I told Kwasi: 'I am being threatened with a market meltdown. This is f***ing ... trends now

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 Tory colleagues for the financial meltdown that torpedoed her premiership. Today, in the final instalment, she reveals her utter relief at leaving Downing 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.

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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

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