© Reuters. British Prime Minister Liz Truss attends a news conference in London, Britain, October 14, 2022. Daniel Leal/Pool via REUTERS
By Elizabeth Piper and Alistair Smout
LONDON (Reuters) – It was a bruising meeting with her Conservative lawmakers this week that finally shook British Prime Minister Liz Truss’s earlier unwavering faith that she could weather the market fallout from her radical economic growth plan.
Two days later, a chastened Truss addressed her first news conference as prime minister to admit she had gone “further and faster” than markets expected and sacked her friend and finance minister Kwasi Kwarteng to try to appease her lawmakers.
Offering little in the way of apology, Truss instead insisted her government could not give up on economic growth, but would slow the pace and bring on board more centrist lawmakers to quell a rebellion in her party.
She also dropped another of her pledges: to scrap a planned increase in corporation tax to try to calm markets, which had baulked at the size of her spending plans combined with the lack of detail about how they would be paid for.
With her credibility in tatters, she is now fighting for her political survival.
“I want to deliver a low tax, high wage, high growth economy. It’s what I was elected by my party to do. That mission remains,” she told the news conference in a low voice, absent of the bravado that marked her appearances in a leadership campaign.
“But it is clear that parts of our mini budget went further and faster than markets were expecting. So the way we are delivering our mission right now has to change. We need to act now to reassure the markets of our fiscal discipline.”
It was a low-key almost solemn performance from a politician who bounded on stage and lapped up the applause from the party faithful during the leadership campaign when she beat her rival, Rishi Sunak, to become prime minister on Sept. 6.
Then, buoyed by her victory, she felt she had no need to appoint anyone but her loyal supporters to her Cabinet team of top ministers, irritating some lawmakers who felt she should have tried to do more to unite the party.
Yet the signs were already there. She had won fewer votes than Sunak from lawmakers in earlier rounds of the leadership contest, and those who did not back her were quick to criticise her first steps in the role.
When Truss unveiled her economic programme on Sept. 23 and the markets plunged, that criticism grew, and even those who had supported her wondered out loud why she had failed to prepare not only the markets but the country for the scale of her tax-cutting plans.
She explained to lawmakers she had to act quickly to help families and businesses with sky-rocketing energy bills, but few understood why her economic programme had to be launched at exactly the same time — a mis-step she later admitted.
But instead of trying to bring in frustrated lawmakers, those closest to her said she pressed on with her plan in her Downing Street office, convinced the markets had overreacted and would calm down when they understood what she wanted to achieve.
That did not happen. As markets tumbled the Bank of England was forced to intervene and, more crucially for many of her lawmakers, a surge in borrowing costs pushed up mortgage rates.
First she U-turned on her pledge to scrap the top tax rate at her party’s annual conference earlier this month, and on Wednesday she met her lawmakers in parliament convinced her measures must have steadied the waters.
Yet she was “received only politely”, said one lawmaker present at the meeting. Then the criticism began.
“It’s an extraordinary situation that we’ve got a prime minister who has been in post for just over a month but she’s not got the full-throated, unanimous support of the parliamentary party which is worrying,” the lawmaker said at the time.
“She’s got to up her game… and I think she knows she’s got to up her game.”
Friday’s second tax reversal and the sacking of her close friend Kwarteng was the latest roll of the dice to try to save her premiership, just over a month old.
She is “badly wounded”, another Conservative lawmaker said, adding it was a “mess”.
Truss has also lost an important ally and, according to one person close to her, an important source of support in Kwarteng. But a veteran Conservative insider said it was simply a case of survival.
“She doesn’t need his support at the moment,” a Conservative insider said. “She needs MPs’ (members of parliament) support.”