"I am not going anywhere," Kwasi Kwarteng declared on Thursday, shortly before he rushed out of a reception at the UK ambassador's residence in Washington on a rainy night to catch the last plane back to London.
By Friday lunchtime, the chancellor had been sacked after his debt-fuelled "mini" Budget sent panic through markets and created political carnage. His 38 days in office was the second shortest tenure in almost two centuries, pipped only by a politician who died of a heart attack.
By cutting her ties with Kwarteng, prime minister Liz Truss insisted she was acting decisively to restore economic stability as she reversed a decision to block a previously planned increase in corporation tax.
"The way we are delivering our mission right now has to change," she said in a short address on Friday that acknowledged little direct responsibility for the financial turmoil of recent weeks.
"We need to act now to reassure the markets of our fiscal discipline."
But just over a month after she took office promising a new radical, tax-cutting Conservative government, Truss now faces political ruin, her signature economic policy rejected by markets, voters and her own MPs.
Ominously, Sir John Curtice, a leading pollster, says Truss is now as unpopular as former premier John Major was in the aftermath of the Black Wednesday currency crisis, the Conservative party's last encounter with economic disaster in 1992. It took the Tories 18 years to win another election.
As Truss begins dismantling the "mini" Budget that was unveiled only three weeks ago, the question being asked by Conservative MPs, the markets and the wider public is how long can this government survive?
Truss, who succeeded Boris Johnson as prime minister on September 6, came to power determined to prove to what she calls the "anti-growth coalition" that a rigorous programme of tax cuts and red-tape shredding could jolt the British economy out of its low-growth torpor.
But after three weeks of market chaos, soaring interest rates and plummeting poll ratings — her Conservatives are now between 20-30 points behind the Labour opposition — she has discovered that opponents to her vaunted growth strategy include many of her own MPs.
"It seems like the anti-growth coalition is everyone except the right wing of the Conservative party," says one shell-shocked Tory MP. A former cabinet minister adds: "She has f***** the party, f***** the country and f***** our prospects at the next general election."
Massive political damage
At a meeting between Truss and her MPs at Westminster on Wednesday, she was repeatedly warned that her policies were not just causing economic pain — mortgages rates have soared after a big sell-off in UK government gilts — but also massive political damage.
In one searing moment, Truss was accused by Tory MP Robert Halfon of having "trashed" a decade of work by successive Conservative leaders to win over working-class voters. One ally of Truss says that on Wednesday the prime minister was in "a pretty hardline place — she was against any U-turn", but that the mood changed after that meeting of the backbench 1922 committee.
The prime minister could see from the atmosphere in the room — and was warned explicitly by allies afterwards — that party discipline had broken down and unless she retreated immediately the pressure to remove her from Number 10 could become unstoppable.
The grim politics of the situation were also colliding with the economics. Treasury and Number 10 had been taking soundings from market participants and received a very clear message. "They said that unless the government reversed the tax cuts, there would be a very bad market reaction," said one person briefed on the discussions. "They made it clear that they did not believe the gap could be closed by spending cuts alone."
On Thursday morning the great unravelling began. Truss, who had taken a hard line just 24 hours earlier, was wobbling. While Kwarteng, who fiercely defended the original tax package, was in Washington extolling its virtues, his boss in Downing Street was starting to unpick it. "Everything was on the table," said one person briefed on the fraught discussions.
A massive support package for energy bills — initially costing £60bn — will survive, but Truss did not go into politics to offer what she once called "handouts" to people. She wanted to cut taxes, but now her cherished plan to hold down corporation tax and to axe the higher rate of tax were binned. Some in the Treasury believe the new chancellor Jeremy Hunt may have to raise other taxes to make the sums add up when he lays out the new government economic plan on October 31.
Truss conceded on Wednesday to her MPs that she had not "laid the groundwork" for her plan sufficiently, but many Tory MPs put the debacle down to an arrogance based on the ideological certainty of a group of rightwingers, fuelled by rightwing think-tanks like the Institute of Economic Affairs. "When facile statements meet real life — boom!" says one ex-cabinet minister.
Truss's problems are not just about communication: in the view of many MPs in her own party, her rightwing solutions to Britain's problems are not even popular with Tory voters.
"We're giving people a load of tax cuts that they didn't ask for and having to do a load of unpopular things to pay for them," laments one minister.
Truss is under heavy Tory fire for planning to cut the benefits of Britain's poorest people during a cost of living crisis, while Conservative MPs have been deluged with complaints from angry voters facing crippling increases in their mortgage costs.
Conservation groups — including the 5.3mn member National Trust — have vowed to resist Truss's free market planning reforms and attempts to restart shale gas fracking, which they claim threaten wildlife habitats.
"This is the biggest attack on nature, certainly in my lifetime and let alone my career," says Hilary McGrady, head of the National Trust, a body that looks after stately homes and is hardly a bastion of the radical left. Suddenly Truss's anti-growth coalition is starting to look like the whole country.
When the prime minister met the new monarch King Charles III on Wednesday night, Truss was caught on camera saying: "It's a great pleasure." The King could only mutter: "Dear, oh dear . . . anyway." The Daily Star on its front page invited bets on which had a longer shelf life: Liz Truss or a 60p lettuce from Tesco, the supermarket chain.
Reversing course
Truss's U-turn on corporation tax — the increase is expected to raise £18bn — might buy her some time, especially if it reassures the markets that she is finally listening. The gyrations of the currency and bond markets since the September 23 "mini" Budget have been part of a negative feedback loop into Westminster, exacerbating a sense of crisis.
The Bank of England, forced into an emergency intervention in the gilts market to avoid a collapse in pension funds, has said it will end its life-support operation on Friday. Truss needed to provide some reassurance to markets before Monday that the situation is under control.
But after that? Truss will hope the political situation will also stabilise and some Tory MPs believe that she might stagger on into the new year. "We would look absurd changing the leader again," says one. But many Conservatives now believe that Truss is finished politically.
Sir Keir Starmer, Labour opposition leader, had warned colleagues over the summer that Truss might enjoy a honeymoon period and that the Tories might be ahead in the polls by Christmas. Instead a YouGov survey this month found that just 14 per cent of the public had a positive impression of Truss compared with 73 per cent who saw her in an unfavourable light.
Labour believes that voters will remember the chaotic events of the past few weeks and how Truss's government made a bad economic situation even worse. "Don't forgive, don't forget," Starmer said.
Although Truss has sacked her chancellor and announced a reversal of key parts of her economic policy, many Tory MPs believe she can only survive in Number 10 until the party has worked out a way of replacing her that does not plunge it into another chaotic leadership contest.
"The mood is already shifting from anger at the sheer stupidity of the prime minister and chancellor to one of sadness," said one well-connected Tory MP before Kwarteng was fired. "We face annihilation at the next election. It's only a question now of when the party gets rid of her."
While Tory moderates are furious with Truss, there is perhaps even more anger on the right. Its dream of turning a post-Brexit Britain into a low-tax, low-regulation economy — "rightwing nuttery" in the words of one former Tory cabinet minister — is disappearing in front of its eyes.
Truss will hope that her MPs recoil from the prospect of another Tory leadership contest. Voters are unlikely to look kindly on a party agonising over the choice of a third prime minister since Boris Johnson won the 2019 general election with an 80-seat majority.
Since David Cameron resigned as prime minister after the Brexit vote in 2016, the UK has started to resemble Italy in terms of its rotating cast of leaders, with Theresa May, Johnson and Truss all entering the famous black door.
Few Tory MPs relish the idea of giving the Conservative party's membership, described by one senior Tory as "a load of loons in Maidenhead", another say in choosing the prime minister.
The fact that there is no obvious successor may yet buy Truss some time. Rishi Sunak, the former chancellor who warned that Truss's policies would end in market chaos, would be a favourite among MPs, but other candidates will also fancy a shot including Penny Mordaunt, leader of the House of Commons, and Suella Braverman, the rightwing home secretary. As the new chancellor, Hunt could yet emerge as a safe pair of hands.
"They only thing keeping her there is we can't work out what to do," says one veteran Tory MP.
Written by: George Parker, additional reporting by Chris Giles in Washington
© Financial Times
