Former U.K. Prime Minister Liz Truss, on Sunday, launched a broadside against the economic orthodoxy of British and international institutions, mostly blaming “a very powerful economic establishment” and a lack of political support for the collapse of her administration and her resignation from office in under 50 days.
In a 4,000-word essay in the Sunday Telegraph newspaper about her “bruising” experience, Ms. Truss suggested that U.K. Treasury officials had misled her with incomplete information, that the media made her government a scapegoat, and that there were “concerted” efforts in Washington, such as from the International Monetary Fund (IMF) and U.S. President Joe Biden, to challenge her plans.
Ms. Truss’s government fell shortly after her September 23 ‘mini Budget’, which included tax cuts and unfunded expenditures, and rattled the markets, resulting in her resignation in October last year. On Sunday, she defended her policies, while admitting that she could have done some things differently.
On the reversal of the corporate tax hike, she said she strongly believed and still believes that raising the rate is “counterproductive” and called the abolition of the 45% top rate of personal income tax a “small measure”.
Ms. Truss discussed her lack of knowledge of liability-driven investments (LDIs), an investment policy linked to pension plans, which she said, were “a problem that would ultimately bring my premiership to an abrupt and premature end”. U.K. Treasury officials did not brief her, or the (then) Chancellor, Kwasi Kwarteng, about the risks LDIs posed to bond markets, Ms. Truss argued.
“Only now can I appreciate what a delicate tinderbox we were dealing with in respect of the LDIs,” she said. Ms. Truss sacked Mr. Kwarteng on the morning of October 14, a move she felt “deeply disturbed” by.
Large sections of the public and the media had become unfamiliar with tax and economic policy arguments, and the sentiment had “shifted Left-wards” over time, the former Prime Minister wrote, as she called out the economic modelling practices of the U.K.’s fiscal watchdog, which undervalued supply-side reforms and lower taxes according to her.
On the IMF’s reaction to her Budget, Ms. Truss said it “commented on distributional aspects rather than market stability which it is hard to conclude was anything but politically motivated”. She referred to Mr. Biden’s remarks as an example of interventions from outside “in tune with growing efforts on the world stage to limit competition between G7 economies, as evidenced by the proposed global minimum tax”.
The U.S. President had called the Budget a “mistake” and singled out the tax cuts.
Ms. Truss wrote that she probably should not have flown to New York ( to address the United Nations General Assembly ) after Queen Elizabeth’s funeral, and stayed back in London to supervise the Budget announcement more closely.
“I fully admit our communication could have been better,” she wrote.
In the hours after the piece was published, British media outlets reported the reaction of MPs, many of whom remained unnamed. Speaking to the BBC on Sunday, Business Secretary Grant Shapps, who was part of the Truss Cabinet agreed with the general idea of cutting taxes, but after reducing inflation and getting debt “under control”.