How did it all go so wrong for Liz Truss?

The former prime minister was fundamentally right in her diagnosis of the situation at home and abroad and what should be done about it


This article is taken from the December/January 2023 issue of The Critic. To get the full magazine why not subscribe? Right now we’re offering five issues for just £10.

From Chevening to Chequers. For me, two weekends, eight weeks apart, will forever bookend my friend Liz Truss’s time as prime minister. The first, a wash of August Bank Holiday sunshine over the Kent countryside. Walking the grounds of the Foreign Secretary’s home with her on one of the last days of a leadership contest she had already won, listening as she outlined her vision for government, stalking ahead impatiently through the yellowing grass.

The second, an October Sunday in Buckinghamshire, an afternoon of bruised clouds and close heat foreshadowing the storm which broke as we dispersed. A small circle of family, ministers and aides, gathered in the Great Hall to say goodbye. A day defined by the quiet dignity and absence of self-pity of its principal protagonist, entirely typical of our host.

These memories are appropriate, because so much of what happened in between was decided at Chevening in the dog days of August. That is the conclusion, correctly, of James Heale and Harry Cole’s Out of the Blue, a brisk and insightful canter through Liz’s career and the forces that shaped her. It was those weeks at Chevening immediately prior to her becoming prime minister that truly mattered to the fate of her premiership.

This is journalism as the first draft of history. In four breathless chapters at the close of their book, Heale and Cole do a good job of unpicking what went wrong, and why. But they largely decline to address an inconvenient truth — a truth perceived by those much-maligned Tory members all summer. Namely that in her diagnosis of the situation at home and abroad and what should be done about it, Liz Truss was fundamentally and importantly right. 

More of that in a moment. First, the fall. 

Any discussion of this leads inescapably to the mini- budget of 23 September. Liz’s Thatcherite zeal, long and sincerely held, demanded a line-in-the-sand moment. However, the ground was fatally unprepared for the tax-cutting radicalism that Kwasi Kwarteng set out, especially when coupled with the size of the necessary but uncapped energy bail-out announced two days earlier. The markets were well and truly spooked. 

The timing was also against her, just as central banks the world over started to act in earnest to curb the inflation caused by Putin’s war. In the eyes of millions of British voters, the fallout from the mini-budget meant the Government alone took responsibility for sharp spikes in both interest and mortgage rates, even though the majority of those increases were already in motion independently. 

The whole package was an exercise in Reaganomics without, fatally, the support of a reserve currency. Indeed, it was launched at the very moment when the strength of the dollar left sterling desperately exposed. As one of her Cabinet ministers, I take my share of the responsibility. But it is important to note that for much of the summer, there was a different plan. 

In July, in the days following Boris Johnson’s resignation, I spoke with Liz about how best to implement her vision for a higher growth, lower tax economy. The role of Chief Secretary to the Treasury is to be a voice of caution, and speaking as the incumbent to a predecessor, I highlighted the need for credible savings options to accompany her tax cuts, warning that without these we would be monstered. She agreed.

We settled on a new spending review, the exercise by which departmental budgets and priorities are determined in conjunction with Number 10 and the Treasury. Events in Ukraine meant the review conducted in September 2021 now strays close to being a fiction: the world has changed. It was time for a reassessment.

We discussed the relative merits of requiring five and ten per cent reductions in expenditure, achievable given how far spending has soared in recent years, and capable of being cushioned by the size of so many Whitehall departments’ Covid-driven underspends. 

Her only caveat, quite reasonably, was that it would be better to identify specific saving plans in the run-up to a budget once safely in office, as opposed to in the heat of a brutal campaign. But the overall approach of securing those savings was not, I believed, in any doubt. 

There was, therefore, a conscious and spectacular change in her policy from mid-July to the end of August. The latter two weeks of August seem to have been pivotal. With an unassailable polling lead and most votes already safely cast by party members, Liz settled in at Chevening for a blizzard of meetings. Here her distaste for “abacus economics”, always present, won out over caution. 

She was well within her rights to point out that the guardians of Treasury orthodoxy are bad at conducting dynamic modelling of the positive impact of both lower taxes and supply side reforms. But this was not the time to try to test that weakness.

Her administration had too few allies when its momentum faltered

As the storm broke from the mini- budget, so a second fundamental error of the Chevening days was laid bare: Liz’s choice of personnel. It was a mistake to have excluded from government so many of those who had backed Rishi Sunak. Her administration had too few allies when its momentum faltered, while a pared-back Downing Street operation found itself fighting on too many fronts.

What Heale and Cole could acknowledge more clearly is that there was a sizeable group of MPs who were unpersuadable from the beginning. From those who shivered at the thought of making the case for lowering the top rate of income tax back to the level at which it had stood at for all but the last six weeks of New Labour’s 13 years in office, even if it would raise more revenue, to those who did little to hide their desire for revenge for the summer’s reversal, the kindling was dry. 

Amid tongue-in-cheek articles by Tory MPs writing allegorically about the perils of dumpster fires, there were plenty of determined arsonists. More time could be expended on this depressing theme, but it would not help those of us who wish to prevent the disaster of a Labour government. Our focus must be on what comes next.

And so we return to the fundamental point: that for all the brickbats, the platform on which Liz was elected PM remains important and urgent, and still needs to be delivered. A reader of Out of the Blue, as the very title suggests, might be surprised that she should have been elected. But it should be no surprise for those who look at the state of Britain today, and the wider global context.

Who can dispute the need for a plan for growth

Who can dispute the need for a plan for growth, at a time of flagging living standards when the Bank of England is forecasting a two-year recession? Taxes are at a 70-year high, and she was right to ease the burden by cutting National Insurance.

The opportunity for further tax cuts may have passed with the mini-budget, but supply-side reform is now more important, not less. Growth since the 2008 crash has been sluggish, and some of the principal reasons for this are the result of policy challenges that a Conservative government with a majority of 70 ought to confront.

We have become a country where it is, literally, very hard to build anything. For all the talk of England’s green and pleasant land being eroded by advancing homes, the greenbelt today is larger than it was when Mrs Thatcher came to power. Much of it is anything but “green”. Meanwhile, a home in England today typically costs 9.1 times earnings. In 1997, that figure was 3.5. 

Bewildering problems are tolerated, such as the 100,000 homes forestalled by the “nutrient neutrality” disaster, which means that in 74 council areas and rising, no new developments are allowed that lead to higher levels of phosphates and nutrients in waterways. 

Building 100,000 homes is the equivalent of one per cent in GDP. Yet we content ourselves with half-measures that will release only a few tens of thousands of those planning permissions over a period of years, at a cost of up to £7,000 per home. A simple, targeted disapplication of the Habitats Regulations, which have transposed the relevant EU law, could unlock those homes overnight, and should be accompanied by tougher requirements on both our water companies and farmers to tackle the primary causes of river pollution more aggressively. 

Housing is just one example among many. We need urgently to reform our statutory staff-to-child ratios that drive up childcare costs for parents unnecessarily. Our ratios are among the highest in Europe — even within the UK, Scotland has lower ratios than England, with high parental satisfaction rates. If we want younger women to succeed, and to make the most of people’s talent, we need to end the situation where it makes no financial sense for so many women to return to the workplace.

Productivity matters. We need to curb the culture of judicial review that ensures major infrastructure projects take years longer to deliver than they should. We also need to grasp the opportunities of Brexit, rather than just talk about them. Reform of EU rules such as Solvency II, proceeding with painful slowness, desperately needs to be accelerated if the City is to succeed. 

Liz saw this with total clarity and planned a series of interventions this autumn. If we are to get our economy moving, it is essential that we should act. None of these problems will resolve themselves of their own accord.

If her instinct for action on the home front was sound, it was doubly so abroad. The Northern Ireland Protocol legislation, so vital to ensuring that all parts of our country get to leave the EU, is very much Liz’s legacy from her time as Foreign Secretary. She understood better than almost anyone in the senior ranks of Government that Brexit cannot be a partial or half-hearted endeavour. Delivering this will be a central test for the new Government. 

Liz, Ben Wallace and Boris Johnson also formed a highly effective triumvirate to deliver the UK response to Putin’s war in Ukraine, prompting Europe and America to follow suit. Liz’s commitment to raise defence spending to three per cent of GDP by the end of the decade is absolutely necessary. Indeed, simply accommodating our current plans will require at least 2.5 per cent of GDP by the middle of the 2020s. 

Russia is the challenge of the day, yet beyond her sits China, casting covetous eyes at Taiwan. The lesson she is drawing from events seems unlikely to be not to act, but rather that to achieve her goal she will need to deploy even more overwhelming force than Putin has been able to muster.

With regard to China, Liz again rose to the level of events. Too many in British and European politics still cling to the German dream of Wandel durch Handel, or inspiring change through trade. Liz did indeed aim to deliver change through trade, but of a different kind. In one of the boldest policies of recent years, she had set out plans to build a democratic alternative to the Chinese “Belt and Road” initiative, not least by championing UK membership of the CPTPP trading bloc. 

When she fell, she was poised to designate China officially as a threat to the UK. From the suppression of democracy in Hong Kong to the genocide being perpetrated against the Uighurs, we should be in no doubt as to the true nature of Xi’s regime. The West will only be able to resist this challenge if we readopt the Cold War trinity of moral confidence, economic dynamism and military strength, and Liz instinctively recognised this.

It was precisely because Liz’s sense of the kind of country we ought to be was so compelling that the Conservative party gave her their decisive backing this summer. It is her tragedy that the mistakes made at Chevening risk diminishing the vision she set out of a more successful Britain, walking tall abroad and better able to offer opportunity and dignity to her citizens at home.

The final words should be Liz’s own. As Justice Secretary, Out of the Blue details the spat she found herself in with the legal profession over caustic Daily Mail headlines during the darkest days of the Brexit deadlock. She found herself caught between the vital importance of upholding freedom of the press and her duty to protect the judiciary. 

In words which could be the epitaph for her short, extraordinary time as our prime minister, she reflected: “I think I could have gone out and done a better defence, and got on the front foot. On the other hand there is no point in doing these jobs unless you stand up for what you believe in.” 

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