In another extraordinary afternoon for British politics the British Prime Minister, Liz Truss, sacked her Chancellor, Kwazi Kwarteng, and announced she would scrap plans to reverse the cut in corporation tax which was the signature move in last month’s mini budget.
In a press conference which lasted fewer than ten minutes, Truss gave an awkward and stilted performance asserting she had acted decisively to sack the Chancellor and replace him with Sunak supporter and leadership rival, Jeremy Hunt, to restore certainty to the markets. Only seconds later, however, the Labour Party was pointing out that during the leadership campaign Hunt had advocated reducing corporation tax from 19p to 15p.
She was unrepentant about her “ambition for growth” and appeared to be saying the timing was wrong. While the PM’s poor press conference performance has done little to reassure her MPs, the reaction from the financial markets was also mixed: the cost of government borrowing rose across a range of bonds, the pound which had risen yesterday amid speculation about a u-turn dipped to $1.12 as she spoke.
The key question on the lips of commentators and MPs, who are worried for their seats in the face growing Labour poll leads, seems to be how long can this go on? The briefing against Truss, even from those within her government, continued with many questioning her competence and pointing to the fact that even the traditional exchange of resignation letters was mishandled; with the letter from the Chancellor to the PM saying he was asked to resign while the responding letter from the PM said she welcomed his decision to quit. The Westminster rumour mill working overtime with some even suggesting that there were moves afoot amongst very senior Tories to replace Truss with a joint ticket of Rishi Sunak and Penny Mordaunt (who came second and third in the leadership contest).
The prospect of a fifth Prime Minister in just six years opens the heart of the dilemma for Liz Truss and a young administration which has lost its Chancellor after just 38 days. Truss lacked a political mandate to deliver the sort of economic and supply side reforms which she had been advocating since the publication of her book, Britain Unchained, co-authored with Kwarteng in 2010. So, the question is, if cutting corporation tax and the higher rate was the elixir for growth why didn’t Boris Johnson do it with his stonking 80- seat majority after 2019?
Critics say we now have a Prime Minister without an electoral mandate and without a policy platform which raises legitimate concerns about the need for a general election. Supporters, although fewer and farther between, still argue that her economic policies need to be given time to work before a general election in 2024.
The next week will be crucial for Truss and the extent that the appointment of Hunt will settle the nerves of her party and the markets. But with polling dropping as low as 19%, suggesting a wipe out for the Conservatives at the next election, she will have to find a new song to sing and fast, otherwise she may be out before Firework Night on 5 November.