In the great game of Sleuth where we try to discover the architect of Liz Truss’ downfall, we are presented with a version of what happened last summer that suggests she was brought down by the “left-wing ec0nomic establishment”. If – as a former member of the Liberal Democrats, Liz Truss was referring to herself, we might find this a credible statement. But Truss does not count herself the architect of her own downfall but blames everyone else that didn’t tell her she was steering the ship of state straight at the harbour wall.
In an interview, former PM Liz Truss says no-one warned her about the risks of the “mini”-Budget to the pension #LDI market. The statement unleashed chaos in the bond market. pic.twitter.com/e0S8j5TqXC
— Josephine Cumbo (@JosephineCumbo) February 5, 2023
It is of course hard to heed warnings when you have sacked your main Treasury adviser and spend your time in Government not commissioning the views of the Office of Budget Responsibility, let alone the Bank of England or the PRA.
While the Bank was preparing for and implementing Quantitative Tightening, Truss and her Chancellor were embarking on a reckless spend of money that she clearly hadn’t got in the hope that the Government would get away with it by borrowing in the short term and recouping revenue from the fast-growing economy to pay this money back.
But this reckoned without the banks who saw a flaw in the plan, it wasn’t costed and had seemed to have been dreamt up by Liz Truss and her Chancellor, they called it Truss-moronic. So did I.
When John Profumo was found out for his Ugandan discussions with some hotties , he went to the East End of London and spent 20 years expatiating his sins by doing good works. Liz Truss by comparison has spent 6 months justifying herself to herself and the result is an article in the Daily Telegraph, designed to win back the hearts of her former supporters.
In case anyone has forgotten we have Jo Cumbo to remind us
The Truss government’s bungled “mini-Budget” triggered chaos in the bond market and a liquidity crisis pension sector. The Bank of England was forced to intervene with a £65bn emergency rescue package to restore calm to markets. https://t.co/hdSFUIrlPP
— Josephine Cumbo (@JosephineCumbo) February 5, 2023
You might say this was “manipulation of the markets” but that would be to ignore the fact that had the Bank not intervened, many pension funds could not have sold at any price and the positions built up from tax-incentivised deficit contributions would have been lost, and with it much of the asset base of the DB pension system.
As it is, the PPF estimate that the net value of DB pensions measured by assets is down over £400bn over 2022 with a high proportion of this attributable to the fire sales of assets that happened because of the market turbulence caused by Liz Truss.
Lest anyone be any doubt whatsoever, it was Liz wot dunnit, with a lead pipe in the Treasury and it was us that was dun.