LIZ TRUSS: I told Kwasi 'I am being threatened with a market meltdown' (2024)

In yesterday’s Mail on Sunday extract from her political memoir, Liz Truss pointed the finger at a vengeful Bank of England governor and lily-livered Torycolleagues for the financial meltdown that torpedoed her premiership.

Today, in the final instalment, she reveals her utter relief at leavingDowning Street after 49 tumultuous days…

THURSDAY, OCTOBER 6, 2022

I headed off to Prague for the first meeting of the European Political Community — set up by Emmanuel Macron as a forum for discussion after the invasion of Ukraine.

Needless to say, Foreign Office officials were salivating over any sense that we were rebuilding our relationship with Europe. It seemed impossible to have a rational discussion without people wanting to relitigate the EU referendum.

Of course, while everybody else met in the main conference centre in Prague, Macron had his own grand side building.

I got the message when I met the likes of Dutch prime minister Mark Rutte that everyone was concerned over what was going on in Britain. Maybe I’m in some serious trouble, I thought.

It was the Eastern Europeans, as always, who provided succour. The Czech prime minister thought my plans totally reasonable — they had much lower taxes in the Czech Republic and those cuts were already delivering benefits.

FRIDAY, OCTOBER 7

When I returned to the UK, a new front had opened up in our battle with the economic Establishment. The Office for Budget Responsibility (OBR) took its revenge for being sidelined over the mini budget, sending an email to the Chancellor warning of a £72billion gap in the public finances.

This was immediately leaked to sympathetic journalists. The culture of leaking and negative briefing was now out of control and, frankly, appalling.

Here was a supposedly ‘independent’ public body apparently engaging in a deliberate abuse of market-sensitive information in order to undermine confidence in the Government. I was furious at their behaviour and still am.

I believed the numbers in the OBR’s analysis were wrong, and so it has since proved. In March 2023, the OBR announced that it had overstated its estimate by a staggering £28.4billion.

In the short term, however, their intervention had the desired effect, sparking another round of meetings in which Treasury officials pressed us to make further changes to our plans. The implication was clear: they believed we should reverse course on the mini budget.

Tonight, the family and I headed off for our first weekend at Chequers, the prime minister’s official country residence. The staff were very welcoming, but it was hard to relax. Chequers had at one stage been owned by Oliver Cromwell’s descendants, and on the upper floor the Cromwell corridor was replete with memorabilia. I wasn’t in the best frame of mind to enjoy reminders of the English Civil War.

MONDAY, OCTOBER 10

Any hope of getting back on the front foot was short-lived. This morning, the Bank of England announced an increase in its measures to stop pension funds from going bust.

Then, to further reassure the markets, Kwasi announced, with my agreement, that he’d bring forward his medium-term fiscal plan from the agreed date of November 23 to October 31 — Halloween. Because of the OBR’s faulty debt forecast, this was starting to look like a horror story. We were now being forced to choose between unpalatable options — slashing public spending or reversing all the tax announcements in the mini budget.

And that was just to make the numbers fit a forecast we believed was comprehensively wrong!

At this point, we also announced the appointment of James Bowler as the new Permanent Secretary to the Treasury. I was personally fine with the choice.

But I resented the fact that I’d been obliged to block Kwasi’s preferred candidate — who had no previous Treasury experience — at the behest of the Bank governor, who warned me of an adverse market reaction. It wasn’t wholly clear if the governor’s warning was a forecast or a threat.

TUESDAY, OCTOBER 11

Today, the Bank of England governor himself caused a market reaction by announcing that the support scheme for pension funds would wind up at the end of the week. This led to an immediate fall in the pound. On top of that, the International Monetary Fund (IMF) has questioned whether the rich would benefit ‘too much’ from the mini budget — surely a domestic question for the UK Government!

The pile-on included President Biden. ‘I wasn’t the only one that thought [the mini budget] was a mistake,’ he said during a visit to an ice-cream parlour in Oregon. ‘I think that the idea of cutting taxes on the super-wealthy at a time when … anyway, I just think … I disagreed with the policy.’ This was utter hypocrisy and ignorance. The top rate of income tax in the U.S. was 37 per cent and only charged to people earning the equivalent of £483,094 and above. By contrast, the top rate in the UK was 45 per cent and paid by those on more than £150,000.

I was shocked and astounded that Biden would breach protocol by commenting on UK domestic policy. Clearly, the Biden administration didn’t want a country demonstrating that things can be done differently.

Kwasi insisted today on flying to Washington to join the annual IMF conference, ignoring my suggestion that it wasn’t a good time for him to be out of the country. I thought no one in Britain would care that he’d missed the conference, and I could see the situation was very fragile. He thought the IMF meeting was more important, and said he didn’t want to show any panic.

Later, I faced an ambush of backbench Tory MPs at a meeting of the 1922 Committee. The ostensible purpose of the meeting was for me to explain my strategy. Yet my political opponents mounted a concerted effort to undermine me, asking a barrage of hostile questions and then briefing the whole thing to the media. It was an ugly scene and left even my staunchest supporters rattled.

THURSDAY, OCTOBER 13

This morning, our new Treasury Permanent Secretary came to see me in the Cabinet room and delivered a stark warning: if we persevered with our plan to cut taxes, the markets would crash.

A warning letter from the Cabinet Secretary Simon Case — who’d just talked to Andrew Bailey, the governor of the Bank of England — said the same thing.

I could see what was about to happen. With the Bank’s support for pension funds about to end, we risked a complete market meltdown. To avoid this, I was told, we’d have to signal a complete change of direction. Our mini budget would be dead, and my entire economic agenda with it.

I knew they had me at gunpoint. The rising culture of leaking would ensure the markets knew exactly what the Bank and the Treasury had advised me, and any remaining confidence in the Government would evaporate.

By presenting their advice in this way, they ensured I had no option but to take it.

Throughout the day, I tried to reach Kwasi to discuss what had now become an existential crisis. He proved difficult to pin down — and when I did speak to him, he didn’t appreciate the scale of what was happening.

He spoke about not panicking and just holding our nerve. It certainly didn’t help that he wasn’t in the country — things always look less bad when you are almost 4,000 miles away. ‘Kwasi,’ I told him, ‘I’m being threatened with a market meltdown. This is f***ing serious.’

Everyone else on my team had already been convinced to surrender. I’d been the last holdout, but I now realised it was a hopeless position.

Faced with the prospect of a catastrophic economic meltdown, I had an overriding duty to do what was necessary to avoid it. Decision made, I went into full damage-limitation mode, operating almost on autopilot.

I had to consider what else would be required. There’d already been extensive calls for Kwasi to be sacked, and I couldn’t see how he could now credibly present such a major policy reversal himself. Reluctantly, I concluded that, to restore confidence, we needed a new chancellor who could steady the ship.

That night, I could hardly sleep. The Horse Guards clock chimed every 15 minutes, counting down to the hideous day ahead. I ran through in my mind everything that had happened and was going to happen.

I knew I was running out of road. It was like a game of Tetris when you start losing control and the pieces are getting closer and closer to the top.

FRIDAY, OCTOBER 14

Appointing another true believer in my agenda would not have cut the mustard. This morning, as Kwasi was flying back to London, I called Jeremy Hunt.

He was in Brussels and initially rejected the call, not recognising the number. When I finally got through and asked him to take over as chancellor, he was somewhat taken aback, to say the least.

We don’t share the same political views, but I had always got on well with him, and I believed he’d be able to do what was now required.

As Jeremy returned from Brussels, Kwasi was flying back from Washington DC. Yet again, I was appalled by a leak: Kwasi learned of his apparent sacking while scrolling through his Twitter feed on his phone while travelling back to central London from the airport.

This was deeply regrettable, and I would have much preferred if, just this one time, the incessant urge to leak had been resisted.

It was a difficult meeting. We’d been friends and political colleagues for more than a decade and had developed our political agenda together. We’d planned this bold economic approach and both still believed in it. Now it was coming to a painful end.

I still don’t think he realised how bad things had become during his absence. I laid it out for him, stressing that I simply couldn’t risk the British Government going bankrupt.

‘I’m sorry Kwasi, but I have to do what I can to stabilise things. And that means you going.’

He was understandably annoyed, and I don’t blame him. He said that sacking him wouldn’t save me and that they’d come for me next.

I conceded he was probably right, but I now had an obligation to at least try to steady the ship. That afternoon, I gave a short press conference to announce the U-turn on corporation tax and explain what the new chancellor and I would be doing to ensure economic stability.

I faced the media frenzy alone. It was a pretty ghastly experience, which felt a lot like officiating at my own funeral.

I was absolutely clear that my economic policy was dead, and most people thought my premiership was, too.

SUNDAY, OCTOBER 16

I invited Jeremy and his family to Chequers for Sunday lunch. Then he and I sat down to go over the announcements he’d be making in the Commons tomorrow.

He’d very quickly got a handle on the situation and was fully across the details of what needed to be done to calm the markets. He’d also taken to the Treasury very easily and they to him.

That was, of course, the purpose of his appointment. The Treasury establishment had defeated me, so now I had appointed a classic Treasury man as chancellor.

Why? Because I was no longer in control of economic policy.

While our children played in the Chequers swimming pool, I chatted with my husband Hugh on the lawn. He posed the question I hadn’t wanted to think about.

Given that I’d been forced to abandon the policies I was elected to deliver, what was the point of my remaining Prime Minister?

MONDAY, OCTOBER 17

Following Hunt’s appointment, the pound rallies by 3 cents to $1.14.

In the afternoon, I was updated on the mood of the Conservative backbenches. It wasn’t good. Immediately afterwards, Jeremy made his first statement in the Commons as chancellor, effectively burying the mini budget.

As I sat alongside him on the front bench, it was something of an out-of-body experience. Listening to him shredding the platform on which I’d won the leadership election was uniquely painful.

TUESDAY, OCTOBER 18

There were further meetings with MPs today, including one with the anti-EU European Research Group of MPs, who were all very supportive — a welcome boost.

All the while, people were getting in touch to offer advice on who I should appoint to the Cabinet, who I should fire, and what I should do to reset the Government. But by this point, however, none of these suggestions was likely to have any impact on the situation.

WEDNESDAY, OCTOBER 19

If I had any hope, then today put paid to it. It began constructively enough with preparation for Prime Minister’s Questions, which took up most of the morning.

Just before midday, I went over to the Commons.

As was now becoming habit, I began by repeating that I was sorry and that I acknowledged I’d made mistakes. MPs were predictably rowdy, but I thought it all went as well as could be expected.

Then, in the afternoon, events took a bizarre turn. I was told the Home Secretary, Suella Braverman, had leaked a sensitive draft ministerial statement to a backbench MP — a serious breach of the Ministerial Code.

After a discussion with the Cabinet Secretary, I concluded I’d have to ask her to step down — so I called her to my office to tell her in person. In her place, I appointed Grant Shapps, who had a reputation as a competent media performer.

This unexpected additional drama meant I didn’t spend much time thinking about that evening’s vote on an Opposition motion on fracking. After attending my weekly audience with the King, I headed to the Commons for the vote, which we won comfortably.

However, it soon emerged there’d been angry scenes during the vote, with our whips openly arguing with MPs and tempers running high.

I then heard that the Chief Whip Wendy Morton and her deputy had both resigned, saying they were unable to put up with the abuse they were getting. This wasn’t a huge surprise. Right from the outset, they’d faced quite appalling behaviour from some of our own MPs, who made their life hell.

There was bullying by one colleague, for instance, over not being invited to the Queen’s state funeral. But that was only the tip of the iceberg.

The abuse hurled at Wendy and others from day one inevitably had a corrosive effect. I’d found myself having to spend an increasing amount of time giving pep talks to try to lift their flagging spirits. It helped that I’m naturally an uber-optimist, but even I found this a strain. And now they’d resigned — the last thing I needed.

I knew this would only increase the likelihood of the house of cards falling down.

So I spoke to Wendy and Craig in my office and urged them to retract their resignations. They were very emotional, and I eventually persuaded them.

I then headed over to the Whips’ office and found it in utter chaos. All around the Commons, I also saw looks of despair on the faces of colleagues. That’s when I thought: this is done. This is terminal. By that time, I had decided that my only option was to resign.

I had already done what was needed to avoid an economic meltdown, but the political meltdown of the Conservative Party now appeared unstoppable.

THURSDAY, OCTOBER 20

I didn’t sleep much that night and in the morning I still felt the situation was impossible. I went down to the Cabinet Room and spoke to my chief of staff, Mark Fullbrook, and Nick Catsaras, my private secretary. Both of them reluctantly agreed that my time was up.

I went back up to the flat to speak to Hugh. He told me I would have regretted never running for leader and trying to do the things in which I believed — but that I wouldn’t regret leaving now that it had proved impossible.

He was right. Decision made, I telephoned His Majesty the King to inform him personally. He was as kind and sympathetic as ever. Then the Cabinet Room started to fill up as close colleagues joined my senior officials and the political team.

A last-minute phone call came in from my daughter, Liberty, calling on me not to resign from the middle of her school playing field. I had to say it was too late.

At 1.30pm, I went out to the lectern outside No 10 and announced my resignation as leader of the Conservative Party.

I was angry and frustrated that it had come to this, but by that stage the overriding feeling was one of relief.

The whole experience as Prime Minister had been quite surreal, and my resignation seemed like just another dramatic moment in a very strange film in which I had somehow been cast.

Things had not worked out as I had hoped.

It’s shocking how close we came to a PM dying

I still find it shocking how close we came to the Prime Minister dying in the first weeks of the pandemic. The fact that this could happen was, to my mind, a major failing of the state.

It demonstrated how unsupported and exposed our Prime Minister is when compared to other world leaders.

As we watched Boris struggling through meetings on Zoom in the days before he was hospitalised, I simply couldn’t understand why he was apparently being left to fend for himself, without on-site medical attention at No 10.

The contrast to what I saw in Washington DC a few months later was stark.

A comprehensive system was under way in which people were isolated in the Executive Office Building next door and tested for Covid before being allowed into the White House.

The President and Vice-President had full medical teams looking after them.

It was a world away from the frankly shambolic arrangements at the heart of the UK Government.

In the first weeks of the pandemic, the Health Secretary, the Prime Minister’s chief adviser, the Chief Medical Officer, and the Prime Minister himself all caught Covid.

As a result, the Government’s entire senior leadership was at risk of being incapacitated at a moment of extreme national peril.

I still find it hard to comprehend how the official state allowed this to happen, and how disastrous it could easily have been.

Underdone barbecue chicken and May’s EU cave-in

The old political maxim is to speak softly and carry a big stick. Between 2016 and 2019, Theresa May’s government was often shouting while waving a twig.

My own view was that we should have been much more hard-headed about Brexit negotiations from the outset. The only thing the EU understand is pain.

We should have told them we were prepared to go for no deal, put tariffs on their agricultural imports and pursued a trade agreement with the U.S.

The truth is we potentially had a lot of leverage, but never used it.

In July 2018, the Cabinet was summoned to the prime minister’s country house, Chequers, where we were asked to endorse a compromise Theresa wanted with the EU.

The room was set up with round tables as if we were attending a wedding.

At the time, this was seen as a make-or-break meeting. In the event, it was something of a damp squib.

I recall a barbecue with some rather undercooked chicken. And, needless to say, Theresa’s compromise — which involved kicking serious problems further down the line — pleased nobody.

We sold off Britain’s embassies – and threw away history

When I arrived at the Foreign Office, I found a demoralised bunch. My predecessor, Dominic Raab, had been a hard taskmaster!

In addition, the Foreign Office had been undermined for years by governments that hadn’t taken foreign affairs seriously enough.

Successive prime ministers had watched as the crown jewels that were our historic embassies were sold off to fund a bloated domestic budget — particularly a growing welfare state.

Ironically, the one historic embassy the Treasury could not dispose of is the Moscow one — across the river from the Kremlin — as it’s on a lease from the Russian government.

This whole exercise in selling off the family silver was driven by the Treasury’s usual pettifogging attitude.

And for what? The capital receipts from flogging off these sites were perhaps a little north of £1 billion overall.

When you consider that the NHS spends that sum in a matter of days, it’s not exactly a huge amount.

Yet, those grand historic embassies are gone for ever.

Britain’s history was just thrown away.

It’s the epitome of knowing the price of everything and the value of nothing.

This abacus accounting has also affected the Foreign Office’s own building in London. The statues on the outside are crumbling and large parts of the place are distinctly shabby.

I wanted to renovate it and commission new statues of great British heroes — but I was told that if we wanted to do that, we’d have to sell off even more overseas embassies!

Boris said he wanted me to be his Geoff Boycott, I said I’d rather be Ian Botham

It started with a tweet. In April 2018, I tweeted in support of Mumsnet, the online forum, over their insistence on having a free discussion on transgender policy.

My view was that adults should be free to live their lives as they want. I was also clear that women were defined as biologically female.

Just under 18 months later, I got a call from an aide to the Prime Minister, asking me if I still agreed with my tweet.

I knew where this was leading. Sure enough, Boris called me himself, asking me to be equality minister.

In typical Boris fashion, he told me: ‘Liz, I want you to be a Geoffrey Boycott in this role’ — a reference to the famously cautious England cricketer of the 1970s.

I presumed this meant he wanted me to play defence on the transgender issue, hose things down and not create any trouble. That might have suited him, but I don’t really see myself as a Geoffrey Boycott figure. So I told Boris I preferred Ian Botham, the charismatic attacking cricketer who once grew so frustrated with Boycott’s negativity that he conspired with the opposition to dismiss him from the match.

Boris countered by suggesting that he saw me as more of a Ben Stokes, the modern-day England star … and so it went on.

It was somewhat surreal to be conducting a ministerial appointment through the medium of an extended cricketing metaphor, but we eventually agreed I’d step up to the crease.

I was horrified by what was going on. Some schools were teaching there are multiple genders. The police were designating some biologically male rapists as women, and the NHS had actually put out guidance about ‘chestfeeding’.

Appallingly, this was happening under a Conservative government. Whereas I was prepared to fight, too many of my Cabinet colleagues wanted to put their heads in the sand. There were even some backbench Tory MPs and advisers in No 10 who actively supported the self-ID agenda.

As I moved forward with my plans to stop self-ID, there was a barrage of leaks to the press. It became a Saturday night tradition that I’d receive a ‘WTF’ text from Boris, demanding to know why our plans had been leaked. I had to point out that as the person who wanted to get this done, it was not in my interests for this to be in the public domain.

Had he considered that one of his own advisers might have leaked the story?

Eventually I got self-ID reversed. There was a lot of support from women’s rights activists — and the predictable backlash from the Left. Slowly, the tide was turning.

• Adapted from Ten Years To Save The West by Liz Truss (Biteback, £20). © Liz Truss 2024. To order a copy for £18 (offer valid to 27/04/24; UK P&P free on orders over £25) go to www.mailshop.co.uk/books or call 020 3176 2937.