The government mini-budget which triggered the pound to fall to a record low against the dollar in late September was the work of “the most self-confident duo ever” of prime minister and chancellor.
That is according to political broadcaster Steve Richards, who told the Business Travel Association (BTA) conference in Belfast that PM Liz Truss and Kwasi Kwarteng “are the two most self-confident politicians I’ve ever met” and “the most self-confident ever to arrive in Number 10”.
He argued: “Their ideological certainty is in marked contrast to other prime ministers.”
Yet after speaking to sources at Number 10 he said: “Their mood now is a combination of absolutely freaked out but defiant.”
The chancellor made a partial U-turn on the mini-budget announcements as the Conservative Party conference began on Monday of this week, dropping a cut in the top rate of tax on the wealthiest earners, worth £2 billion a year to the Treasury.
But it was the government’s failure to say how it would pay for the entire £45-billion package of tax cuts in the mini-budget that unsettled the financial markets.
Richards warned the government would not recover if the pound fell to parity with the dollar, arguing a sterling crisis was “the greatest trauma for any prime minister”.
But even if the pound steadied, he said: “What happened can’t be unmade. They set out to define themselves in bold colours, they can’t say they’re not doing it.”
And if they cope with the pressure from the financial markets, he said: “The other pressure is the opinion polls.”
Noting a succession of polls giving Labour a huge lead over the Conservatives, Richards said: “That will freak out Tory MPs.”
He asked: “Why did they do it? Didn’t they think about the consequences? Clearly, they didn’t. Truss and Kwarteng come from the ranks of think tanks. No one tests their theories.”
Richards noted Truss lacked support among Tory MPs even before the mini-budget and told the BTA: “Tory MPs are wary of her. Most voted for Rishi Sunak [as leader]. Normally, a leader tries to accommodate doubters, but she hasn’t.
“Kwarteng is trying to reassure the markets. But they can’t change the fundamentals and keep political credibility. If this carries on, Kwarteng will be the shortest-serving chancellor in history.
“Some Tory MPs are already speculating about another leadership contest.”
He warned conference attendees to “be prepared for an epic autumn” if Tory MPs “stick with this regime”.
Yet he noted of the government: “It’s a cabinet of people who will just do what Truss says. Even Tory MPs are saying ‘We need a period in opposition to sort this out. I speak to Tory MPs who say ‘I don’t care if we lose the next election’.”
Richards said: “The chancellor wants to announce spending cuts quickly. That is a big problem. Tory MPs are massively in favour of spending cuts in theory but against them when they hear what they are.”
He added: “Strikes are going to be a feature [because] the government can’t afford inflation-proof pay rises in the public sector.”