The Irish Times view on Liz Truss: struggling for credibility

Defending austerity politics in 1980, Margaret Thatcher derided calls for a U-turn: “You turn if you want to. The lady’s not for turning”. Not so her admiring successor, Liz Truss. As reversals go, yesterday’s abandoning of proposals to abolish a 45 per cent rate of tax on the wealthiest takes some beating. The British prime minister’s first Conservative Party conference in that role would normally have been an occasion for a new leader to celebrate with the rank and file. But Birmingham is seeing only a desperate apologia and scramble to legitimise her new vision, a sign not of boldness but weakness.

Investors gave a cautious welcome to the £2 billion retreat on a package of £45 billion in unfunded tax cuts, intended to save Truss’s skin ahead of almost certain Commons defeat from her own backbenchers. Other unfunded tax and social insurance cuts remain in place – and the return of bankers’ bonuses. While sterling recovered somewhat in response to Truss’s change of policy, the cost of raising government debt and of mortgages has soared, and the Conservatives are now openly contemplating cuts in real welfare payments to balance the books.

How much longer this chaos can continue is unclear. With one opinion poll already showing a 33 percentage point lead for Labour, calls for Truss’s departure are emanating from even within the Tory party itself. Explaining the reversal on the 45 per cent tax rate, chancellor Kwasi Kwarteng said the row around it was a “distraction”. But this is not about the optics. Kwarteng’s and Truss’s blind enthusiasm for trickle-down economics is undiminished. More is promised. As Truss’s defeated rival for the Tory leadership, Rishi Sunak, previously warned, the market reaction to unfunded proposals would not be good. She has a long way to go to regain lost ground.

Nor will Kwarteng’s scramble for growth materialise: although the latter has suggested his mini-budget would generate an impressive 2.5 per cent GNP growth, economic consultants Oxford Economic paint an altogether bleaker picture – output around 0.4 per cent higher by 2027-28 due to the tax cuts. Right up to the U-turn Truss and Kwarteng have defied economists, the market and political commentators to dispute the link between their mini-budget and soaring interest rates.

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These, they claimed, were the responsibility of the independent Bank of England – a bit like blaming the arrival of a lifeboat for the abandonment of a sinking ship. The Tory conference might have been an opportunity to right the ship and plug the holes in the hull. But it is already clear that it will take a lot more than that to restore stability and credibility to an administration that has had the worst possible start.