How did Truss happen? A UK observer explains

For those looking at British politics from the outside, the short but chaotic leadership of now-former PM Liz Truss must be baffling. A brief in-country explainer may help.

The previously-resigned Prime Minister Boris Johnson was ousted by his own party for successive scandals and pathological lying. This should not have been surprising: Johnson had been sacked from previous jobs in both media and politics for (wait for it) lying, and has a long history of untruth.

This led to a race to replace him, with Tory MPs voting for candidates in successive rounds until there were two left. Rishi Sunak had more elected MPs supporting him than Liz Truss. These two remaining candidates, Truss and Sunak, were then put to the voting of the Conservative Party rank and file members. Here, there was more support for Truss than Sunak, with Truss positioning herself more to the right to appeal to the Party members.

Truss handily won the "public" vote.

But this already represented a big problem for her. Here she was, leading the Party and the government, but being less popular with elected MPs than Sunak, whom she defeated. The grassroots members meant nothing now in the cloisters of Westminster. To make matters worse, Truss didn't reach across the Tory aisle to seek a spectrum of support in creating a new government but chose for cabinet roles those who she knew were loyal to her.

About that Tory aisle

The Conservative Party, for the sake of simplicity, can be split into two factions. The centrists (those more to the left of the right-wing party), known as the "One Nation Conservatives," were broadly Sunak (and other candidate) supporters, and were to a fair degree opposed to Truss before she had even set foot in the House of Commons as leader.

The other half of the Party is very much to the right, represented by the European Research Group (or ERG, an anti-EU contingent largely responsible for Brexit) and other ideologues who very much want small government and slashing of regulation, and who to some significant degree deny climate change or accept lobbying on behalf of the fossil fuel industry and other similar players.

US readers may spot hallmarks of the GOP, with the Republican split between fiscal conservatives who are socially fairly liberal (traditional economic liberals) and the fervent and foaming MAGA right, virtue signaling to their rank-and-file base.

This Tory right faction was very much in support of Truss, and she received the lobbying and support of such think tanks as the free-market advocates the Insititute of Economic Affairs (IEA), whose Mark Littlewood was advising this new government. With such advice, Truss and her Chancellor the Exchequer, Kwasi Kwarteng, created a mini-budget (against economists' warnings) to be a stop-gap before the next full-scale annual budget.

But the plan cooked up was right out of the IEA playbook, including unfunded tax cuts for the richest:

Initially hailed by her supporters as “at last, a true, Tory budget”, the “mini” fiscal event included the biggest tax cuts since 1972, funded by a vast expansion in borrowing, and with only a vague attempt to argue it could be paid for by an unlikely economic boom.

Economists balked at the idea that £45bn of unfunded tax cuts for the rich could ever catalyse economic growth and pay for itself in the way the government argued. Not just critics from a supposed “anti-growth coalition”, but also from Goldman Sachs, Bank of America and the IMF. With inflation at a 40-year high, rising recession risks and higher borrowing costs across advanced economies, it was a big gamble at the wrong moment.

The international reaction was swift and damning. The pound fell to its lowest-ever level against the dollar, while gilt prices collapsed. Over four days, long-dated government bond yields – which move inversely to prices – rose by more than the annual increase in 23 of the past 27 years.

It was so bad that The Bank of England intervened, pledging to buy up to £65bn of government bonds, looking to save funds for UK pensioners from collapse. 

In the race for leadership, Rishi Sunak, the previous Chancellor, had warned of such reckless economics:  "As he had warned, there was indeed a run on sterling, gilt market freefall and spooked global investors. Even the International Monetary Fund (IMF) intervened with a stunning public rebuke."

Mark Littlewood, though, among others, was very happy: “It’s refreshing to hear a chancellor talk passionately about the importance of economic growth and supply-side reforms, rather than rattling off a string of state spending pledges and higher taxes,” he said on the day of the statement last month. “Only by bearing down on the amount of tax the state collects across the income spectrum, and reducing the regulatory burden, can we create better conditions for growth.”

The mini-budget was met with public outcry. In a time of a cost-of-living crisis, giving tax cuts to the richest was not well-received. Truss's government had already made a host of U-turns on unpopular moves, and the PM decided to make her Chancellor fall on her sword in announcing a new Chancellor and a U-turn on the mini-budget.

This, however, sealed her fate. Announcing something that divides half of your party is never a good thing, but reversing that decision then annoys the half that supported the original thing. The One Nation Tories sounded off at the mini-budget, with Sunak supporters crying "I told you so!" Truss had riled the centrists in the Party in order to appease the ideological right. But on realizing quite how unpopular this move was with the media and general public (as well as domestic and international financial institutions), she instigated her U-turn. This then riled the right of the Party who absolutely wanted this style of economics.

In her reversal of policy, Truss ended up full circle at the place where she had started, but now with everyone angry at her. The pro-Sunak camp smelled blood, and the ERG-right was reeling with an ideological opportunity lost.

Even given the chaos that would undoubtedly ensue, Truss had to go.

And this is where we are, with Rishi Sunak as the favorite for Prime Minister, and Penny Mordaunt, one of the previous final candidates, also running.

Until a few hours ago, Boris Johnson was also running, because people have exceptionally short memories in politics. This move was against the advice of many as it would have thrown the Party into further disrepute, with at least one MP who had originally ousted Johnson claiming they would immediately defect to Labour if Johnson wins. Now Johnson, presumably on the advice of strategists, has dropped out. There was talk that he might have done a deal with Penny Mordaunt such that it is Sunak against a Mordaunt/Johnson ticket.

If the Tory Party's present record-breaking lack of support in the general public were to translate into general election results, they would be absolutely decimated. A new poll shows that the Tories (CON, below) have dropped to an unprecedented low of 14% public support.

NEW: Westminster Voting Intention poll (20 Oct):

🔴 LAB: 53% (= from 12 Oct)
🔵 CON: 14% (-5)
🟠 LDM: 11% (+3)
🟢 GRN: 6% (=)
🟡 SNP: 5% (-1)

Full tables: https://t.co/ZIdyZ4hK99

— PeoplePolling (@PeoplePolling) October 21, 2022

For the opposition parties, 2024's general election can't come soon enough.