We have a chancellor who sticks to his guns, except when he doesn’t. Unfunded tax cuts for the rich are so popular there will be more to come, except that, actually, come to think of it, now there will be one fewer. And in No 10, the lady’s not for turning, except when she is. Confused? Not half as much as this government is.
In a quarter of a century of covering party conferences I can’t remember a car crash like this, or a prime minister whose authority drained so fast. The speed of her decline is dizzying, as if someone had fast-forwarded the film straight to the big fight scene at the end; within the space of a week, she has lost the confidence of her MPs, the markets and the country. From abroad, we’re now viewed with the rubbernecking fascination the tabloids once reserved for Kerry Katona or Britney Spears in mid-breakdown. Is Britain … all right? Our friends are worried for us. And all the time, real money is draining from real pockets, alarmingly fast.
The U-turn on the 45p tax rate came too late to stop the slide. Mortgage rates have already risen, as a result of Liz Truss and Kwasi Kwarteng’s preening overconfidence. The Bank of England has ploughed billions into bailing out pension funds, thanks to this pair’s misplaced belief in their own unorthodox genius. Now they’re scrabbling for billions of pounds of spending cuts in a hurry, after it emerged that the markets don’t buy the foundational myth of Trussonomics – namely that tax cuts would stimulate so much growth they’d essentially pay for themselves, eliminating the need for painful spending decisions.
Assuming Truss honours past promises to ringfence pensions, the obvious target is vulnerable people whose benefits have already been either frozen or raised only by miserly amounts for the past six years. Taking from the poor to give to the rich in a cost of living crisis is cruel beyond belief. The next few weeks will tell us whether it’s so cruel as to be actively unworkable for the Conservative party.
Ditching the toxic tax cut gives Truss at best only a little bit of breathing space. It was the most politically neuralgic measure in the mini-budget, but not the most expensive one – she’s still committed (at least for now) to billions of pounds worth of cuts to the basic rate of income tax and corporation tax – and nor is it necessarily what panicked the markets, which seem to have been signalling more general alarm at what the Tory donor Gareth Quarry (now defected to Labour) calls her “GCSE economics”. All of which means this isn’t the end of the story.
Tory MPs weren’t solely objecting to a tin-eared tax cut for the rich, but to the prospect of being simultaneously forced to approve more cuts for vulnerable people. Plenty of them represent seats that are not traditionally Conservative, where wages are low and their voters rely on universal credit to top things up. They know now that Truss is capable of retreating on unpopular policies, leaving those who have loyally defended her looking ridiculous.
It may take more blind faith than some Tory MPs in marginal seats possess to follow Truss and Kwarteng trustingly towards the sound of gunfire again, this time over spending cuts their constituents will hate. As she let slip to Laura Kuenssberg on Sunday morning, Truss takes the cold-eyed purist’s view that there is too much emphasis on how voters feel about policies, and not enough on the numbers. That’s what makes the 45p rate, reduced from 50p by George Osborne more to create the warm fuzzy feeling that we were “all in it together” than for the sum it actually raised, an irritant for her. But the rebels understand, as Osborne did, that in politics feelings matter. Fail to read the room, and there will be consequences.
Threats to remove the whip from MPs who voted against Kwarteng’s proposals seem to have only encouraged rebels to get organised. They know she can safely expel one or two mutinous backbenchers, but kick out 30 or 40 and you’ve effectively created a brand new opposition party. Now they know they can push her around, they’ll do it again. It’s hard to see her forcing through planning reforms that defeated Boris Johnson at the height of his popularity, for example. But take away her tax cuts, neuter the reforms she said would unleash growth, and what’s left?
“I get it,” said Kwarteng, announcing his U-turn on Monday morning. But they still don’t get it, he and Truss; they don’t get it at all. They still give the unfortunate impression of thinking that the rest of us are too slow to understand their daring brilliance, and should frankly concentrate more. (“What I’m telling you, but I don’t think you’re listening … ” as Kwarteng said testily to Nick Robinson on Radio 4’s Today programme on Monday morning.) But most of all, they don’t seem to get that this isn’t like the time Osborne raised tax on sausage rolls and inadvertently started a war with Greggs. It’s not a relative slip of the pen, an oversight easily rectified. It’s a thread that, once pulled, makes the whole damn thing unravel.
Gaby Hinsliff is a Guardian columnist
• This article was amended on 5 October 2022 to make it clear that George Osborne reduced the tax rate for high earners from 50p to 45p, rather than introducing the policy as a whole, which was done in 2010 by Labour.
