Market turmoil brings Liz Truss to the brink

When Kwasi Kwarteng told the Washington media he was “going nowhere,” Conservative lawmakers joked about whether the chancellor meant he was staying at his job or abroad. A Whitehall official quipped, “Maybe he can apply for political asylum.”

Though Kwarteng insisted at Thursday’s annual IMF meetings that “our position hasn’t changed” on its unfunded $43 billion in tax cuts, turn on the proposals.

The chaos has also raised questions about whether Truss and Kwarteng can survive: in Westminster, Conservative MPs debated who could replace Truss as Prime Minister, with some also saying the Chancellor must go. Tories’ ratings in opinion polls have plummeted since the “mini” budget.

Conservative Party rules would need to be changed to oust Truss quickly. But a veteran Tory official said that if Sir Graham Brady, chairman of the 1922 Conservative Backbench MPs committee organizing leadership elections, received more than 100 letters of no confidence in Truss, “he would have no choice but to do something about it.” . She has been prime minister for 37 days.

Truss’ allies warned that an about-face on the “mini” budget unveiled on Sept. 23 would erode her entire economic agenda. “That would mean that as a project it is politically finished,” said a senior Tory. “What’s the point of a truss government if it doesn’t implement radical economic reforms?”

Government insiders said Downing Street was considering jettisoning large parts of Kwarteng’s financial report, including a proposal to reverse a proposed corporate tax hike that would cost £18 billion a year by 2026. Number 10 said, as with Kwarteng, that nothing had changed.

But George Osborne, a former Tory chancellor, said a significant pullback from the “mini” budget before Kwarteng outlines on October 31 how he will deleverage Britain’s public debt is inevitable.

“Given the pain the financial turmoil is inflicting on the real economy, it’s not clear why it’s in anyone’s interest to wait another 18 days before the inevitable ‘mini’ budget reversal,” he tweeted.

Lord Norman Lamont, who was Tory chancellor on “Black Wednesday” in 1992 when John Major’s government was humiliated by sterling’s exclusion from the European Exchange Rate Mechanism, said a U-turn was the least bad option for Truss.

“Sometimes it is said that politics is the art of the possible. I think it’s the art of choosing between the incredible and the completely impossible,” he told the BBC.

A Truss ally suggested that scrapping the corporate tax plan, if agreed, could be presented as “readjustment in light of global market conditions.” The government is keen to blame the market turmoil since the ‘mini’ budget on global factors, rather than accepting it as stemming from specific UK problems.

There was no consensus among Truss’s team as to what exact elements of Kwarteng’s financial report should be dropped, and how soon. “The U-turn was briefed before the policy was decided,” an official said.

Some government insiders blamed a lack of senior officials at Number 10 for the chaos, as several of Truss’s assistants were on vacation and waiting in Washington. An official described the mood at Number 10 as “gloomy” on Thursday.

The lack of experience in Truss’ team was highlighted by MPs who claimed it was not prepared for a crisis. “She doesn’t have good advisers,” said a Whitehall official.

An official said there was “a lack of decision-making at Number 10″ and paralysis across Whitehall. “There is inexperience and naivety [Truss’s] Team doesn’t realize the mess they’ve made.”

Another official added: “They just don’t know how to govern”.

If Truss drops more of the “mini” budget after dropping her plan to end the 45p top tax rate at the Tory conference after opposition from MPs, questions will immediately be raised as to whether Kwarteng can stay as chancellor. A Treasury Department veteran said: “The answer has to be to blame him, fire him and start over and hope that’s the case in two years [at the next election] that is a distant memory.”

A government insider said Truss had no choice but to reverse the unfunded tax cuts and fire Kwarteng. “Their only political options are to throw away a large part of the ‘mini’ budget, sack Kwarteng and blame him. But I doubt it’s there yet,” he added.

Sajid Javid, who was briefly Chancellor in Boris Johnson’s government, was widely seen by ministers as the only viable contender to succeed Kwarteng. “Saj is the only one who is close enough to their agenda and can have some credibility with the markets,” said a minister.

However, should Kwarteng be pushed out, attention will likely quickly turn to Truss and whether she can survive as PM. Sir John Curtice, a leading psephologist, said Truss was as unpopular as Major now after Black Wednesday.

“She is more unpopular than Boris Johnson at the worst time of his tenure, in mid-January this year when the Partygate scandal was at its peak,” Curtice told the BBC.

Senior Tories were skeptical about Truss’ prospects if Kwarteng were to be forced. “The idea that the prime minister can scrap her ‘mini’ budget and her chancellor without taking responsibility herself is for the birds,” said a former minister. “She is the first Lord of the Treasury. It was their budget and their catastrophic misjudgment.”

Paul Goodman, editor of the ConservativeHome website, suggested that a possible joint ticket by former Chancellor Rishi Sunak and House of Commons leader Penny Mordaunt could unite to oust Truss.

But few Tories see an obvious successor to Truss or an easy way to install a new party leader and prime minister without further turmoil. Market turmoil brings Liz Truss to the brink

Adam Bradshaw

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