Liz Truss must have the skin of a rhino as the former Prime Minister never gives up, no matter how nasty the accusations being thrown at her are.
Even before Truss launched a defence of her chaotic time in office today, came another salvo from across the Atlantic from none other than the Don Draper lookalike, Mark Carney, one-time governor of the Bank of England and now said to be considering going into Canadian politics.
Carney, who was speaking at the centre-left love-in – otherwise known as the Global Progress Action Summit in Montreal, accused Truss’s regime of delivering “Argentina on the Channel” as she prepares to deliver a defence of her economic legacy today.
“When the Brexiteers tried to deliver Singapore on the Thames, the Truss government instead delivered Argentina on the Channel.” Carney, who has himself been criticised for keeping interest rates too low for too long – a factor which has led to the current crisis – while he was running the Old Lady, went on to say that Truss’s tax cuts were a “Pavlovian reaction of extreme conservatives to every problem” but insisted it was “grounded in a basic misunderstanding of what drives economies”.
Carney’s barbs didn’t stop Truss from going on with not only a defence of her economic legacy but a renewed call on her successor, Rishi Sunak, to cut taxes, prune welfare spending, raise the retirement age as well as delaying the net-zero commitment.
Yet while admitting to her audience at the Institute of Government today that she tried to push through her radical reforms in a rush, there was still no hint of any apology for the market chaos triggered by her mini-budget including £45 billion of tax cuts along with a huge energy support package.
This is what she said: “Some people said we were in too much of a rush. And it is certainly true that I didn’t just try to fatten the pig on market day – I tried to rear the pig and slaughter it as well. I confess to that.
“But the reason we were in a rush was because voters wanted to see results. I knew with the level of resistance and the lack of preparation time that things weren’t going to be perfect.”
In terms of a mea culpa, she also conceded that her communication “could have been better and the operation better honed” and that she was unable to implement her plans because there was a “powerful force comprising the economic and political elite, corporatists, parts of the media and even a section of the Conservative parliamentary party” who opposed her ideas.
Indeed, she’s still sticking to the line that the reasons her policies did not get implemented were down to “a reaction from the political and economic establishment which fed into the markets.” “I was effectively forced into a policy reversal under the threat of a UK meltdown”. She also argued that her tax cuts were not unfunded as they would have increased revenue in the long term.
What’s more, Truss is still sticking to the line that it wasn’t her mini-budget that crashed the markets. “I do want to challenge the phrase ‘crashed the economy’. The fact is that since I left office, both mortgage rates and gilt rates have gone higher than they were at the time of the mini-budget. I just think you are repeating a line to take from the Labour Party…”
And on this diagnosis she has evidence on her side, whatever her critics might say. Interest rates and gilt yields were already on the rise world-wide well before her mini-budget. But here in the UK the mayhem in the gilts market was made far worse by the catastrophic collapse in the price of long-dated gilts, leading to pension funds dumping their bonds because of their huge exposure to Liability Driven Investments. It was this – rather than her unfunded tax cuts – which set off the real panic, leading some traders to say we were minutes away from a “Lehman-style crisis.” And it was these huge jumps in yields which forced the Bank of England to step in to prop up gilt prices.
Yet there still has been no investigation into the role of the Bank of England during this crisis, or to the way in which pension funds were persuaded to overdose on gilts over the last few decades. If Truss doesn’t want to go down into the history book as the architect of crashing the market, she should be calling for a proper inquiry into the LDI market, and how the funds were pushed into bonds rather than equities.
