't have done that, maybe I should have softened the situation.» But you can't campaign for leadership as a rebel and then get into the top 10 and not follow through. This policy was difficult to implement in the face of strong opposition, but I believed that the alternative of doing nothing would be even worse.”
Kwasi Kwarteng also thought a lot about how things would turn out. His friendship with Thruss, strained by his official position, was not destroyed.
But as time passed, it became clear how prepared his old ally was for the job. “I love her very much, she is a wonderful person, very sincere and honest,” Kwarteng said. “But if it weren’t for the mini-budget, she would have blown up on something else. I just don't think her temperament was right. She just wasn't cut out to be Prime Minister.»
An abridged extract from The Right to Rule, published 28 September (John Murray, £25); pre-order at books.telegraph.co.uk
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