No wonder so many Tories are glum, and furious with Truss

The Bank of England has warned that if interest rates continue to rise, then the number of households facing difficulties in paying their mortgages will match levels last seen before the financial crash in 2008.

Yesterday, US inflation nudged down slightly from 8.3% to 8.2% last month; a bigger drop had been expected. Which means the Federal Reserve could hike base rates higher ahead of the mid-term elections in November to try to lower rising prices.

Worryingly, this could put even more pressure on the Bank to raise rates here on November 3. A rise higher than 1% may not be impossible.

At Westminster, as Truss sought unsuccessfully to use the art of deflection at PMQs, the glum faces behind her said it all. Afterwards, the PM embarked on the traditional tour of desperation for beleaguered leaders, visiting the Commons tea-room to try to reassure worried colleagues that all will be well. Later, she addressed the 1922 backbench committee of Tory MPs. The mood was said to have been “unspeakably bleak”.

One Conservative MP vented his frustration at his leader’s “catastrophic misjudgement” in a searing text to colleagues, saying Truss had taken “zero responsibility for driving the economy into a wall”. He explained how when households come off their old fixed rate, the “‘Truss premium’ will be added to every new mortgage, which will become the source of bitter resentment from all who pay them…Every Tory MP will be blamed by their constituents for their higher mortgage payments.”

Robert Halfon, who chairs the Commons Education Committee, told Truss that she had “trashed the last 10 years of workers’ Conservatism,” focusing instead on tax cuts for the rich and raising bankers’ bonuses.

Another senior Tory, apparently a Truss supporter, summed up the grim mood among many colleagues succinctly: “We’re going to lose. Nothing makes any difference now. We’re f****d.”

Truss’s charm offensive to calm colleagues’ nerves has included having meetings with them in Number 10, which are expected to continue throughout next week. But they don’t seem to be working, as one MP told The Times that the mood on the Conservative backbenches was now “deadly” for the PM.

Pressure is mounting with not only Conservative MPs but also Whitehall officials telling Truss to ditch much of her Budget or at least delay the 1p off income tax for England.

Indeed, as I write, Westminster is awash with rumour that she is indeed preparing another reverse-ferret on Kwasi Kwarteng’s beleaguered Budget. Heaven knows what the position will be by the time this article is published.

While No 10 adamantly professed yesterday morning that there would be no more U-turns on the Growth Plan, by lunchtime “active” crisis talks were said to be going on in the Downing Street bunker with the prime candidate for another humiliating U-turn the decision to scrap the planned hike in Corporation Tax next year.

By keeping the increase from 19% to 25%, the Treasury would rake in a not insignificant £15.4bn a year, which would help begin to fill the £60bn hole in the finances.

While Labour’s Rachel Reeves said reports of another major U-turn showed how the Truss Government was in “utter chaos,” the money markets liked the sound of reverse gear being engaged; the pound strengthened and borrowing costs fell. Following talks with the Chancellor and Bank Governor Andrew Bailey in Washington, Kristalina Georgieva, head of the IMF, said, perhaps knowingly: “Don’t prolong the pain. Make sure that actions are coherent and consistent. If the evidence is that there has to be a recalibration, it is right for governments to do so.”

Recalibration may become today’s Whitehall buzzword/euphemism.

Today, Threadneedle Street is due to end its emergency bond-buying meant to help stabilise pension funds. News of another U-turn could help ease market reaction to this and begin to calm things down. Keeping the markets sweet is clearly a key ingredient in restoring financial stability and credibility.

So, allowing Jacob Rees-Mogg out onto the airwaves to promote a blame-everyone-else-but-the-Government strategy and trash the UK’s financial infrastructure – the Bank and the OBR – which investors will look to to engender confidence, is nothing short of crass stupidity.

Soon, eyes will turn to Hallowe’en and the Kwarteng trick-or-treat medium-term fiscal statement but, by then, there may not be much of the original mini-Budget left. Given the continuing instability, why on earth is he waiting another three weeks?

If the Chancellor’s numbers don’t add up and the markets are spooked again, then Truss’s future in Downing Street might be counted in weeks rather than months. Paul Goodman, the editor of the influential ConservativeHome website, suggested there is speculation about replacing her with a joint ticket of ex-leadership rivals Rishi Sunak and Penny Mordaunt.

Yesterday, the polling expert Professor Sir John Curtice summed up the PM’s dilemma. He didn’t hold back. “She has got two problems. One is that she isn’t really liked; her personality is not one that warms the general public. Secondly, she is regarded as incompetent.”

Unpopular and incompetent; not, I suggest, a winning combination.

James Cleverley, the ever-loyal Foreign Secretary, argued it would be a “disastrously bad idea” for his party to oust a leader after such a short time. Given the economic damage being caused, some might conclude it would be a disastrously bad idea if it didn’t.

Meantime, at his sedate weekly audience in Buckingham Palace, King Charles greeted Truss with the opening remarks: “Dear, oh dear.” Which summed things up nicely.

Read more by Michael Settle:

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