Halfway through the Tory leadership contest in 2022, Liz Truss knew she was going to win. She gathered her team at Chevening, the Palladian house in Kent which is the grace-and-favour home of the foreign secretary, on August 13. Details of what would become the mini-budget were thrashed out in meetings at Chevening between Truss and a quad of economic ministers, which included the future chancellor Kwasi Kwarteng, Chris Philp, who was to be chief secretary to the Treasury, and Simon Clarke, the current chief secretary. Economists, ministers and civil servants all advised her to tread cautiously. She ignored them all.
Economists Gerard Lyons and Julian Jessop presented a paper on ways of boosting growth, but it also warned: “The markets are nervous … if immediate economic policy announcements are handled badly then a market crash is possible.” Truss ignored the caveats. One conviction they did reinforce — particularly Lyons — was Truss’s decision not to ask the Office for Budget Responsibility (OBR) to do a formal forecast of the public finances ahead of the mini-budget.
Simon Case, the cabinet secretary, and senior Treasury officials Cat Little, the acting permanent secretary at the Treasury, Beth Russell, the director-general of tax and welfare, and Philip Duffy, the director-general of growth and productivity, “made clear there was a risk” in not using the OBR, a Tory said.
• The downfall of Liz Truss — by those who were there
Truss’s original plan had been for a three-year spending review to identify cuts in Whitehall budgets to balance out the tax cuts Truss wanted. Kwarteng, Clarke and Philp all saw them as a package. The need for spending cuts was Kwarteng’s one clear disagreement with Truss before the mini-budget. His adviser Celia McSwaine recalled: “He raised that point repeatedly, but unfortunately just lost the battle.” A cabinet minister observed: “She wasn’t interested in spending reductions at all. She literally wouldn’t talk about it, in a way that was quite weird. I think she thought it would be unpopular.”
Advertisement
Clare Lombardelli, the Treasury’s chief economist, was “unbelievably nervous” about the issue, a political aide recalled — “sweating spinal fluids”. In one meeting Case said: “Shouldn’t we have a conversation about spending cuts? Otherwise, people will see through it instantly.” Truss appeared to concede the point, suggesting a list of potential cuts was drawn up, but nothing came of it. Another aide said: “Simon Case was really pissed off.” The cabinet secretary told a colleague “this is economically illiterate” and described Truss as “completely mad”.
A cabinet minister said Truss became “massively emboldened”, getting a “head rush” combining “dangerous levels of self-confidence and a nagging insecurity that she didn’t have much time”. Truss decided to abolish the cap on bankers’ bonuses and cut stamp duty.
One of Truss’s team suggested that what came over her was effectively the manic state of a mental breakdown: “She wasn’t depressed, but she had a breakdown. She was giddy with expectations. She developed a serious detachment from reality, she was more demanding and intolerant of people. She didn’t want to be challenged. Two things change people — power and money. Those are the two torches of life which tell you what a person is about. At the start of the leadership campaign, she listened to a lot of people because she was unsure of herself. When it dawned on her she was going to win, she jettisoned this approach and it made her psychologically unfit to be prime minister.”
Power struggle
Truss had promised action to curb the soaring cost of energy bills. Two days before they moved into Downing Street, Truss’s team had been installed in Dover House, the official Whitehall waiting room for incoming prime ministers. Kwarteng and Philp wanted to at least “claw back” some of the costs. Kwarteng had heard from power industry bosses who suggested the handouts be treated as a loan, with customers asked to pay back some of the money over decades. One of those present recalled: “Kwasi expressly said that this would help the bond markets see that there is some income that will partly offset the massive liabilities that we are creating.”
Truss rejected this approach, with very little debate. “I am not going to do that,” she said. “That sounds like a new tax. Why would you even do that?” Kwarteng said: “This is £120 billion, can we talk about this?” A witness said: “She just shut it down. That was typical of how decision-making was done.”
Advertisement
Read more extracts
The last thing to be agreed was the number above which energy consumers would not have to pay more for the next two years. “There was a debate about whether it should be a £3,000 cap or £2,500,” said one of those present. The difference between these two decisions was “a £10 billion decision”, with the lower cap more expensive. Truss peremptorily declared: “Make it £2,500.” Philp, the new chief secretary to the Treasury, interjected: “Are you sure you don’t want to talk about it?” “No,” said Truss. “Do £2,500.”
Radical thinking
When the Queen died, three days into Truss’s premiership, attention in Whitehall turned to preparations for her funeral. Truss used the time to get even more radical. She got “very testy with Simon Clarke about investment zones”, a fellow cabinet minister observed. “She felt that he wasn’t going fast enough.” Another cabinet minister said: “Liz wanted hundreds of them and the liability was hundreds of billions, potentially.” The Treasury insisted on a cap on the numbers to ensure quality. Truss wanted no cap at all. When Clarke questioned this, she “sashayed around” the cabinet table, smiled at him flirtatiously and said: “You’ve got to live a little.”
In the headlong rush to pile policies into the mini-budget, most of Truss’s pragmatic political aides were kept in the dark about what she was planning. One political adviser found out about plans to double the threshold at which stamp duty was paid to properties worth £250,000 after pocketing a stray piece of paper left lying around at Chevening. On September 20, the day after the Queen’s funeral and three days before the mini-budget, the aide concluded that the plans were “f***ing mental” and decided to try to stop Truss in her tracks.
Using a burner phone to avoid detection, he called Steven Swinford, political editor of The Times, to leak the story, hoping that would lead to it being scrapped. The leak failed because other news organisations struggled to follow it up. When journalists phoned the comms team asking for a confirmatory steer, her spin doctors had no idea whether the story was true or not because they had been frozen out.
Taxing issues
It was only on the morning of Thursday, September 22, the day before the mini-budget, that comms director Adam Jones, deputy chief of staff Ruth Porter and close aide Jason Stein learnt about the most explosive item in Kwarteng’s speech: a decision to scrap the 45p top rate of tax, which kicked in on those earning £150,000 a year. Even Kwarteng’s team were on edge. One of them contacted an aide to Rishi Sunak for advice about how to handle the rollout and admitted: “It’s completely insane.”
Advertisement
From Truss, however, there was no evidence of doubt. She told her quad: “I’m prepared to take the difficult decisions.” That evening she told a senior civil servant: “My one worry is that I’m not going far enough.” To political aides, she kept repeating the phrase: “Go big, or go home.” In the end, she would do both.
The budget bombed, and with it the pound and the pensions industry. Borrowing rates soared. Kwarteng told the prime minister: “We should slow down.” Truss was still fired by an intoxicating cocktail of paranoia and extreme urgency. “I’ve only got two years!” she protested. “You will have two months if you carry on like this,” the chancellor warned.
At the Tory party conference, media focus on the 45p tax cut was drowning out any coverage of the more popular measures. That Sunday night Truss summoned Kwarteng to her suite. “What’s up?” he asked, gazing at ranks of aides. “This looks like an interview … I love that,” his bonhomie forced. “What’s going on?”
Truss wasted no time. “45p rate,” she said, her voice grave. “We need to rip the plaster off … I think we need to do it, like, now.” She added: “Basically, what I think we need to do is say, ‘Although I, Kwasi Kwarteng, and I, Liz Truss, massively support getting rid of this ridiculous rate, which is higher than Ireland’s, it’s clear that it’s becoming a distraction from a massively positive package.’” Then the key part for Kwarteng. “I think, basically, you should just say that tomorrow …”
“In the speech …”
Advertisement
“… on the media.”
“On the media round?” Kwarteng sounded alarmed.
“Because of all the market shit it’s just created this pressure cooker. We need to do something to relieve the pressure.”
Kwarteng would be made to own the U-turn. The chancellor reached for Shakespeare: “My view is that if you’re going to do it, it were done and ’twere best it was done quickly.”
“That’s exactly what I was thinking,” said Truss. “Lady Macbeth!” Kwarteng laughed nervously. Eleven days later Truss sacked her chancellor. Six days after that, she resigned as well.
Advertisement
Out by Tim Shipman (HarperCollins £30). To order a copy go to timesbookshop.co.uk or call 020 3176 2935. Free UK standard P&P on online orders over £25. Special discount available for Times+ members.
