Rob Wilson is a former Minister for Civil Society, and was MP for Reading East from 2005–2017.
Liz Truss has written an open and honest account of her 49 days as Prime Minister. She accepts she made mistakes, that she could have done things differently and bears her share of the blame for what went wrong during a personally bruising period for both her and the country.
Whatever your view of Truss’s article, the issues she raises are extremely serious. The notion that a Prime Minister of the United Kingdom is being blocked by officials, that a groupthink bias exists within some of our most important organisations and institutions, that officials and organisations were resistant to anything that moved us away from the EU, and that hugely serious economic matters are not routinely communicated are remarkable and consequential charges.
She is probably too low key in her article about the challenge she faced on becoming Prime Minister. She had a terrible, almost impossible inheritance. High energy costs, global supply chain issues, very high taxes, a global economy slowing, the Bank of England failing in its primary duty and institutions in crisis after Covid and Brexit problems.
She also had a Parliamentary Party at loggerheads and a number of MPs who had taken leave of their senses. Even though she won a big majority of the Conservative Party in the country and the largest number of MPs declaring, there was a feeling from the very outset that she would not be allowed to govern in the way she wanted.
As she says herself, she could have done things differently, communicated better or not moved to deliver all her agenda so quickly for example – but, as she explains, it was clear that a large number of those with influence were determined not to help, and probably hoped she would fail.
The Bank of England and the Treasury both knew before Truss and Kwarteng were in place that both were very unhappy with their performance, and wanted a substantial and immediate change of direction. Both organisations were firmly locked into the economics of the Gordon Brown era – the orthodoxy of a preference for high taxes and high spending, and demonstrated no sign of a desire to change.
Frankly, it was a huge economic error that the Bank of England had continued quantitative easing for as long as it did and failed to raise interest rates as early as it should. It made economic instability more likely. The Treasury, too, put more weight and emphasis on raising taxes and spending than seeking a more dynamic, productive economy.
Whilst there was no conspiracy, it was obvious that neither the Bank nor the Treasury were keen to enact the Truss reform manifesto. She notes the “pessimism and scepticism” about the growth potential of the British economy, that Brexit was seen as damage limitation and that deregulation was unwelcome (affecting the relationship with the EU).
The implication here is important – that being close to the EU was more important than the UK making the most of its independence. It was a noxious mix of timidity that could only take the UK down a route of decline and decay – something that had last taken root before the Thatcher Governments of the 1980s.
But possibly most damning was the failure of the Bank and Treasury officials to mention the threat to the bond market from Liability-Driven Investments (LDIs). Like much else in the world of finance, few people take a strong interest in their pensions and how they are managed, and don’t appreciate how delicate the balance of the financial markets can be.
With the Truss Government’s plans clear, the question must be why did no-one raise the potential for turbulence with either the Prime Minister or the Chancellor? As Robert Peston, ITV’s Political Editor, has said: “It is astonishing that the Bank of England, the Pension Regulator and HM Treasury were so wrong footed by pension funds’ fire sale of government bonds… as a result of their overuse of LDI hedging strategies. This was the most serious regulatory failure since the 207/8 banking crisis.”
Yet this factor has rarely been mentioned by the mainstream media or economics press. It turned temporary market jitters into a full-blown crisis. Realistically, how does an incoming Government deal with such regulatory failure? Had she known, Truss would almost certainly have changed course. Did Treasury officials or the Bank want to help her succeed? Did they actively thwart her? These are clearly open questions.
It is unsurprising that Truss describes trying to get her change of direction as “pushing water uphill”. She is right that the Conservative Party, with a few honorable exceptions, had lost its nerve in making the arguments about tax and economic policy. The political argument has drifted ever leftwards due to insufficient challenge and debate, and much of the media and public sphere has followed it.
The OBR is inadvertently filling a gap left by policy makers in the Treasury and in the governing party and thereby dominating fiscal policy. The result, Truss says, is economic modelling that “tends to undervalue the benefits of low taxes and supply-side reforms for economic growth and overvalue the benefits of public spending.”
Although she doesn’t mention it, the Government machine widely views business as an instrument of, for example, its social and environmental policy. It is no longer enough for businesses to employ people, provide great products or services, create wealth and make a profit.
Instead, government pushes a range of anti-profit business models that would lead to the collapse of investment, share prices and pensions if ever widely implemented. It is a reckless and odd strategy that fails to recognise the huge good that capitalism has achieved both here and around the world.
Truss felt impelled to stand for the position of Conservative leader because she felt the country needed a change of direction. She was and still is right about that. She argues compellingly that the cocktail of forces ranged against her meant she never really had a fair chance to succeed whilst in government – that essential economic market information wasn’t given to her.
It is important that the charges she makes are debated. Specifically, we need to review the powers and functions of economic organisations that are too unaccountable even from the Chancellor and Prime Minister. Although the desire still exists in some quarters to simply blame Truss for all that went wrong economically, she has been brave enough to make an important and timely intervention on matters that should not be ignored.
Rob Wilson is a former Minister for Civil Society, and was MP for Reading East from 2005–2017.
Liz Truss has written an open and honest account of her 49 days as Prime Minister. She accepts she made mistakes, that she could have done things differently and bears her share of the blame for what went wrong during a personally bruising period for both her and the country.
Whatever your view of Truss’s article, the issues she raises are extremely serious. The notion that a Prime Minister of the United Kingdom is being blocked by officials, that a groupthink bias exists within some of our most important organisations and institutions, that officials and organisations were resistant to anything that moved us away from the EU, and that hugely serious economic matters are not routinely communicated are remarkable and consequential charges.
She is probably too low key in her article about the challenge she faced on becoming Prime Minister. She had a terrible, almost impossible inheritance. High energy costs, global supply chain issues, very high taxes, a global economy slowing, the Bank of England failing in its primary duty and institutions in crisis after Covid and Brexit problems.
She also had a Parliamentary Party at loggerheads and a number of MPs who had taken leave of their senses. Even though she won a big majority of the Conservative Party in the country and the largest number of MPs declaring, there was a feeling from the very outset that she would not be allowed to govern in the way she wanted.
As she says herself, she could have done things differently, communicated better or not moved to deliver all her agenda so quickly for example – but, as she explains, it was clear that a large number of those with influence were determined not to help, and probably hoped she would fail.
The Bank of England and the Treasury both knew before Truss and Kwarteng were in place that both were very unhappy with their performance, and wanted a substantial and immediate change of direction. Both organisations were firmly locked into the economics of the Gordon Brown era – the orthodoxy of a preference for high taxes and high spending, and demonstrated no sign of a desire to change.
Frankly, it was a huge economic error that the Bank of England had continued quantitative easing for as long as it did and failed to raise interest rates as early as it should. It made economic instability more likely. The Treasury, too, put more weight and emphasis on raising taxes and spending than seeking a more dynamic, productive economy.
Whilst there was no conspiracy, it was obvious that neither the Bank nor the Treasury were keen to enact the Truss reform manifesto. She notes the “pessimism and scepticism” about the growth potential of the British economy, that Brexit was seen as damage limitation and that deregulation was unwelcome (affecting the relationship with the EU).
The implication here is important – that being close to the EU was more important than the UK making the most of its independence. It was a noxious mix of timidity that could only take the UK down a route of decline and decay – something that had last taken root before the Thatcher Governments of the 1980s.
But possibly most damning was the failure of the Bank and Treasury officials to mention the threat to the bond market from Liability-Driven Investments (LDIs). Like much else in the world of finance, few people take a strong interest in their pensions and how they are managed, and don’t appreciate how delicate the balance of the financial markets can be.
With the Truss Government’s plans clear, the question must be why did no-one raise the potential for turbulence with either the Prime Minister or the Chancellor? As Robert Peston, ITV’s Political Editor, has said: “It is astonishing that the Bank of England, the Pension Regulator and HM Treasury were so wrong footed by pension funds’ fire sale of government bonds… as a result of their overuse of LDI hedging strategies. This was the most serious regulatory failure since the 207/8 banking crisis.”
Yet this factor has rarely been mentioned by the mainstream media or economics press. It turned temporary market jitters into a full-blown crisis. Realistically, how does an incoming Government deal with such regulatory failure? Had she known, Truss would almost certainly have changed course. Did Treasury officials or the Bank want to help her succeed? Did they actively thwart her? These are clearly open questions.
It is unsurprising that Truss describes trying to get her change of direction as “pushing water uphill”. She is right that the Conservative Party, with a few honorable exceptions, had lost its nerve in making the arguments about tax and economic policy. The political argument has drifted ever leftwards due to insufficient challenge and debate, and much of the media and public sphere has followed it.
The OBR is inadvertently filling a gap left by policy makers in the Treasury and in the governing party and thereby dominating fiscal policy. The result, Truss says, is economic modelling that “tends to undervalue the benefits of low taxes and supply-side reforms for economic growth and overvalue the benefits of public spending.”
Although she doesn’t mention it, the Government machine widely views business as an instrument of, for example, its social and environmental policy. It is no longer enough for businesses to employ people, provide great products or services, create wealth and make a profit.
Instead, government pushes a range of anti-profit business models that would lead to the collapse of investment, share prices and pensions if ever widely implemented. It is a reckless and odd strategy that fails to recognise the huge good that capitalism has achieved both here and around the world.
Truss felt impelled to stand for the position of Conservative leader because she felt the country needed a change of direction. She was and still is right about that. She argues compellingly that the cocktail of forces ranged against her meant she never really had a fair chance to succeed whilst in government – that essential economic market information wasn’t given to her.
It is important that the charges she makes are debated. Specifically, we need to review the powers and functions of economic organisations that are too unaccountable even from the Chancellor and Prime Minister. Although the desire still exists in some quarters to simply blame Truss for all that went wrong economically, she has been brave enough to make an important and timely intervention on matters that should not be ignored.