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<\/p>\nJust over a month into her premiership and under fire on multiple fronts, Liz Truss returned to her desk in 10 Downing Street to find a signed letter from Simon Case, the most powerful civil servant in the land.<\/p>\n
Its contents were devastating.<\/p>\n
Case, a former Buckingham Palace aide, had at the age of 41 become the youngest ever Cabinet Secretary after being appointed under Boris Johnson two years earlier. Now happily ensconced in the role, and reporting to a new PM, he’d started to flex his muscles.<\/p>\n
It was October 14. A fortnight earlier, the bespectacled technocrat had played a key role in forcing the country’s third female Tory PM to dump one of the most contentious parts of her controversial ‘mini-Budget’ \u2014 the surprise move to cut the top rate of income tax from 45 per cent to 40 per cent.<\/p>\n
But now Case had a second key tenet of Truss’s agenda in his sights. Namely, he wanted to ensure that she also scrapped a signature plan to cancel the proposed rise in corporation tax from 19 to 25 per cent, agreed by Rishi Sunak in 2021 when he was Chancellor under Boris Johnson.<\/p>\n
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‘Deposed’: Then-Prime Minister Liz Truss talks at a press conference in No10 after sacking Kwasi Kwarteng as\u00a0Chancellor on October 14 last year<\/p>\n
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Just over a month into her premiership and under fire on multiple fronts, Liz Truss returned to her desk in 10 Downing Street to find a signed letter from Simon Case (pictured), the most powerful civil servant in the land. Its contents were devastating<\/p>\n
The civil servant’s letter contained what seemed a clear warning: if the policy wasn’t reversed, Britain risked being thrown into an immediate and severe economic crisis.<\/p>\n
‘It was clear and unambiguous,’ says a source with knowledge of the letter’s contents. ‘Case’s letter told the prime minister that, if she didn’t “move” on this, the Governor of the Bank of England, Andrew Bailey, was warning that interest rates would rise, causing serious instability across the financial markets.’<\/p>\n
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By the time Truss read the letter, adds the source, newspapers were already reporting that a U-turn was imminent. Fleet Street had apparently been briefed to that effect.<\/p>\n
‘Markets were already pricing in a corporation tax change, so refusing Case would have caused even more volatility. She was basically left with no choice but to do what he wanted,’ said the source.<\/p>\n
At a press conference that day, a downbeat Truss admitted that parts of her mini-Budget had gone ‘further and faster than markets were expecting’.<\/p>\n
Chancellor Kwasi Kwarteng, who had humiliatingly been ordered back by Truss from a meeting of the International Monetary Fund (IMF) in Washington, found his position untenable after the policy reversal. Within hours, he had been sacked by Truss in a last desperate throw of the dice to bolster her premiership.<\/p>\n
The dismissal of her one-time close friend on October 14 was in vain. She was out herself six days later, becoming the shortest-serving prime minister in British history.<\/p>\n
Her tenure, which began with such promise on September 6 last year when she was sworn in by the Queen at Balmoral, had lasted just 44 days.<\/p>\n
Yet following that ignominious period in British politics, it is time to ask why exactly Liz Truss fell from power. Was she her own worst enemy, or were other forces at play?<\/p>\n
For a start, the extraordinary role of a civil servant in seeming to undermine a prime minister raises an extremely important question: who exactly runs modern Britain?<\/p>\n
What’s more, Case’s involvement in what turned out to be the death knell for ‘Trussonomics’ will also heighten tensions between the Tories and civil servants. For while Theresa May was brought down by her own MPs, angered and frustrated over her failure to deliver a Brexit deal, and Boris fell after the resignation of dozens of ministers after one scandal too many, the demise of Truss was different.<\/p>\n
Rising numbers of Tory MPs believe that Truss was the first prime minister to be intentionally deposed by the ‘Blob’ \u2014 the increasingly partisan quangocrats, civil servants and other key figures in Left-leaning institutions who seem determined to undermine the elected government.<\/p>\n
Today, with a renewed spring in her step, Truss has returned to the political fray. She recently launched an international ‘task force’ to seek new solutions to sluggish economic growth.<\/p>\n
Backed by economists from around the globe, the newly invigorated MP for South West Norfolk hopes her Growth Commission will help restore her battered reputation.<\/p>\n
She also promises an explosive new memoir, to be published later this year.<\/p>\n
Truss has long been evangelical about the benefits of fiscal conservatism. In the Tory leadership contest, she pitched herself as the great ‘disruptor’, challenging the old orthodoxies and institutional ‘groupthink’ that, she argued, had stunted economic growth, imposing ever-higher taxes and rising public spending on the British people and economy.<\/p>\n
Yet once in office, friends say, she fatally underestimated the hostility from three of the Blob’s most powerful economic institutions: the Treasury, the Bank of England and the Office for Budget Responsibility (OBR). Their apparently concerted efforts to orchestrate her demise began when Truss kick-started her tenure by unveiling a tax-cutting ‘mini-Budget’ on September 23.<\/p>\n
The OBR was incensed, having been denied for the first time the opportunity to give its own analysis of the mini-Budget prior to its publication. The revenge was not long in coming and brutal: a devastating private assessment, that the mini-Budget would create a \u00a370 billion black hole in the nation’s finances, was soon leaked to a national newspaper, causing turmoil on the markets.<\/p>\n
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During Truss’s first week in office, she had made the bold move to dismiss Permanent Secretary to the Treasury Sir Tom Scholar (pictured), one of Britain’s most senior civil servants<\/p>\n
Truss and her team were enraged by the leak, which they regarded as reckless and inaccurate.<\/p>\n
‘The \u00a370 billion figure simply wasn’t right,’ said an informed source. ‘The Bank of England and the OBR rely on the same tired old models which say if you cut taxes, you lose revenue. Those models ignore the fact that lower taxes attract more investment and incentivise hard work \u2014 and can, therefore, do the exact opposite.’<\/p>\n
Supporters of Truss point out that the OBR, set up by George Osborne when he was Chancellor to provide independent analysis of the public finances, is stuffed full of former employees of the Left-wing Resolution Foundation, whose chief executive Torsten Bell is the living embodiment of New Labour thinking.<\/p>\n
A party apparatchik, Bell’s tweets and regular BBC interviews reveal endless criticism of free-market policies.<\/p>\n
He does it with the relish you would expect from someone who worked for Gordon Brown (and his successor as Labour Chancellor Alistair Darling), before becoming Ed Miliband’s head of policy when the latter was Labour leader between 2010 and 2015.<\/p>\n
Little wonder that Truss had not been interested in getting the OBR to deliver a prior assessment of her mini-Budget. ‘She knew if they saw it, they’d try to block it and nothing would ever happen,’ says an ally. At the Treasury, knives were also out.<\/p>\n
During Truss’s first week in office, she had made the bold move to dismiss Permanent Secretary to the Treasury Sir Tom Scholar, one of Britain’s most senior civil servants. An arch-Remainer who previously served as David Cameron’s ‘Adviser for Europe’, Scholar epitomised the stuffy economic orthodoxy that Truss was trying to overthrow. But the Civil Service bitterly resented her decision to sack him.<\/p>\n
Shortly after Scholar’s departure, the International Monetary Fund (IMF) slammed her mini-Budget as a ‘large and untargeted financial package’. Truss and her team were knocked sideways. It was an extraordinary intervention from a body normally charged with rescuing basket-case economies in Latin America.<\/p>\n
To this day, Team Truss suspect that allies of Scholar, who after all had served on the board of the IMF, were behind the attack. ‘It was the Blob,’ insists a Truss supporter. After the IMF and the OBR leak, the markets were in turmoil. So Case, in concert with Governor of the Bank of England Andrew Bailey, apparently began manoeuvres to get key parts of the mini-Budget reversed.<\/p>\n
In a humiliating climbdown, Truss then announced the cancellation of the cut in the top rate of income tax during a stormy Tory Party conference in Birmingham.<\/p>\n
Then came the Case letter and that fatal corporation tax U-turn.<\/p>\n
‘Markets can behave irrationally and saying something will cause turmoil often means that’s exactly what happens,’ says the ally. ‘I believe this is a case of unelected officials forcing a serving prime minister to make a decision she did not want to make.’<\/p>\n
Following Truss’s corporation-tax climbdown, Sir Graham Brady, the chairman of the Tories’ powerful 1922 Committee, told Truss she had lost the support of most of her own MPs. ‘The card had been pulled from the bottom of the pack by Case,’ added the source. Within days, Rishi Sunak had been drafted in as PM to steady the ship after the chaos of Truss’s abortive premiership. But Sunak is floundering in the polls. His popularity currently stands at the lowest it has ever been. Only 32 per cent of the public now believe Sunak makes the best PM, down two points from July in the latest Savanta poll.<\/p>\n
Labour leader Sir Keir Starmer’s score remains unchanged at 39 per cent, giving him the largest lead over Sunak since the latter became PM last October.<\/p>\n
Meanwhile, inflation, which scaled a 41-year high at 11.1 per cent last October, slipped to 6.8 per cent in July. But it is still one of the highest of any G20 country.<\/p>\n
We hover above the G20 inflation ‘relegation’ zone with only India, Turkey and Argentina below us.<\/p>\n
Interest rates, too, are currently higher than they were during Truss’s time in No 10, as the nation’s mortgage holders are discovering to their horror.<\/p>\n
The Bank of England is expected to raise borrowing costs yet again later this month, taking the Bank rate to 5.5 per cent. The litany of bad news continues.<\/p>\n
When Boris Johnson became prime minister, annual public spending was \u00a3880 billion. It has now soared to \u00a31.2 trillion. Has anyone noticed a corresponding improvement in services?<\/p>\n
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Chancellor Kwasi Kwarteng (pictured), who had humiliatingly been ordered back by Truss from a meeting of the International Monetary Fund (IMF) in Washington, found his position untenable after the policy reversal. Within hours, he had been sacked by Truss in a last desperate throw of the dice to bolster her premiership. The dismissal of her one-time close friend on October 14 was in vain. She was out herself six days later, becoming the shortest-serving prime minister in British history<\/p>\n
The total national debt has soared to a record \u00a32.58 trillion. The annual cost to the taxpayer of servicing this gargantuan sum, thanks to rising interest rates, is eye-watering. It was \u00a360.8 billion under Truss but has risen to \u00a3110.8 billion on Sunak’s watch.<\/p>\n
The question, therefore, arises: who has been proved right, Truss or the Blob?<\/p>\n
Ewen Stewart, of Walbrook Economics, is depressed about the prospects for the UK economy. ‘The Government has not only raised taxes to a 70-year post-war high, but they have markedly raised spending. The public sector is now 47 per cent of the economy as there has been a huge expansion of the state, crowding out the private sector,’ he said.<\/p>\n
He makes another crucial point. ‘The tax cuts \u2014 cancelling the corporation tax rise, cutting the top rate of income tax and cutting the basic rate \u2014 were small beer compared to the public money spent on lockdown.’<\/p>\n
The National Audit Office estimated this figure at \u00a3370 billion but that excludes the negative impact on the economy of people who never returned to work.<\/p>\n
Mr Stewart adds: ‘Benefits are rising by more than 10 per cent, far more rapidly than most people’s salaries, so we need incentives to encourage work. The Government has no strategy for growth. We urgently need one.’<\/p>\n
No doubt Truss believes she is ready to provide it.<\/p>\n
Yesterday it was reported Chancellor Jeremy Hunt may abandon in his autumn statement upgrading working benefits in line with inflation. Truss proposed last year raising benefits in line with wages growth, not inflation. It would have cut \u00a34.8 billion off the benefits bill in the first year. A large number of Tory MPs attacked the plan at the time, but now it seems Hunt has come round to her way of thinking.<\/p>\n
And now, as the election draws closer, there is alarm among those same Tory MPs who ousted Truss over whether Sunak can turn round the polls by then. One poll last week suggested five Cabinet ministers will lose their seats.<\/p>\n
Little wonder that there’s a renewed clamour on the Tory benches, led by Truss’s Growth Commission, for urgent tax cuts.<\/p>\n