Inside Politics: Down – and out?

Calls for Truss to resign as new chancellor Hunt rips up mini-Budget, writes Matt Mathers

(PA)

Hello there, I’m Matt Mathers and welcome to The Independent’s Inside Politics newsletter.

Hunt is back on the trail, Mordaunt is hoping the penny has dropped and Sunak might be trying to convince colleagues he’s not too rish for the top job. Are we about to enter Wacky Races 2.0?

Inside the bubble

Commons action gets underway at 2.30pm with levelling up questions to Simon Clarke. After that comes any government statements or urgent questions. Next Chris Grayling has a ten-minute rule bill on deforestation, followed by the government’s energy prices bill.

Daily briefing

When the herd moves

Kwasi Kwarteng is out, Liz Truss is on life support and Jeremy Hunt, the new chancellor, is going through what’s left of her mini-Budget – or what might become known as the second-longest suicide note in history – with a big red marker pen. So what happens next as we enter what is sure to be another week of high drama at Westminster? Hunt, Mr Competence personified, gave an assured set of broadcast interviews yesterday as he attempted to steady the ship and calm the markets by suggesting taxes might have to go up while public spending goes down.

There is more on this morning. In a statement, the Treasury has said the chancellor will bring forward measures from the medium-term fiscal plan that he says will support fiscal sustainability, with Hunt’s emergency words expected before lunch time. It is expected that the 1p cut to the basic rate of income will be cancelled. After 8am, when the bond markets open, it will be clearer just how far Kwarteng’s sacking and Truss’s statement later in the afternoon on Friday went in calming investor nerves. The Bank of England’s emergency package to prop up some pension funds has also ended and the speed at which the chancellor is moving this morning suggests the reaction may not be good, although the pound is slightly up against the dollar.

Yesterday, Hunt claimed that Truss had changed as he called on his colleagues not to ditch the PM, who remains in office but with no power and crucially now, no mandate either. “I worry about further political instability, but even more economic instability,” Hunt said as he tried to make a case for Truss staggering on in office. But arguments about stability may ring hollow coming from any Conservative MPs or ministers following what critics might describe as the seven-year coalition of chaos (set in train by David Cameron) under Theresa May, Boris Johnson and now Truss, who – along with Kwarteng – is the direct cause of much of the current turmoil in the economy.

Hunt, it appears, has so far failed to convince some of his colleagues, never mind anybody else, and letters of no confidence are already going into Sir Graham Brady, chairman of the 1922 Committee of backbenchers who organise the party’s leadership election. A number of MPs went public last night calling on Truss to go and the debate among many Conservatives now is not whether Truss can survive but how long has left. Hunt himself, Sunak, the former chancellor, Mordaunt, the Commons leader and Ben Wallace, the defence secretary, are just some of the names being bandied about as potential replacements.

Are there any mechanisms for dispatching the PM? Under current rules, no: a leader who wins a contest is safe from challenge for a further 12 months. But the Conservative Party’s constitution is as flexible as its ideology and if enough MPs will it, then the rules can be changed. Conversations are taking place about how a coronation can take place without involving the barmy members who put Truss in office in the first place. Raising the threshold of votes required to get on the ballot to a level so high that only two candidates make it, with second place agreeing to drop out before the contest goes to the membership, is one idea being put forward.

Ours is a parliamentary democracy, meaning that the party with a majority in the Commons has the right to choose the PM. But would it be acceptable – or morally right – for the British public to have another Conservative leader foisted upon them in this way, given recent events? “The PM must go,” said one newspaper’s leader column yesterday. “Sunak has to step up – then call an election.” The Independent? The Observer? Sunday Mirror? No – The Sunday Times. Newspapers usually sympathetic to the Conservative Party are now apparently just as exhausted as everybody else.

With Labour surging in the polls, installing someone like Sunak might be the only chance the Tories have of avoiding a 1997-style wipeout at the next general election. A new poll by Opinium yesterday projected Keir Starmer’s party would win 411 seats on current levels of support. Former PM Boris Johnson famously said that, “When the herd moves, it moves” and there is nothing like the threat of losing their seat to focus the mind of a Tory MP. Some of them may now feel that the only way to save themselves is to switch off Truss’s ventilator.

(PA)

Growth downgraded

As if the current economic woes weren’t bad enough, investment banking firm Goldman Sachs has issued another gloomy forecast, saying that Britain’s recession will be more than twice as deep as previously expected.

Analysts at Goldman have downgraded growth from -0.4 per cent to -1 per cent, following Truss’s U-turn on corporation tax, with the bank saying that rising interest rates will also play a part in the downturn.

The BoE expects Britain to enter recession in the fourth quarter of 2022 and stay there for more than one year.

Goldman Sachs has warned that the impact of recent developments in Britain’s fraught political sphere will plunge the economy lower than feared.

“Folding in weaker growth momentum, significantly tighter financial conditions, and the higher corporation tax from next April, we downgrade our UK growth outlook further and now expect a more significant recession,” it said.

On the record

Tory grandee Sir Malcolm Rifkind says Truss should resign.

“Conservative MPs must decide either to support Truss or demand her resignation. I think the latter would be in the national interest. Once a new PM is chosen, he or she must get the economy back on an even keel.”

From the Twitterati

Guardian columnist Rafael Behr on Trussonomics.

“Trussonomics is the spliff that Brexit smoked after a long session in the pub. Tories now having a market whitey, kneeling in front of the toilet, room spinning.”

Essential reading

• Hamish McRae, The Independent: Do the financial markets have too much power?
• Sean O’Grady The Independent: Jeremy Hunt has saved Liz Truss’s premiership
• Katy Balls, The Guardian: ‘It feels like this week or next’ – this latest U-turn has only ramped up plots to depose Liz Truss
• Borzou Daragahi, The Independent: Iran’s leaders believe their own lies – and it’s dangerous

Inside Politics first appeared in our daily morning email. You can sign up via this link.