Reality is about to collide with Trussonomics – the results won’t be pretty

Energy is at the top of the in-tray of the prime minister, who is said to be contemplating a price freeze, writes James Moore

All downhill from here: Liz Truss faces a tough economic backdrop, starting with the energy crisis (Reuters)

Has UK plc been Trussed-up like a turkey by the Tory party? We’re about to find out.

The new prime minister, Liz Truss, won the race to No 10 by living in economic la la land; by telling her party what it wanted to hear while appearing to ignore the grim reality playing out in the country and acting as if the hard choices it will force upon her were someone else’s problem.

Both the bond markets and the performance of the pound tell you the markets have been running scared of a fiscally irresponsible Truss government blowing a hole in the public finances. This has actually served to compound Britain’s problems by making borrowing more expensive and stoking inflation. Truss has cost the country a lot of money before even getting elected.

The pound did tick up a little as her victory was confirmed, not least because the event brought weeks of uncertainty to an end. Trouble is, that uncertainty could very easily turn into crisis if Ms Truss is as good as her word and keeps all the promises she has been making to Tory party members. This will, of course, prove to be quite impossible. Some of those promises will surely be quietly shelved. Some will simply be blown away by the gale-force wind of Britain’s economic woes.

If that sounds gloomy, I’m sorry but we can’t simply talk our way out of them. The biggest problem facing her administration is obviously energy. When it comes to that, Ms Truss at one point talked of her disdain for “handouts” while advocating tax cuts for the rich. Now she’s reportedly giving in and preparing to once again adopt a version of Labour’s policy.

Labour was first with proposals for an energy price cap. The idea was derided by the Tories – economic madness! – until it was adopted. Labour also pushed the idea of a windfall tax on energy companies. “Ooh, we don’t like that,” the Tories said. “You’ll hurt investment in Britain’s energy future!” Once again, they later took the plunge. Of course they did. And that investment? There’s still money pouring into the North Sea. With energy prices as high as they are, of course there is.

It looks like it will be third-time lucky for Britain with respect to Labour’s popular proposals for a domestic energy price freeze. Perhaps Ms Truss should just appoint shadow chancellor Rachel Reeves to the portfolio of wise men and women who are supposed to be appointed to advise the Treasury.

As happened with the first two examples, what emerges on energy from Team Truss won’t be quite the same as Labour’s plan. The really interesting thing – and a likely point of divergence – is how she plans to pay for it. A freeze, of whatever kind, is going to be expensive. Labour promised another windfall (tax) to pay for it, assumed a lower inflation rate from the move and got into a spat with the good people at Full Fact when the party called the plan “fully funded”.

Whether or not its policy proposal is that, it does at least recognise that you simply can’t create what Theresa May – remember her? – once memorably described as a “magic money tree”. How Liz “no new taxes” Truss works that particular angle will be interesting indeed.

The negative reaction to her election, which poured in from the economic commentariat that fills the financial press corps’ inboxes at a time like this, doesn’t bode well. I don’t think I’ve ever seen quite the level of pessimism in response to the election of a new prime minister as I have with this one.

When Britain has a new leader, people usually like to make nice. They offer fulsome congratulations, while gently putting in the odd bid, maybe a light shot across the bows at worst. There was, it’s true, some of that about. But there was just as much “oh god, it’s awful and she’s got to get a grip on this quick”.

A PR company sent round a basket of quotes from small businesses. The one from the founder of Buy Britain, an online marketplace for British-made products, was particularly on point: “Liz Truss is now at the helm of a sinking ship and there’s no getting off. We can only hope she’s successful in the new job as she is facing an economic and political Everest.”

Yes, the fantasy Ms Truss sold is about to meet reality – a hard reality. About the only thing in her favour is the low expectations she’s starting with.

Trouble is, she doesn’t have much of a hand to play to exceed them. But Ms Truss can’t fold the hand she has, like a wise poker player would do. She has to play it through.

We will be Truss-ed up like a turkey without any trimmings if she gets it wrong. Sadly, she’s shown every sign that she will.