She said she wouldn’t, but she has. Following ‘a conversation’ between Liz Truss and her Chancellor Kwasi Kwarteng, the government retreated on their pledge to scrap the top rate of tax—the 45p in the pound earners of over £150,000/year pay. Following a ferocious backlash from her party as well as key sections of the Tory media, Truss was really left with no choice—despite vowing to tough it out to anyone outlet who would listen.
Truss can then add her U-turn to an already impressive list of achievements. In her four short weeks in office—two if you want to discount the fortnight of official mourning for the Queen—she has caused the pound to sink to its lowest ever level against the dollar. She is the first Conservative leader since December 2001 to be on the wrong side of a 30-point polling lead. And no other Tory leader has stoked so much rebellion among their parliamentary ranks so quickly, to the point Tory MPs are briefing the press that her tenure in Number Ten will be over by Christmas.
Like the First World War catastrophes seldom are, but no new Prime Minister has sunk as far as fast. At the rate things are going, as former Tory MP and Conservative Home editor Paul Goodman puts it, a 1997-style wipe out would be ‘a good result’. Truss has therefore got to be hoping that she can reverse some of the damage as she, in parliamentary parlance, uses conference to introduce herself to the voting public. Reversing gear on the 45p tax rate was presented as ‘listening’ to the public. She and Kwarteng say they ‘get it’. But the rest of their programme, which still involves cutting social security and state spending on essential services, might suggest otherwise.
Truss’s plan to ‘Get Britain Moving’, as per the conference slogan, is almost designed to antagonise as many people as possible. There are two components: borrow money to freeze the unit price of energy for two years, and cut taxes for the wealthiest. The abolition of the 45p rate was part of this package, but scrapping the planned corporation tax rise, relaxing stamp duty on house purchases, and reclassifying businesses with under 500 employees as ‘small’ and therefore exempt from a raft of regulatory protections are part of the same.
For the first, the groundswell of public opinion and the adoption of price freezes by opposition parties meant Truss had to have her own plan. However, borrowing to protect the profits of energy suppliers is unlikely to find a sympathetic audience. It says everything that even Keir Starmer recognises the popular anger toward the electricity and gas companies and that Labour’s levy on their windfall profits administers the sort of populist kicking the Tories were past masters at harnessing. Truss has missed an easy win.
Second, borrowing money to give more to the wealthiest in the middle of a cost of living crisis is brave politics, if by brave we mean stupid. But it’s much worse than that. Kwasi Kwarteng’s ‘mini-budget’ has increased the cost of borrowing, which threatened dozens of pension funds with insolvency because their assets were tied up in low yield government bonds. Their value diminished, meaning they had to sell them at a loss to meet liabilities in an unsustainable downward spiral. To deal with this self-inflicted Tory crisis the Bank of England were forced to buy up gilts to stabilise the price and hike interest rates—increasing the cost of mortgage repayments for millions and threatening hundreds of thousands with home repossession.
How to make sense of this self-evidently reckless strategy? After all, announcing that your government is solely interested in looking after the rich and anyone who is struggling should, in the words of Conservative chair Jake Berry, ‘get a better paying job’, is not the stuff from which election-winning coalitions are made. For one, Truss is very poor at politics. We saw during the Conservative leadership election how she planned to introduce regional pay for public sector workers and civil servants, meaning everyone outside of London and the South East—including the police and military—would take a pay cut. Declaring war on solar panels during an energy crisis and during hustings saying she would ‘look at’ making the national speed limit on motorways advisory are some recent, pre-Number Ten examples. That she was elected to parliament on a neoliberal, public sector-chopping, tax-cutting manifesto in 2010 seems to suggest that, for her, the prevalent common sense of the early Coalition years has not moved on. The assumption is the public would simply swallow tax cuts for the rich because it would grease the wheels of economic growth.
The second key factor are interests. It was widely reported on Sunday morning that after giving his statement, the Chancellor spent the evening quaffing champagne with the very same hedge fund managers who were in the process of making a packet from shorting the pound. It’s hard not to conclude that the Truss-Kwarteng gambit was deliberately designed to achieve this outcome, with a view to depressing the value of UK assets—ideal if the medium-to-long-term plan is outsourcing more state functions, particularly the NHS, and hawking these openings to speculators and outsourcers, foreign and domestic. Her remarks about not wanting to impose an energy windfall profits tax because it would deter investment chimes with this prospectus.
This helps explain why some sections of the Tory press are already gunning for Truss’s government, The Times in particular. For one her seemingly laissez-faire approach to popular consent doesn’t just threaten the Tories’ chances in 2024, it might well implode the foundations of the party itself. Risking pensioners’ incomes and attacking Tory-supporting mortgage holders raises the chances of a permanent end to the Tories as a party of government. Second, the knock-on consequences threaten not just the mass base of petty landlords, but rises in interest rates jeopardises large property owners, and businesses dependent on credit lines. In other words, Truss is a danger to the commercial activity of most of the British capitalist class.
In a poor defence of her programme in interview with Laura Kuenssberg on Sunday morning, Truss tried defending her moves as ‘emergency action’ to freeze energy bills, pointing out this was the bulk of the intervention. On inflation, she claimed Vladimir Putin was responsible and it is therefore a global problem. Her defence of tax cuts for the rich was about ‘simplifying the system’ and ‘making the country successful’. Pressed on whether her government would uprate benefits in line with inflation as promised by the previous Tory administration—and apparently accepted by Truss during the leadership election—she would not be drawn on future fiscal plans, though she did say the triple lock on the state pension would remain. But what her critics want to hear, i.e., signs of concessions or a climbdown, there were no hints before it was briefed to The Mail late on Sunday evening.
Few watching would have found this defence convincing. Among them was Michael Gove, who said borrowing to fund tax cuts was ‘unconservative’ and went on to say prioritising help for the richest above everything else showed ‘the wrong values’. Increasing numbers of Tory MPs agreed, including former Transport Minister Grant Shapps. Four weeks into her premiership and already The Mirror was talking up the efforts of rebels mobilising a 70-strong cadre of MPs to force another leadership contest. Far from being unruffled, on the Sophy Ridge programme, party chair Jake Berry said any upcoming vote on Truss’s economy-wrecking package would be treated as a confidence issue. In other words, he was not privy to the wavering of Truss and Kwarteng over the issue. Still, with apocalyptic polling and the seeming guarantee of obliteration, threats like this cannot carry much weight if enough Tory MPs think they’re doomed anyway.
This mess was a situation entirely of Truss’s creation. She put herself in a situation where either she would blow up her party by pursuing the 45p tax cut or blow up her premiership and what little authority she had by climbing down. She chose the latter. The problem is that rebellion still simmers. The ‘distraction’, as she and Kwarteng termed it, has gone, but the plan to cut more from social security and public services still finds plenty of opposition on the Tory benches. It says everything about the topsy-turvy Tory world we live in that Esther McVey, David Cameron’s former hatchet woman at the DWP, has spoken out against the immorality of taking more money from the poorest. The scene is set for more reversals and more appalling polling. Marx once noted the bourgeoisie creates its own gravediggers. In today’s Conservatives, they appear much closer to home.