Now Liz Truss must deliver

This is Iain Martin’s weekly newsletter, exclusively for Reaction subscribers.

From the spiritual, the sublime, the transcendent, it’s straight back to temporal politics today. There will now be a four day blitz unleashed by a largely inexperienced Number 10 team, seeking to establish its authority and to show that post-Boris Johnson there is a new government in town.

It is only two weeks today since Liz Truss travelled to Balmoral to be asked by Queen Elizabeth II to form an administration. Two days later the Queen died. New Prime Minister, new monarch.

I won’t add to the mountain of metaphors. What more is there to be said about the queue and the days of the country paying its respects? Britain excelled itself. All culminating in Monday’s extraordinary events, from the magnificence of the military operation, to the religious ceremony and the perfectly pitched words of the Archbishop of Canterbury hymning a glorious life of service, and the massed pipes, and the lone piper during the committal at Windsor as the coffin slipped from view.

It has been said already, on social media, that the Queen’s funeral will be the last occasion of its kind. I’m not sure that’s right. Why would anyone, bar the most bitter Republican, suggest sweeping away and replacing with utilitarian dullness what happened yesterday? Imagine.

Yes, the late Queen was a particularly special monarch, on the throne for 70 years and the embodiment of our connection (almost gone) to the wartime generation. Yes, she embodied old-fashioned service and obligation to country. But King Charles has it too, in his own distinct way. And the new Prince of Wales too, and hopefully his children will. That means that for the rest of the century, at the very least, it continues. Thank goodness.

Operating on a somewhat shorter time scale, Liz Truss must this week justify the faith of her supporters and show she has the beginnings of a plan to get Britain through the energy crisis and growing on the other side of it. First, the Prime Minister is off to the UN shindig in New York.

I must admit, in spite of the widespread criticism, I like Truss’s focus on going for growth and the new spirit. The circumstances are hardly propitious, the economy may blow up first, but under bungling Boris the situation was completely hopeless. He had no interest, really none, and even less understanding, of economics.

Truss understands the government cannot mandate or deliver growth. There is no single switch to flick. What her Number 10 can do, if it is focused enough and not swept away by international tides or disasters, is apply a pro-growth test to policy. On planning reform, on deregulation, on reform of the tax system, on improving trading relations with the EU, on encouraging investment, asking always whether any given measure helps or hinders growth. Let’s see.

Why Tom Scholar of the Treasury was sacked

All change at His Majesty’s Treasury too, where a new Chancellor is at work preparing an emergency “fiscal event” to be presented to the House of Commons on Friday. While much of the Prime Minister’s focus in public has been on the aftermath of the death of the Queen, on attending services, and on the diplomatic and security headache of hosting world leaders, the work in the background has been centred on preparing those announcements to launch the new administration’s programme.

With the currency taking a hammering, a lot rests on whether or not Kwarteng, Chancellor, historian, rises to the challenge.

He is making these preparations for his announcements – for tax cuts, some deregulation, and assorted pro-growth adjustments – without the help of a Permanent Secretary, the most senior Treasury official, because the holder of that position was whacked by the Chancellor when he took over. A search is underway for a replacement. 

Sir Tom Scholar, a civil service veteran who has served Prime Ministers and Chancellors for decades, was told by Kwarteng two weeks ago his services were no longer required. It is said Scholar expressed some astonishment. Was the Chancellor really ending his 30 year civil service career? Yes, came the answer.

The removal of Scholar has horrified senior former officials and some – note, not all – of the senior politicians he worked for. Ever since his sacking the airwaves and letters pages of newspapers have featured numerous complaints from ex-mandarins who detect capriciousness and a reluctance by Team Truss to listen to challenging advice.

Lord Butler, a former cabinet secretary, worries that the neutrality of the civil service is being jeopardised. Shouldn’t Simon Case, the current cabinet secretary, have stuck up for Scholar?

When Lord Agnew, a former Treasury minister writing in The Times, published a rip-roaring denunciation of Scholar last  week, he was criticised by mandarins. Agnew was furious about fraud in the Covid business loans scheme and blames Scholar’s running of the Treasury. Agnew’s background is business, and like many who go late and with reformist zeal from commerce into a department such as the Treasury they find the politics frustrating. A minister who is not the Chancellor will often get surprisingly little access to the top of the department. The Permanent Secretary acts partly as a gatekeeper, executing the Chancellor’s wishes. Resentments fester, and in Agnew’s case turned into fury at the waste of public money. Resentment was also a feature of Liz Truss’s experience of being Chief Secretary to the Treasury from 2017 to 2019, and it was a key factor in Scholar’s whacking. More of which in a moment.

Ahead of becoming Chancellor, Kwarteng was warned by more than one person that on entering the Treasury he might need all the crisis era statecraft experience he can get his hands on. It is always good to have someone on call who knows how and when best to place the crucial call to the US Treasury, the European Central Bank or the IMF.

The sacked Scholar was a veteran of the financial crisis. He was part of the team in HMT that devised and implemented the bailout of the banking system when the economy blew up in 2008. He was a character in the chapters on the rescue in my book, Making it Happen: Fred Goodwin, RBS and the men who blew up the British economy, published in 2013.

Interestingly, Scholar was not mentioned in financial crisis era Alistair Darling’s memoir of the same period, although other officials were. The pair were not close. Something in Scholar’s manner or sense of humour didn’t appeal to Darling when he was Chancellor.

Before he took office Kwarteng had considered phasing out Scholar, managing him out, having him on hand in the Treasury for six months or so during the immediate crisis while he identified a replacement.

Instead, in the days before they took over the decision was taken by Prime Minister and Chancellor that it should be a clean break. Scholar was out.

Scholar was the official guiding the negotiations with the EU for David Cameron ahead of the 2016 referendum. He was never forgiven, it is said, by Truss and other Remainers who had to switch to Brexit after the referendum, for not getting more from the EU in those pre-2016 talks. Truss was a Eurosceptic who was persuaded by Cameron and Osborne to back Remain in 2016 on the back of Scholar’s deal. Since then she has been reborn as a Brexiteer, approaching her work with the zeal of a convert and accepted as such by those who voted to leave.

Even more importantly, for Scholar, Liz Truss’s formative experience as Chief Secretary to the Treasury, under Philip Hammond in the May government, was a distinctly unhappy one. It is an understatement to say Philip Hammond as Chancellor was dismissive of Truss. Whispered tales circulated at the time of her being cut out. The atmosphere was deeply poisonous.

As Jill Rutter, of the Institute for Government, pointed out last week, Treasury Permanent Secretaries do have a habit of allowing the Chief Secretary only a limited role.

This, with Hammond, was way more than that. And Scholar, enthusiastically helping his then boss Hammond, made himself very unpopular with Truss. This was a political miscalculation. Turns out Philip “social kryptonite” Hammond was finished when Boris Johnson took over in 2019, and in the whacky races of British politics Liz Truss bested her rivals to emerge as Prime Minister three years later.

Some other ministers who worked with Truss earlier in her career found her difficult and unusually insistent on pursuing her own favoured projects.

Well, she has the power now. As Sir Tom Scholar can testify.

EU and UK reset being attempted

A few weeks ago, it looked as though reborn Brexiteer Liz Truss was going to trigger Article 16 and start a trade war with France and the EU, on the basis that her attempts at forging a compromise on the Northern Ireland Protocol as Foreign Secretary had been rebuffed. Why faff about any longer? Why not just get the pain over with right away as one of the first moves of a new administration? The incoming Prime Minister had options prepared.

In the event, circumstances changed. The death of the Queen prompted an eloquent tribute from President Macron. If Truss really thought, as she joked during the leadership campaign, that the jury was out on whether Macron is a friend or foe of Britain, she had the  answer.

Truss, pledged to go for growth. Starting a trade war with the EU is unlikely to help there.

The EU has also indicated since she took office that it is open to a reset in relations after the Johnson era. Even if the proposals from the Commission on reducing trade checks between Northern Ireland and the mainland do not go far enough for Truss, the mood music is conciliatory. 

The EU has had to adjust its thinking. Its intelligence on the Tory leadership race in the summer seems to have been faulty, according to officials. They had held off compromising on Northern Ireland, seeing off Boris Johnson and waiting for the flexible dealmaker Rishi Sunak to win and step back from a fight.

In the event, it’s not Sunak. It’s Truss. In the new dispensation both sides see an opportunity for having a go at a reset, however, in the light of what’s coming, on the energy crisis and likely recession. A compromise looks like a sensible idea.

What I’m reading

Chip War: the Fight for the World’s Most Critical Technology is the new book by historian Chris Miller and it’s an absolute belter. The US dominates this vital industry. Our world – communication, cars, energy, transport, much weaponry – doesn’t work without these chips. China wants to end its reliance on US chips. There will be great power competition, and quite conceivably fighting.

Popping into a central London library last week I also picked up a copy of Coffee with Hitler, by Charles Spicer, and found the introduction engrossing. Before the outbreak of the Second World War a small group of Brits set about attempting to avert disaster. Their Anglo-German friendship society tried a doomed, naive shot at civilising the Nazi regime involving afternoon tea, drinks, trips to Berlin and correspondence. Their amateur diplomacy didn’t work. I’ve ordered the book and will report back.

Have a good week.

This newsletter was delayed from its usual Saturday morning delivery, for which apologies. The Queen was lying in state and humble politics seemed unimportant. On Saturday and Sunday on the domestic front we were also engaged in the ancient ceremony of “dropping off a much loved son for freshers’ week at university” and somewhat distracted. New beginnings, a new era. Onwards.