Wednesday 12 October 2022

The Tories under Truss are done for

Kwarteng and Truss are finished. The only question now is how long they can last - my guess is Christmas at best. Reaction to the mini-budget has been cataclysmic in financial markets and the announcement yesterday by Bank of England governor Andrew Bailey that his £65 billion support package would end on Friday sent the pound down again. This was supposed to avoid a sell-off which risked the collapse of some pension schemes. Bailey told them: “You've got three days left now and you've got to sort it out.”

Bailey is getting stick but I don’t think he had a choice. The £65 billion was guaranteed by The Treasury and if they won’t extend the programme of buy-backs, he had a duty to warn the markets.

Criticism is coming from all directions. The IMF, the IFS, and all the papers are all piling in. The Economist was particularly brutal:

I can’t remember a government getting into such trouble in so short a time - ever. A new prime minister, however they arrive, is usually expected to be given time to put their own mark on things. But Truss was so desperate to show she was different- even though she had supported Johnson to the hilt - she and her chancellor managed to destroy any goodwill they had within a month.

I also see the ONS said this morning that the UK economy unexpectedly shrank in August by 0.3% and the figure for July was revised downwards. Some Brexity economists were temporarily buoyed yesterday when the IMF forecasted that Britain would grow by 3.6% this year, the highest in the G7. But this ignored the sorry fact that we are still the only G7 economy to remain below the pre-pandemic level. It doesn't look like we'll hit 3.6% anyway.

Next year we are down to 0.3% according to the IMF but even that may be optimistic.

Sky News' Ed Conway has a decent explanation of the problems facing the pair here:

The IFS published a 'green budget' which I assume is saying much the same as the OBR is expected to say when their report in response to Kwarteng's mini-budget is published at the end of October. In other words, the public finances are now on an unsustainable path and he has the choice of cancelling (or delaying) most of his tax cuts or trying to force through £60 billion in public spending cuts when every government department is struggling to manage with present funding levels alongside inflation at 10%.

I used to think that Brexit would be terminal for the Tories but now I think things are so bad, Tory financial incompetence will take Brexit down before that. 

I see the latest YouGov polling for WhatUKthinks in answer to the question: In hindsight was Britain right or wrong to vote to leave the EU, which I have been posting about since 2017, shows a record low for WRONG. 

One poll on 22 September shows 61% (wrong) to 39% (right) while the latest on 7 October shows 60% to 40% - when don't knows are removed. Digging down into the data, note a few things:

Only 75% of 2016 leave voters now think leaving was RIGHT.  At the same time, 92% of remain voters think it was WRONG. It's clear where the mind-changing is going on.  Every region now has a majority thinking it was wrong and the only age group which still thinks it was RIGHT is the 65+ and that is narrowing naturally, as expected.

Even Tory voters from 2019 who support Brexit are now down to 73%.

There is still a majority - just 2% - in social grades C2, D, and E who think it was RIGHT, down from 28% in August 2016.

I think the next election is lost, and the result will be worse than the Tory party could ever image (get the prosecco and pop-corn in on election night) and I think - seriously - they will be fortunate to end up with double figures in seats.

If that were to happen, recriminations in the party will tear it apart and it will separate back into UKIP and moderate Conservatives. But I don't see them back in power for 15 years or more. What Truss has done will go down in history.

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