7 Oct 2022

Having spoken to Truss critics and supporters at the Conservative Party Conference in Birmingham over recent days, here’s our summary of the likeliest scenarios facing the nation and its new Prime Minister in the months ahead.

​​​​​Honeymoon? What honeymoon?

​​​​​”The honeymoon from hell” was how one wag described the four weeks faced by Liz Truss since becoming Prime Minister.

First, her radical energy intervention of September 8 was crowded out of the news by the passing of HM Queen Elizabeth later that same day.

Millions were promised billions, yet hardly anyone had time to register the largesse.

What came to infuriate many Conservative MPs with regard to the (not so) mini budget 13 days ago was that it represented a second chance to impress the government’s generosity upon voters – only for that chance to be squandered.

“The Chancellor did not need to spatchcock in all that stuff about 1p off basic rate tax, 5p off the 45p rate, an end to the cap on bankers’ bonuses,” says one Conservative MP.

“He had plenty of time, and even now we don’t understand why he rushed out a shock-and-awe package. One with no reassurance about how to get borrowing under control and no reassurance from an independent OBR (Office of Budget Responsibility) commentary. Of course the markets reacted.”

The decision to “go large” on the mini budget provoked a sterling crisis and turned Liz Truss’s coronation conference into a crisis one. Now the government has U-turned on cutting the 45p tax rate and brought forward from Nov 23 to this month its plans for a statement on borrowing, accompanied this time by an OBR commentary. Yet few Tory MPs believe their party’s political crisis ends here.

We’ve boiled things down to the core scenarios currently troubling those hoping to avoid a Tory meltdown.


Highways to Hell

Road to Ruin No.1: October OBR outrage.

The OBR issues its own independent verdict on a budget, so the government cannot know for sure whether its boffins will conclude that the Chancellor’s package shall result in his promised growth of 2.5pc per annum.

If the OBR forecasts (say) two per cent and isn’t convinced by any new plans to bear down on public borrowing, then nobody knows just how sharp the next market reaction may be. It is possible to imagine another firestorm, this one resulting in Truss deciding to replace her Chancellor in order to reassure voters, markets and her party.

If that doesn’t do the trick and polls remain as bad as now, some Tory MPs believe another bout of party panic could result in a Truss No Confidence vote by backbenchers. How long until that moment arrives is hard to tell, but even if Truss held on until Spring, a bloodbath in the May council elections might finish her.

It is not certain that she could rely on her support in the “Tory press” holding firm were trouble to mount. Executives at the Daily Mail, which campaigned aggressively for a Truss premiership, were furious not to have been tipped off about the 45p U-turn in spite of a senior editor speaking to Truss on the Sunday evening when the change was decided.

The paper ran content supporting the “Not for turning” stance Truss had taken earlier in the day, found themselves scooped by The Sun, then had to make major edition changes. One MP laments the episode: “So it turns out that on top of everything else, neither Liz nor her team understands modern media management or basic courtesy to core supporters?”

To be fair to the PM and her team, this scenario is predicated on “worst case” outcomes, especially as regards the OBR report this month. It is more likely that any OBR dissent will be buttered and the markets prove more immune to controversy (especially as financial world concern likely turns to worries about Credit Suisse, Deutsche Bank and EU banking regulatory standards).

Nevertheless, this pathway to doom is far from impossible and quite a few Tory MPs put it at the top of the “drama list”.

Road to Ruin No.2: Finance Bill fails.

This is where a lot of the “action” is right now in terms of private plotting and general chatter among Truss’s backbenchers.

The Finance Bill is the annual measure authorising the government to go on taxing people and employers. It runs to hundreds of clauses and usually covers just about everything a government does, because just about everything a government does involves raising or spending money. And there’s the rub.

While there are grey areas, most of Truss’s radical measures will likely end up in a Finance Bill before the end of the financial year in April. That could mean amendments and revolts aplenty.

The Bill may need to cover matters as disparate as: limiting Whitehall budget rises beneath the rate of inflation; limiting welfare rises to the rate of average pay growth rather than price rises; allowing lower taxes and higher subsidies in the new Investment Zones; adjusting budgets for environmental protection; adjusting the sugar tax; adjusting green levies.

It is often said that a Finance Bill cannot be amended. Also that rebelling and voting against the Finance Bill is tantamount to opposing your own government in a confidence vote – because without a budget, a government cannot function and its leader will probably be forced to seek a General Election.

It turns out both statements are over-simplifications.

In 1994, the then Tory government lost a vote on one part of its Finance Bill, seeking to increase Value Added Tax on fuel. The government adjusted, the Finance Bill passed, an election wasn’t held for a further three years.

Truss and/or the parliamentary authorities will need to decide what amendments can be voted on come the next Finance Bill. If there are individual defeats on separate items of contention, the PM will find her authority and her programme chipped away – echoing the Major era just alluded to.

Amendments aside, the PM will need to decide what sabres she rattles in terms of warning her MPs to back the overall Finance Bill or face a General Election.

Again, there are echoes of Major. He turned key EU-related votes into matters of confidence and managed to cling to power – but then lost office in Labour’s landslide victory of 1997.

If Truss frames the main Finance Bill vote as a confidence matter and loses her Bill, nobody knows whether she’d opt to bring back a watered-down one (as John Major did in 1994), resign to make way for a new leader, or attempt an election.

Her MPs might oust her should she threaten the latter course. And if they don’t, then at least one political editor wonders whether our new King might end up being drawn into politics. Would he grant a dissolution should Truss lose a budget-related confidence vote – or decline, effectively inviting the Tories to replace their leader?

Road to Ruin No.3: death by a thousand cuts.

​​​​As the country learned during the Battle for Brexit, our unwritten constitution means political dramas can turn into something akin to a football match where no-one’s sure of the rules and the rules themselves can change from what we all thought they said.

Thus it is with the Finance Bill.

Rather than risk her authority by stuffing all her radicalism into a single Finance Bill, why not split most changes into disparate free-standing measures before April and avoid the drama? Is that prohibited?

The answer depends on who you speak to. Yet even if this escape route does exist, does it really help? Tories we speak to doubt a trail of individual defeats chipping away at the PM’s authority and the programme she promised would impress voters.

The same is threatened over non-budget measures, such as planning reform, and what regulations to bring in to replace the huge volume of EU ones about to be repealed.

Truss losing a war of attrition with her own party would hardly be a recipe for success against a newly resurgent Labour party that is topping 50pc in some opinion polls.

Road to Ruin No.4: People in grey suits.

Given the potholes on the path ahead, it’s easy to imagine Labour maintaining its poll lead of 20% or more.

The General Election is due by January 2025 at the latest. The nearer it comes, the less tolerant Tory backbenchers will be of an ongoing dramatic poll deficit. There could be a big wobble if the Tories perform disastrously come May’s local elections.

Already, there is talk among some MPs of re-running the manoeuvre used in 2003 against then Tory Opposition leader Iain Duncan Smith: dumping an under-performing leader and replacing them with a single agreed candidate, averting the need for a leadership race.

Duncan Smith was ousted in an MPs’ confidence vote before Michael Howard took over. Given the Tories have only just ousted Boris Johnson, would they have the nerve to strike twice within a parliament?

Maybe, maybe not. But one sign of the times is that some veteran Tories and funders are already wondering whether party elders (the “men in grey suits” of less diverse times) could gang up on Truss to persuade her to leave, should things remain as bad as they have in her first few weeks.

And yet… nobody has a clue who to install “by acclamation” if Truss were told to go. One Tory backbench leader opposed to Truss is frank: “There would be no consensus among my colleagues over Boris, none over Rishi. The absence of a consensus candidate to succeed Liz will probably save her in the end.” Which brings us to..


The narrow road to a fourth term

Some businesses whisper that they liked most of the mini budget and believe the money markets overreacted. Indeed, the pound came back to its pre-mini budget levels by the time Tory conference got underway, and inflation-rise predictions are easing.

With around two years until the next election is held (exact timing is in the PM’s gift) – there could yet be time for the economy to revive, Tory fortunes to pick up and Labour to falter.

True, that scenario requires a lot of things to go right for Truss. But consider her side’s case.

Maybe voters love the tax cuts, despite pretending not to. That’s the pattern of most recent elections, hence Labour caution on the issue even now.

Maybe Truss squeezes welfare and finds it plays well with many hard-working audiences (witness the Osborne era). Maybe the analysts predicting her measures boost growth one per cent in 2023 are right and she at last wins respect from her MPs and the public.

And maybe Labour looks less shiny as its policies and people fall under greater scrutiny. Say that with knobs on if strikes escalate and voters think Keir Starmer mealy-mouthed about it.

There is also the matter of the Cabinet. Stuffed with supposed Truss loyalists, a surprising number broadcast their dissent from her core programme while in Birmingham. Meanwhile, Michael Gove and Grant Shapps stirred trouble from outside the ranks of government. Imagine them brought in, trouble-making agenda items dumped…. A reset.

Only a minority we spoke to in Birmingham this week had much faith things will turn out okay for their party. Some in that minority had an impressive steeliness about them. Yet even they have trouble denying it: things have changed of late, and not in the government’s favour.