HomePoliticsLiz Truss has made a U-turn. It will be enough?

Liz Truss has made a U-turn. It will be enough?


BIRMINGHAM, England — Then, in the end, Liz Truss I was to turn. But the damage to his faltering administration may already have been done.

On Monday, Truss Chancellor Kwasi Kwarteng bowed to pressure from his Conservative Party colleagues and scrapped his flagship cut from the top tax rate from 45 pence to 40 pence, a central component of last month’s so-called mini-budget.

“We understand it and we have heard it,” Kwarteng said as he announced the dramatic change of direction On twitter.

Later emerged will also present an announcement on how the tax cuts will be financed, having initially insisted to the public — and the markets — you must wait until November 23.

A parliamentary insurrection, gathering pace rapidly as MPs met for their annual party conference in Birmingham on Sunday, appears to have been quelled, for now.

Asked if he would now support the mini-budget in parliament after his most controversial measure was abandoned, rebel leader Michael Gove said: “Yes, I think so, based on everything I know. There were a lot of good things that were announced… The debate over the 45 pence tax increase obscured that.”

Market reaction was also moderately positive, with bond and currency markets bouncing slightly after the announcement.

But most MPs and delegates in Birmingham believe it will take much more than a single U-turn to rebuild the political and fiscal credibility of the fledgling Truss administration, with some MPs fearing a revival is already out of reach.

“It started very poorly and in my experience what you see is what you get. People are not mysteriously really shit, and then they become really good,” said a senior Tory MP.

Pissed off

While a Tory rebellion appears to have been averted for now, few MPs believe it will be the last face of Truss in the difficult weeks and months to come.

Even before the now infamous Kwarteng ‘fiscal event’, Truss had many detractors in the Conservative banks. Only about a third of her own parliamentarians backed her in the contest for her leadership and, after taking office, she almost exclusively chose loyalists for her ministerial ranks. Those who backed her opponent Rishi Sunak were left out of her.

“Your party’s management has pissed people off,” said the senior Conservative MP quoted above, with many of those they described as talented MPs questioning whether the government was worth supporting in the long run.

But while the 45p tax rate “lightning rod” had now been “neutralized”, according to one minister, MPs could soon find another hot topic and “drive it next”.

Foreign Minister Kwasi Kwarteng | Ian Forsyth/Getty Images

Two major potential flashpoints will be the new government’s approach to welfare payments and the financing of public services. Ministers are currently undecided whether to increase benefits in line with inflation, as the Boris Johnson administration promised, while reducing them at the same time. heavy tracks that cuts to the state are on the way.

The opposition Labor Party, now rapidly advancing in the polls, also sees political capital in Truss’s declared plans to lift the cap on bankers’ bonuses and abandon the corporate tax hike.

“They still have a total of £17bn unfunded [corporation] tax giveaway to the wealthiest businesses at a time when people and businesses are struggling with the cost of living.” said a Labor official, in a sampling of the messages Conservative MPs are likely to face in the next election.

Few Conservative MPs are optimistic that Truss can turn things around.

“Politics works like a pendulum. If it swings to the middle, it is possible to pull it back. But if it goes too far it can become irreversible,” said the minister quoted above.

Writing for POLITICO, Boris Johnson’s former No. 10 communications chief Lee Cain said it was “unlikely” that Truss’s reputation would ever recover.

“It didn’t have to be this way,” he wrote. “Many of the unforced errors could have been avoided if the prime minister had understood how to speak to the audience that matters most to him. — the electorate.:

Benefit of the doubt

But voters may still be more forgiving than some of Truss’s critics in the party, according to pollsters and focus group experts who closely monitor public opinion.

“We consistently find that voters don’t mind giving a U-turn to an unpopular policy,” said Luke Tryl, director of consultancy More in Common, which regularly hosts focus groups across the country.

“In fact, one of the things that we found during the leadership contest was that people really liked the fact that Liz Truss changed her mind, because they felt like that’s what normal people do,” he said.

But he warned that while voters don’t care about U-turns as one-offs, “a series of them is starting to look chaotic and will make voters concerned about whether the government knows what it’s doing to help the country through the turmoil.” ”.

tax credibility

Crucially, reversing just £2bn of the proposed £45bn of unfunded tax cuts seems insufficient, on its own, to restore confidence in the UK economy and bring spiraling interest rates down.

“When market confidence has been shattered, as we saw last week, the daunting task of restoring credibility is extremely difficult, and even more difficult when strategies change,” said Charles Hepworth, chief investment officer at GAM.

“Currently, the market has little faith that the PM and Chancellor can restore credibility in the short term, and this is putting renewed pressure on UK risk assets.”

Neil Birrell, chief investment officer at Premier Miton Investors, agreed that the U-turn would not resolve the turmoil in financial markets.

“High inflation and high interest rates are not going to go away quickly, and economic growth is under serious threat,” he said.

“Markets still need to hear how the package will be financed,” added Iain Anderson, chief executive of H/Advisers Cicero, who said the next tax return scheduled for November 23 must be filed urgently.

The first senior Tory MP quoted above lamented that the market turmoil that followed the mini-budget meant that the Tory party would now “own interest rate rises, many of which were going to happen anyway”.

“I can’t ever remember any politician recovering from such a savage self-inflicted wound,” said Giles Wilkes, a senior fellow at the Institute of Government and a partner at Flint Global.

“Gordon Brown recovered somewhat from the multiple slip-ups of 2007-08 with his commanding response to the global financial crisis, but even that wasn’t enough.”





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