In the autumn of 2022, Liz Truss bet her premiership on a so-called mini-budget that ripped up decades of economic orthodoxy. It did not pay off.

By Nick Robinson www.bbc.co.uk

I spoke to those involved about the thinking behind the biggest risks she took during her seven weeks as prime minister – and why they did not succeed.

1. Not heeding warnings of ‘fantasy economics’

At the start of Liz Truss’s leadership campaign, when I interviewed her on Radio 4’s Today programme, I put it to her that she was gambling with the British economy by preparing to borrow as much as Jeremy Corbyn, whose policies she had condemned.

She replied that the real gamble was to carry on as we were; condemned the economic ideas of the past 30 years pursued by both Conservative and Labour governments, which she called the “Treasury orthodoxy”; and told me she was prepared to “bulldoze” opposition to her plans.

During the campaign, her rival, the former Chancellor Rishi Sunak, called her ideas “fantasy economics”. His ally Michael Gove said they were a “holiday from reality”.

And, as it became ever more clear that she was going to win, her circle of advisers got smaller.

Then-cabinet minister and one-time Truss ally Simon Clarke describes the mood in the Truss campaign as “revolutionary”. He says: “You could definitely sense that she herself had resolved that it was do or die.”

2. Sacking a top Treasury official

Days after she moved into No 10, Truss sacked the Treasury Permanent Secretary Tom Scholar, a senior civil servant who had worked for chancellors from Gordon Brown to Rishi Sunak.

This had the effect of intimidating other officials.

Once it had become clear she would win the Tory leadership election, officials met her at Chevening – her official residence as foreign secretary – but they did not warn her about her plans.

They believed it was not their job to do so, given that Truss was not yet prime minister. But one political ally of Truss’s, who asked not to be named, told me that anyone who challenged her was “executed in that room”.

Indeed, very few of those who worked behind the scenes have been prepared to talk up until now. I’ve spoken to many off the record. Asa Bennett, Liz Truss’s speechwriter both before and after she became prime minister, did agree to talk in public.

“It’s safe to say that he [Scholar] would still have been in the job if he was deemed to be helpful,” says Bennett. “Certainly many saw him in the Tory Party as the personification of Treasury orthodoxy.”

3. Bypassing the budget watchdog

Truss did not trust the Office for Budget Responsibility (OBR) – the body set up by the former Conservative Chancellor George Osborne to make sure politicians could not fiddle official economic forecasts.

She believed its forecasts were usually wrong and that it did not share her belief that tax cuts could stimulate growth and, potentially, pay for themselves.

In order to bypass the OBR, she said her plans to spend billions on tax cuts were not a budget. They were instead what she initially called a fiscal event – language designed to ensure she could ignore the law that states that the OBR must issue forecasts whenever there is a budget.

This world view echoed what Truss was hearing from those around her during the summer leadership campaign.

Jon Moynihan, who was Liz Truss’s main fundraiser and spoke to her regularly throughout the campaign, says: “This whole idea that you have to get the tick of approval from the OBR, which has been consistently wrong in its financial forecasts is, in my view, anti-democratic.”

4. Not following some tax and spend advice

Truss’s allies in cabinet warned her that she needed to produce plans to cut spending to demonstrate how she intended to pay for tax cuts.

The minister who previously had been in charge of public spending at the Treasury, her new Levelling Up Secretary Simon Clarke, discussed plans with her to cut spending by five to 10%.

And while there remained ministers back at the Treasury arguing for the need to talk about spending restraint – a paragraph spelling that out was removed by No 10 from the Chancellor Kwasi Kwarteng’s mini-budget speech.

Truss told them that cuts would “distract from the message” about tax and growth and they could “worry later” about it.

People who raised worries were told that they had become part of the “Treasury orthodoxy”.

“We certainly discussed the importance of making sure tax and spend were in alignment,” says Clarke, who at one point was rumoured to be a candidate to be Liz Truss’s chancellor.

“The question which sits at the heart of all of this is at what moment in her mind she decided that was not necessary… I think her appetite for radicalism had only consolidated.”

5. Not having her ‘homework marked’

Truss had a trio of friendly economists who gave her advice. They were known as the Trussketeers.

One – Gerard Lyons – says that he warned her not to go further or faster than was expected by the financial markets and that he wrote a memo to the chancellor in the week of his mini-budget to repeat his warning.

“My view, both privately and publicly, was that any fiscal announcements needed to stick to what the markets had expected,” he says.

“I think all three outside economists stressed it was necessary to have a fully costed budget. The phrase I used: it was necessary to have your homework marked.”

6. Cutting the top rate of tax

Truss’s closest allies inside No 10 and in the cabinet did not know that she intended to cut the top rate of tax until the night before the mini-budget.

Although the cost was relatively small compared with other tax-cutting plans, it sent a signal to voters and the markets that the new prime minister was willing to ignore concerns about unfairness – and was ideological in her approach to economics.

Rachel Reeves, shadow chancellor, sat opposite Kwasi Kwarteng as he announced the plan.

“There’s lots of things that we prepare for because we don’t know what the big surprise is going to be in the budget,” she says.

“We didn’t anticipate that happening. The reason that we didn’t anticipate that happening is that it was bad economics and bad politics.”

7. U-turning on 45p tax

In the fallout from the mini-budget, Truss hoped that reversing her plan to cut the top rate of tax would silence her critics. But she encouraged them to demand further changes – and also embarrassed and alienated her allies who, like the Daily Telegraph, had praised her as the lady who was not for turning.

When she did backtrack – in the middle of the Conservative Party conference – even her most ardent fans were worried.

“I thought: ‘It’s the beginning of the end,'” says Jon Moynihan. “Concede on one, you would end up conceding on all.”

8. Sacking her chancellor

Jon Moynihan was right. Days after the Tory Party conference, Truss sacked Kwasi Kwarteng, her friend, long-term ally and the man who had implemented her ideas.

She replaced him with Jeremy Hunt, who tore up almost every one of the policies in Kwarteng’s mini-budget.

Sir Graham Brady, Chair of the influential backbench 1922 Committee, could sense which way things were moving.

“I think at that point it was very difficult to see how the whole thing could just work,” he says.

“She could do everything possible to restore market confidence, but to do that she was ending up doing all of the opposite things to those that she promised to do.”

9. Making enemies in the party

Truss sacked almost all those who disagreed with her and promoted those who backed her.

She did nothing to reach out to Rishi Sunak and his supporters despite the fact that he had won the support of more MPs than she had.

Her allies accused her critics – like Michael Gove – of mounting a coup. They still believe that to be true.

Nadine Dorries, former Culture Secretary and an ally of Truss, is writing a book arguing that this was a case of conspiracy rather than cock-up.

“The moment she won the leadership competition, they were never going to let her stay. She was always going to be removed. I thought she may be there for six months. But I knew they weren’t going to let her survive until the next election.”

10. Fighting the financial establishment

Truss’s allies believe she was undermined by leaks from the Treasury and the hostility of the Bank of England and the International Monetary Fund (IMF), which criticised her policies.

Truss’s supporters – and some of her critics too – believe the people she had sacked, ignored or belittled were happy to see her fail.

Some allege there was co-ordination between the Bank of England and the IMF in issuing critical statements which unnerved the markets. Senior officials in one organisation had previously worked in another or knew their counterparts well.

Her allies blame the Treasury for briefing news of a possible climbdown on corporation tax, that bounced her into making the U-turn, then forced her to sack her chancellor, and ultimately cost her her job.

The “forces against her” comprised “such a huge proportion of the British establishment or blob”, says Jon Moynihan.

“I don’t think the Bank of England was particularly well-disposed towards the Truss government.”

Asked if there were people in the Treasury and at the IMF who wanted Truss’s government to fail, Jon Moynihan says “certainly”.

11. Truss always believed in herself

Liz Truss was nicknamed “the human hand grenade” but embraced this as a compliment rather than criticism.

Officials say she always wanted to be the most radical person in any room – which was fine when she was not the ultimate decision-maker and could be overruled. But once she was prime minister there was no-one empowered to hold her back.

Her chief of staff was a political campaigner who openly admitted to having very limited knowledge about policy. Her chancellor was an old political friend and ally who said that he saw his job as delivering the PM’s wishes. Her cabinet secretary had been told she planned to sack him and, insiders believe, did not want to stand up to her whilst his position was insecure.

Truss was the Conservative Party members’ choice to be PM. MPs who were not her supporters rushed to endorse her once they saw she was going to win. The Daily Mail and Daily Telegraph hailed her as Margaret Thatcher’s successor. Her most ardent supporters attacked Rishi Sunak as a socialist.

She, and they, gambled. Many would say, the country paid the price.

Additional reporting by Jack Fenwick and Stephanie Mitcalf

The head of the police watchdog has been forced to resign after becoming the subject of a police investigation, Home Secretary Suella Braverman says.

“Leaky Sue” might benefit from a bit of self reflection – Owl

www.bbc.co.uk

Independent Office for Police Conduct director general Michael Lockwood said on Friday that he was resigning for “personal and domestic reasons”.

But on Saturday the home secretary said she had taken action after learning of the probe into a historical allegation.

Mr Lockwood was asked to either resign or be suspended, Ms Braverman said.

She said she had accepted the resignation, which came into immediate effect. No further information about the nature of the allegation was given.

Home Office staff are now working with the IOPC to “put in place temporary arrangements for the organisation’s leadership”, Ms Braverman added.

The home secretary said in a statement: “I took immediate action upon being made aware that Mr Lockwood was the subject of a police investigation… and instructed my officials to ask him to resign or face immediate suspension from his role.”

Mr Lockwood was the first person appointed to lead the IOPC when it replaced the Independent Police Complaints Commission in 2018.

It handles the most serious complaints against police in England and Wales.

In his statement on Friday, Mr Lockwood said he was resigning with “great sadness”, adding that it had been an “enormous privilege” to serve as the organisation’s first director general.

He was previously chief executive of the London Borough of Harrow, north-west London.

After the Grenfell Tower fire in 2017, Mr Lockwood was asked by a government task force to lead the recovery and remediation work and liaise with the bereaved families and survivors, according to the IOPC website.

A qualified accountant, he has also worked in central government at the National Audit Office, and for the Local Government Association as executive director for local government finance and policy.

“The deal looks to be worth £12m per year, which is a tiny percentage of Cornwall Council’s budget – about 1%.” (Labour Leader)

“A drop in the ocean when you consider that the council faces a shortfall of £63m in its budget for the next year.” (Acting Leader LibDems)

“It’s astonishing that this deal is being signed by one person, Linda Taylor, without even holding a debate and a vote of her cabinet let alone Cornwall Council. This is the same Linda Taylor that has said she wants to be mayor and she will know the job will pay double what she gets now. This whole thing has a nasty whiff about it. It’s a shabby stitch-up by one political party that knows they are losing power.” (Independent councillor Tim Dwelly).

Campaigning to become Mayor of a rural area the size of Cornwall will need the logistic backing that only a National Party or a millionaire can offer. Doesn’t look very “fair” or “democratic” to Owl, more like a “plutocracy”. 

Richard Whitehouse www.cornwalllive.com

Cornwall Council has signed a new devolution deal with the Government which would guarantee £360million of funding and new powers over the next 30 years. Cornwall MP Steve Double said that the publication of the Cornwall deal was the “start of a new era”.

At Spaceport Cornwall Levelling Up Minister Dehanna Davison signed the document alongside Cornwall Council’s Conservative leader Linda Taylor with both describing it as an “historic” day. The deal is subject to public consultation, full agreement from Cornwall Council and Parliamentary approval.

Under the deal Cornwall Council would be given responsibility for the adult education budget as well as getting additional powers over planning, housing and transport. The deal includes an additional £8.7m for housing and funding for the Cornish culture and language.

The proposed deal has been overshadowed by the requirement for Cornwall Council to change its governance arrangements to secure the deal which will mean Cornwall having a directly-elected mayor for the first time. There has been a vigorous debate about whether there should be a public referendum on whether Cornwall wants to have a mayor elected by the people – instead of a council leader chosen by councillors.

Explaining the need for a mayor Ms Davison said: “We set out in the Levelling Up white paper a framework for devolution and different levels that people could opt into and we always said that in order to access the biggest groups of powers and funding we would like to have that directly accountable leadership so we in central government can go spend the money on what they are doing and that is why we really believe in the mayoral model.

“But we have never imposed that on any local area, it has always been for areas to opt into that and Cornwall were very keen to do so and I am really, really pleased that they decided to. You would have heard what Steve the local MP was talking about, having a seat at the table in these big national negotiations Cornwall will be there with their mayor and attracting international investment. People all over the world know what a mayor is as a figurehead for a local area and a spokesperson for that local area and that is going to be really important.

“But also being on the start of a devolution journey with a mayor in place, if you look at other areas across the country with elected mayors – I’m talking about Teesside, West Midlands, and Greater Manchester – they started with a particular deal and since then there has been so much more progress, so much more powers given, so much more funding given so I think this is the start of a really, really incredible and positive journey.”

The headline figure on the deal is the £360m over 30 years which provides £12m a year for Cornwall. But Ms Davison said that it was not just about the funding: “It is absolutely not, this is the start and the start of a long-term agreement between Government and Cornwall to make sure we are focusing on what is right for Cornwall and they have the powers and funding they need to attract investment, grow local jobs, bring benefits for the local area and that investment fund is additional money, money that wasn’t available otherwise so that is a good thing, but having it guaranteed across 30 years is really important because what that allows us, the mayor, the leader, to do is borrow against it and put in place really major investments at the outset.

“A guaranteed 30 years of funding coming in they are able to invest in vital infrastructure improvements, they can invest in job growth and opportunities, so it is so much more than that, but also having a seat at the table, looking at further, deeper devolution as we move along, there will be other opportunities, this is not the end it is very much the start.”

The Cornwall Devolution Deal which was signed at Spaceport Cornwall today [Looks a bit “foxed” to Owl]

Cornwall Council is set to launch its consultation on the deal next week and the minister said that people should get involved: “This is an opportunity for local people to feed in and give their views but I would certainly hope that now that they can see the detail of what is in the deal that they would see it as an optimistic thing. Of course it is up to Cornwall Council, Linda and her team to go out and sell this as well as local MPs and us in Government but also that is why the consultation is important. I am an optimist, I am very much an optimist, and I feel in my bones that when people see these details and recognise what it could mean for them and their communities they will absolutely be behind this.

“There are real tangible things here for local people and it is our job to go out and sell that. That consultation is going to be really important and we would encourage as many people as possible take part.”

St Austell and Newquay MP Steve Double attended the event at Cornwall Airport Newquay and said the deal was about much more than just extra funding and he believed the introduction of a Mayor for Cornwall was actually more important.

“It is far more than that (funding), clearly the money is welcome but we need to see this as the start of the journey. It is not the finished picture. It gives us the opportunity to reset our relationship with government to have a new era, to have a seat at the top table along with the other mayors across the country. And then that gives us a basis for future negotiations to attract more investment, more powers, devolve more powers to Cornwall.

“It will give us a much stronger voice nationally and to really start to address some of those deep-seated issues and those powers are there in the deal around housing and dealing with some of our challenges around transport, adult education, these are really important things for Cornwall’s future and to have that clear, democratically-elected political leadership that really can represent Cornwall at the top table is really important, that is what this deal is about. Money is important and welcome but it is really about giving us a stronger voice.”

On the split opinions about a mayor Mr Double claimed it would not add another level of bureaucracy and would give people more of a say: “I think in terms of Cornwall it is primarily an administrative change. We are simply saying that instead of 87 councillors picking who should be the leader of Cornwall Council the people of Cornwall will get to elect who leads Cornwall Council, we are basically swapping the leader of Cornwall Council for a directly-elected mayor and that means that the people of Cornwall will have a far greater say over who leads the council.”

And he added it would help Cornwall on a wider scale: “I also think it is about having that far greater profile and voice nationally and internationally. We mustn’t underestimate the international significance. Governments around the world and businesses around the world are used to dealing with mayors, they understand that they have that clear political leadership and mandate and therefore it gives us a great opportunity to promote Cornwall internationally and attract investment and help with our economic growth here in Cornwall. So I think for those reasons that is why I believe it is the right thing to do. I know a lot of people have got caught up in it and lots of speculation that it means another layer of bureaucracy it really won’t, it isn’t another layer of government, it is about replacing the leader of Cornwall Council chosen by councillors with the leader of Cornwall Council chosen by the people of Cornwall.”

But what if, in the consultation, the people of Cornwall reject this deal and proposal for a mayor? Mr Double said: “The council will have to listen to that, that is the whole point of the consultation. But now we have got the deal and people can see for themselves, I would simply say to everyone in Cornwall, let’s approach this with an open mind, most decent, honest, sensible people in Cornwall I think will take the opportunity to look at exactly what is on offer, not the speculation and all that has been going on up until this point. We have now got it in black and white, take a look and I struggle to see what’s not to like about this. More money, more powers, the opportunity to continue to protect and enhance our unique Cornish identity and culture, which is really important to a lot of people here, and the opportunity to make the most of the opportunities ahead of us.”

Mrs Taylor said: “This is a big deal for the whole of Cornwall and provides the certainty required to tackle the challenges we face. This gives us the opportunity to secure more decision-making powers as well as bringing in millions of pounds of extra investment which will allow us to shape the future of Cornwall for the benefit of residents for many years to come.

“The proposed deal provides clarity in uncertain times and would allow us to make future plans with confidence, enabling us to deliver on our priorities to create a carbon neutral Cornwall where everyone can start well, live well and age well.

“The government has made it clear that the proposed deal is conditional on making our governance change. I am appealing to one and all to carefully consider this huge opportunity for Cornwall to receive more funding, powers and influence – and have your say on the deal that will help shape Cornwall’s future when the consultation begins next week.”

However, opposition councillors have not been impressed, many of them highlighting that they had not been given details of the deal before they were released to the media. Cllr Taylor said the information had been sent out by the Government and she did not want councillors to hear about it in that way but all councillors would be sent a copy of the deal and have a briefing on it.

Labour group leader Jayne Kirkham said: “On the face of it (because most councillors have not yet seen it) the deal looks mainly to be worth £12m per year, which is a tiny percentage of Cornwall Council’s budget – about 1%. It cannot possibly deal with all the issues that Cornwall faces.

“It also seems that the cost of the mayoral election and paying for the mayor themselves could have to come out of that figure, which may not be able to be spent on services like social care. The whole deal is conditional upon Cornwall accepting a mayor and there do not seem to be any significant powers passported down from Westminster as part of this deal.

“It’s also disappointing that the deal is being ‘signed’ today by a junior government minister and the leader of Cornwall Council before Cornwall Council and the people of Cornwall have even seen it. The Conservatives are taking Cornwall for granted.

“The next Labour government is committed to pushing forwards with genuine devolution that will be much deeper and broader than that being offered by the Conservatives. We also wouldn’t force a mayor or governance structure on Cornwall.

We have a plan for green growth – investment in renewables, clean power, insulating 19 million homes, skills and jobs. All of that could benefit Cornwall so much and bring real investment and decent, well-paid jobs down here.”

Mebyon Kernow leader Dick Cole called on people to take part in the consultation and call for “real devolution” for Cornwall. He said: “From the press release it is clear to me that this so-called devolution deal is not devolution at all. It does not include far reaching powers being transferred from Westminster to Cornwall like what has happened elsewhere in Wales and Scotland that helped create the Welsh Parliament and Scottish Parliament.

“As someone who has campaigned for meaningful devolution for his entire adult life I am desperately disappointed that this is the best that we can do. I would call on everyone to call for proper devolution.”

He added: “We feel very much outside of this, it is a Conservative council coming up with something with a Conservative Government. People should make their views heard and I would say that people need to look at the devolution deal as well as the mayoral part of it. Cornwall is a unique place, it is a Celtic nation like Wales and Scotland and we should be coming together asking for proper devolution like they have got.”

Colin Martin, acting leader of the Liberal Democrat group, said: “The content of the deal looks extremely weak. It touches on many areas of concern to residents in Cornwall, but the new powers and funding on offer fall far short of what is needed to tackle the enormous challenges we face.

“For example, on housing, we want the power to require planning permission before a home can be converted to holiday accommodation. There are 21,000 people on the waiting list for affordable housing in Cornwall, and 25,000 houses being used as second homes or holiday lets. But all the deal offers is a promise to ‘work closely with Government to address these issues’. That’s exactly what was promised would happen if we elected six Conservative MPs to represent us, and again in 2021 we were told the same if we elected Conservatives to run the council, yet the situation has only got worse.

“The promise of £360m sounds great… until you realise it’s spread over thirty years. The annual figure of just £12m is a drop in the ocean when you consider that the council faces a shortfall of £63m in its budget for the next year.

“Devolution without adequate powers and money is simply a recipe for passing the buck. The new mayor will end up being a lightning rod to divert criticism for Conservative failure away from our Conservative Government.”

Independent councillor Tim Dwelly said: “It’s astonishing that this deal is being signed by one person, Linda Taylor, without even holding a debate and a vote of her cabinet let alone Cornwall Council. This is the same Linda Taylor that has said she wants to be mayor and she will know the job will pay double what she gets now. This whole thing has a nasty whiff about it. It’s a shabby stitch-up by one political party that knows they are losing power.

“And everyone can see it’s no big deal. There isn’t going to be any extra money at all for council services. Not even £1. The Cornish people must be given a vote on whether they want an all-powerful mayor running everything. It’s time for a referendum. Without one this whole thing will be seen as the worst possible case of London ordering Cornwall to do what it’s told.”