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Truss won’t restore Britain’s credibility simply by changing chancellor- Newshubweek

Truss won’t restore Britain’s credibility simply by changing chancellor
Written by Arindam

“Back again?” King Charles asked Liz Truss, as a camera captured her arrival at their audience this week. Muttering under his breath, he summed up the mood of the nation: “Dear oh dear.” That remains my sentiment exactly, despite Truss’s eleventh-hour U-turn.

Her reversal on corporation tax was the right thing to do — in fact, the markets had made it essential. But Truss’s inability to give even a hint of apology for the havoc she has wrecked was staggering. Asked why she was staying when her chancellor is not, she responded: to ensure “economic stability”. Her survival is far from assured.

Appointing the highly experienced Jeremy Hunt as chancellor was a shrewd move. He is also the kind of moderate Tory who was depicted by Truss only last week as being part of the “anti-growth coalition”. So, presumably, is Kwasi Kwarteng, sacked for implementing the policies that this prime minister hubristically rushed into.

I wonder how much longer it would have taken Truss to capitulate, had the Bank of England not played a terrifying game of chicken with the government this week. While governor Andrew Bailey can be a clumsy communicator, his emergency bond-buying operation did stop the run on the pound. And his decision to double down on Friday’s deadline for that operation forced the government to act. But it was risky, and he should never have been put in that position.

Truss can’t restore Britain’s credibility, nor her own, by simply changing her chancellor and raising corporation tax. In six short weeks, her government’s actions have undermined the precious, long-term predictability of our financial regime. The memory of their arrogance will endure, and sadly so will many of the costs.

This government’s private and public briefings against the Bank of England, the Office for Budget Responsibility and the civil service — institutions that are there to help curb ministerial delusion — have made Britain look more like an emerging market than a proud member of the G7. Until Friday, the Truss regime was still blaming everyone but itself for market turmoil, mortgage fears and mounting debt interest. The business secretary Jacob Rees-Mogg was touring broadcast studios insisting that the chancellor could ignore the OBR, just as Kwarteng had been trying to reassure markets by saying the exact opposite.

Truss’s government lost credibility on September 23, and much of the uncertainty she created can’t easily be reeled back in. The probability of a Labour government being elected has been massively increased by what shadow chancellor Rachel Reeves calls the “kamikaze Budget”. So has the likelihood that this prime minister will be unable to get legislation through parliament. Two weeks ago, the shrewd observer Professor Charles Goodhart suggested that Britain should “say goodbye to growth” for the next two years. Whether or not that remains entirely true, markets will continue to tread gingerly as long as Truss stays in power.

Even before she sacked her chancellor, Truss had a serious management problem. Collective cabinet responsibility had broken down. The home secretary wants us to leave the European Convention on Human Rights, even though that would breach the Good Friday Agreement (does she even realise this?). Penny Mordaunt, leader of the Commons, was unable to conceal her exasperation with Truss’s robotic non-answers at Prime Minister’s Questions. Many ministers are struggling to trust someone whose instincts are so far removed from their own.

The tone of her press statement did nothing to reassure, or reach out to her critics. In making Kwarteng her sacrificial lamb, Truss now risks being — in Denis Healey’s immortal words about Geoffrey Howe — “savaged by a dead sheep”. But he is not the only threat. Having ditched some of her most treasured policies, Tory MPs are already asking what is left. They wonder whether to go down fighting under a new leader at the next election, or lose what could be 200 seats, if the polls remain dire.

In six short weeks Britain has acquired Italian-style politics and finances, without the sunshine. Four days after the “mini” Budget, it was costing the UK government more to borrow than Italy or Greece.

To restore confidence, why don’t we now copy Italy and bring on the technocrats? Britain urgently needs a new administration which can restore financial stability. In the absence of a Mario Draghi figure, MPs should crown Rishi Sunak, who was thought by some to be too much of a spreadsheet nerd to be prime minister, but whose warnings about what would happen if Truss implemented her policies were spot on. A Hunt-Sunak partnership would have a very different tone.

As a former protégé of George Osborne and a long-serving cabinet minister, it is surprising that Truss seems not to have learnt the lessons of the financial crisis. When Osborne and David Cameron came to power in 2010, they won market confidence by showing that they were serious about balancing the books. They also made strenuous efforts to keep their party united in coalition. The prime minister’s initial refusal to appoint any Sunak supporters to her cabinet may prove to have been a fatal mistake.

One of Truss’s other vindictive decisions was to stop King Charles from attending the COP27 climate summit next month. This bizarre decision will deny that meeting the presence of a highly respected environmentalist, and prevent Britain from projecting some much-needed soft power. Dear oh dear indeed.

camilla.cavendish@ft.com

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Arindam

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