Rob Wilson: Asking serious questions about the Trus Bank, the Treasury, the

Rob Wilson is a former Minister for Civil Society, and was MP for Reading East from 2005-2017.

Liz Truss has written an open and honest account of her 49 days as Prime Minister. He admits that he made mistakes, that he could have done things differently, and that he can take responsibility for what went wrong at a personally traumatic time for both him and the country.

Whatever your view of Truss’s article, the issues he raises are very serious. The idea that a UK Prime Minister is being blocked by officials, that there is a groupthink bias within some of our key agencies and institutions, that officials and agencies are resistant to anything that takes us away from the EU, and that broadly serious economic issues are not communicated regularly Substantial and consequential charges.

He is perhaps the least important in his article about the challenges he faced in becoming prime minister. He had a terrible, almost impossible legacy. High energy costs, global supply chain problems, very high taxes, a slow global economy, the Bank of England failing in its primary responsibilities and companies in crisis after the Covid and Brexit crisis.

One of his parliamentary parties was also mired in conflict and several MPs lost their senses. Although he won a large majority of the Conservative Party in the country and declared the largest number of MPs, there was a feeling from the start that he would not be allowed to govern that way.

As he himself says, he could have acted differently, communicated better or not moved to deliver all his agenda so quickly – but, as he explains, it was clear that a large number of influencers were determined not to help. , and perhaps he expected to fail.

Both the Bank of England and the Treasury knew before Truss and Kwarteng were in place that both were very unhappy with their performance, and wanted a significant and immediate change of direction. Both organizations were firmly entrenched in the economics of the Gordon Brown era – a preferred orthodoxy for high taxes and high spending, and showed no sign of willingness to change.

Frankly, it was a huge economic mistake that the Bank of England continued quantitative easing for as long as it did and failed to raise interest rates as soon as it should have. This has increased the likelihood of economic instability. The Treasury, too, places more weight and emphasis on taxing and increasing spending than on a more dynamic, productive economy.

Although there was no conspiracy, it was clear that neither the Bank nor the Treasury was interested in enacting the Trust Reform Manifesto. He notes “pessimism and skepticism” about the growth prospects of the British economy, that Brexit was seen as damage limitation and that deregulation was undesirable (affecting relations with the EU).

The implication here is important – that it was more important for the UK to stay close to the EU than to make the most of its independence. It was a dangerous combination of cowardice that could only lead the UK down a path of decline and decay – something that finally took root before the Thatcher government of the 1980s.

But perhaps most damaging was the failure of bank and treasury officials to address the threat to bond markets from liability-driven investments (LDIs). As with many things in the world of finance, few people take a keen interest in their pensions and how they are managed, and do not realize how delicate the balance of financial markets can be.

With the Truss government’s plans clear, the question should be why no one has raised the possibility of turmoil with the Prime Minister or the Chancellor? Robert Peston, as ITV’s political editor, said: “It is surprising that the Bank of England, the Pensions Regulator and HM Treasury were so misguided by the pension fund’s fire sale of government bonds… as a result of their excessive use of LDI hedging strategies. It was the most serious regulatory failure since the 207/8 banking crisis.

Yet this factor is rarely mentioned by the mainstream media or the economics press. This turned temporary market volatility into a full-blown crisis. Realistically, how would an incoming government deal with such regulatory failures? If he had known, Truss would certainly have changed. Did Treasury officials or banks want to help him succeed? Did they actively fail him? These are clearly open questions.

It is surprising that Truss described his attempt to change direction as “pushing over water”. He is right that the Conservative Party, with a few honorable exceptions, has lost its nerve to make arguments about taxes and economic policy. Political arguments have shifted to the left due to insufficient challenge and debate, and much of the media and public have followed suit.

The OBR is inadvertently filling the gap left by policymakers in the Treasury and the governing party and thereby dominating fiscal policy. The result, says Truss, is economic modeling that “underestimates the benefits of lower taxes and supply-side reforms to economic growth and overestimates the benefits of public spending.”

Although he did not mention it, the government machine widely sees business as an instrument of, for example, its social and environmental policies. It’s not enough for a business to hire people, provide great products or services, create wealth and make a profit.

Instead, the government pushed a range of anti-profit business models which, if widely implemented, would cause investment, share prices and pensions to collapse. It’s a reckless and strange strategy that fails to recognize the enormous good capitalism has achieved here and around the world.

Truss was motivated to run for Conservative leader because he felt the country needed a change of direction. He was and still is right about this. He argues persuasively that the cocktail of forces against him meant that he did not have a fair chance of succeeding while in government – that he was not provided with the necessary economic market information.

It is important that the allegations he makes are disputed. In particular, we need to review the powers and functions of economic bodies that are not even accountable to the Chancellor and the Prime Minister. Although there is still a willingness in some quarters to blame Truss for everything that has gone wrong economically, he was brave enough to make an important and timely intervention on an issue that should not be ignored.