A little under four weeks as prime minister and it couldn’t really have gone worse for Liz Truss.
A mini-budget that precipitated a run on the pound (it has rallied a bit since), a £65bn emergency intervention by the Bank of England to prop up pension funds, and the withdrawal of nearly 1,000 mortgage deals from the market in anticipation of a big hike in interest rates later this year.
The Conservatives are experiencing their worst polling since the late 1990s and dozens of Tories are contemplating losing their seats at the next election.
The question for me in Birmingham this week is simple: Has Liz Truss’s disastrous mini-budget already sealed her fate?
Ask Conservative MPs, and there is already a movement to try to oust her. Her insistence that she will not reverse any elements of her budget, regardless of the political toxicity or the clear economic risks, has led some MPs to say privately they want her to go.
“There needs to be policy change and personnel change,” said one senior Conservative.
“There are MPs saying she simply cannot lead us through a general election and MPs are putting forward suggestions to Sir Graham Brady about rule changes.
“One scenario is that MPs decide a new PM and it’s not put to members.
“People are very anxious.”
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When I asked the MP if Ms Truss could survive until Christmas, they told me: “I think it’s probable that she will be gone by Easter.”
‘This plan is not going to work’
A former cabinet member also confirmed that colleagues were working up options to try to remove Ms Truss, as they whispered to me that they might now stand down at the next election in the face of almost certain defeat.
“This plan is not going to work,” they said.
For a new prime minister, who in typical times might expect a honeymoon period rather than the mutterings of divorce papers, such remarks are totally damning and speak to the extremely difficult predicament she now faces.
For, just as I’d never been to a more positive Labour Party conference than the one last week, I’ve never been to a Conservative one so shrouded not just in gloom about the electoral prospects of the party, but palpable anxiety about the Truss administration.
And this is about more than even the existential threat her policies could pose to the Conservative Party.
There is genuine fear too that she might “tank the economy”. As one former senior minister told me after the mini-budget: “It’s madness and I’m scared.”
Already MPs mutter that she will have to change – the policies and the personnel, or face a showdown with her party.
One MP told me there are easily 100 MPs who could rebel against her budget. The political toxicity of abolishing the top rate of tax for those earning over £150,000 a year, while mulling a real terms benefits cut for the four million at the bottom end of the income scale relying on universal credit, is plain to see for many MPs – even if Ms Truss wants to turn a blind eye.
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But it’s not just the politics of her mini-budget, it’s the economics of it.
“We can’t ignore the cost of borrowing line item,” is how one former minister puts it. “What are the fiscal rules?”
If the prime minister can’t prove to the country, the markets, the Office of Budget Responsibility, and her backbenches that her government can achieve 2.5% growth, then the tax measures will have to be funded through debt.
And that has an obvious knock-on effect for families, with those on average mortgages having to potentially pay more in higher mortgage costs than in tax cut gains.
All of it is causing acute anxiety for MPs as they look at the polls and the prospects of their own re-election.
Plenty of those in the Sunak camp are keeping quiet for now, telling me that they want to let this play out and don’t want to take aim at Truss publicly – yet. But two outriders – former cabinet ministers Michael Gove and Julian Smith – are saying publicly what many are saying privately.
This is Mr Gove on Sunday: “I think there are two specific concerns that I have about the unfunded nature of tax cuts and about the 45p tax cuts, which we now have an opportunity to reflect on.”
“And I think it would be wise for us to recognise that they are neither the right economic nor the right political response to the situation that we face at the moment,” he told journalist Christopher Hope at a Daily Telegraph event.
When he was asked whether the policy should be reversed, he didn’t blink: “Yes”.
‘We cannot clap for carers one month and cut tax for millionaires months later’
And this was former chief whip Julian Smith in response to chairman Jake Berry’s warning on Sky News’ Sophy Ridge on Sunday show that Tories who voted against the mini-budget would lose the whip: “The first job of an MP is to act in the interest of their constituents and in the national interest.
“We cannot clap for carers one month and cut tax for millionaires months later.”
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All of it appears to be falling on deaf ears, with the PM and her team adamant that her plan is the right one and the mistakes over the past week were about the communications strategy not the policies.
As one of her key allies put it to me: “The PM gets this past week has been disruptive,” but “she firmly believes her plan for the economy is the right one.
“We’ve been stuck in a world of high taxes, cheap credit, and low growth for too long, with too much focus on tax and spend at the expense of growth.
“That status quo isn’t working, so we have to change course, otherwise we’re consigning the economy and country to long-term decline.
“We’ll do that and manage the public finances responsibly.”
Pro-growth, pro-investment, low-tax. That’s the mantra.
‘There is still so much wastage across various parts of the system’
The PM’s cabinet and top team are also supporting her.
One senior minister pointed out to me on the eve of the conference that such a big change in approach – the biggest shift in economic approach for a generation or more – was “always going to shock the markets” but the principles of leaving more money with individuals and businesses was the right one, as were the efforts – and we’re going to see what this looks like in practice later this year – to cut back on government costs (read: spending).
“There is still so much wastage across various parts of the system,” they said.
But will this government even get that far?
Ms Truss has four days in Birmingham to try and sell her plan not just to her members and MPs, but to the country.
The problem she has is that so many people seem to have stopped listening already.
A PM not for turning and a parliament in which many MPs now think they have nothing more to lose. Strap in.
Volodymyr Zelenskyy says two Chinese citizens have been captured while fighting in eastern Ukraine.
He said his forces had fought six Chinese soldiers and two of them had been taken prisoner. He added he had ordered officials to obtain an explanation from Beijing.
“We have information that there are many more Chinese citizens in the occupier’s units than just two. We are now finding out all the facts,” he added.
As it happened: Zelenskyy demands reaction from US
China is an ally of Russia and has been accused of helping its war in Ukraine, though Beijing has repeatedly denied allegations that it has supplied Kremlin forces with weapons.
“Russia’s involvement of China in this war in Europe, directly or indirectly, is a clear signal that Putin is going to do anything but end the war,” Mr Zelenskyy said. “He is looking for ways to continue the war.”
Mr Zelenskyy described China as having joined Russia’s war against Ukraine and said he expected the US to react.
There was no immediate comment from China.
How many Chinese are actually fighting for Russia?
Were they volunteers – or mercenaries – who had signed up to fight in the Russian army on their own?
Alternatively, does the Chinese government sanction their involvement – or even encourage it? That would make the situation far more serious.
The capture of these Chinese nationals in Donetsk begs another question – how many Chinese are actually fighting for Russia? In his written post on social media platform Telegram, Volodymyr Zelenskyy said “there are many more Chinese citizens” other than these two.
Still, the Ukrainian president works hard to suggest the Chinese, officially at least, are blameless.
“Russia’s involvement of China in this war… is a clear signal that [Russian President Vladimir] Putin is going to do anything but end the war,” he writes on Telegram.
This is a generous interpretation of China’s approach to the conflict, which is quite openly contradictory.
Fighters of various nationalities have joined Russia’s army during the war, often in return for promises of large sums of money. This does not represent official interventions by their home countries.
North Korea has also sent thousands of its troops to support Russia.
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‘This could be very, very embarrassing for China’
After Mr Zelenskyy’s announcement, the Ukrainian foreign minister said he had summoned China’s diplomat for an explanation, saying on social media the presence of Chinese citizens in Russia puts Beijing’s stance for peace into question.
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Ukraine in Belgorod, almost out of Kursk
Last night, Mr Zelenskyy confirmed for the first time that Ukrainian forces are active in Russia’s Belgorod region.
He described the actions as “just”, adding: “war must return to where it came from”.
Meanwhile, regional governor Alexander Khinshtein said Russian forces are on the verge of reclaiming Kursk, months after Ukraine’s surprise incursion.
He claimed Russian forces had seized the settlement of Guyevo. Russian state news agency TASS said only two more settlements are left to recapture – Gornal and Oleshnya – to retake the entire region.
World
What we learn from video of captured Chinese national in Ukraine – and the serious questions it raises
In a carefully written post on social media platform Telegram, Volodymyr Zelenskyy accused the Russian army of deploying Chinese citizens on the battlefield in eastern Ukraine.
What about the proof? Well, the Ukrainian president says his security services captured two people from China in the Donetsk region – along with identity documents, personal data and their bank cards.
Follow latest: Zelenskyy demands reaction from US
A video of a man in military fatigues who had been captured by Ukraine was pinned to the bottom of the statement.
We get snippets of a conversation where the alleged combatant seems to be talking about the events that led to his capture.
“When we arrived at the place… and then my commander.” The man gestures at the floor and ceiling, making shooting noises. “I was also injured.”
Volodymyr Zelenskyy uploaded a video appearing to show a Chinese citizen in military uniform in Ukrainian custody
These details will make it difficult for the Chinese government to deny the incident out of hand, although they are highly unlikely to supply additional information.
Important details like, who are they? What function(s) do they fulfil in Ukraine’s occupied territories?
Were they volunteers – or mercenaries – who had signed up to fight in the Russian army on their own?
Alternatively, does the Chinese government sanction their involvement – or even encourage it?
That would make the situation far more serious.
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The capture of these Chinese nationals in Donetsk begs another question – how many Chinese are actually fighting for Russia? In his post, Mr Zelenskyy said “there are many more Chinese citizens” other than these two.
Still, the Ukrainian president works hard to suggest the Chinese, officially at least, are blameless.
“Russia’s involvement of China in this war… is a clear signal that [Russian President Vladimir] Putin is going to do anything but end the war,” he writes on Telegram.
This is a generous interpretation of China’s approach to the conflict, which is quite openly contradictory.
On one hand, Chinese President Xi Jinping describes China as a neutral party to the conflict, while simultaneously offering Mr Putin long-term political and economic support.
In fact, he described their partnership as a “no limits” one in a phone call with Mr Putin on the third anniversary of Russia’s full-scale invasion of Ukraine.
Mr Zelenskyy then, is making a point with this post – but he does not want to make the situation any worse.
The severity cannot be overstated, if an additional 50% tariffs are levied on all Chinese goods it will decimate trade between the world’s two biggest economies.
Remember, 50% would sit on top of what is already on the table: 34% announced last week, 20% announced at the start of US President Donald Trump’s term, and some additional tariffs left over from his first term in office.
In total, it means all Chinese goods would face tariffs of over 100%, some as high as 120%.
It’s a price that makes any trade almost impossible.
China is really the only nation in the world at the moment that is choosing to take a stand.
While others are publicly making concessions and sending delegations to negotiate, China has clearly calculated that not being seen to be bullied is worth the cost that retaliation will bring.
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Tariffs: Xi hits back at Trump
The real question, though, is if the US does indeed impose this extra 50% tomorrow, what could or would China do next?
It has said it will “fight to the end”, but what does that mean?
In reality, there are few good options.
There are some obvious measures that China will almost certainly enact.
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Further export controls on rare earth minerals (crucial for the development of high-tech products) are one example. China controls a huge proportion of the world’s supply, but the US would likely find workarounds in time.
Hiking tariffs on high-impact US products such as agricultural goods is another option, but there is only so far this could go.
The potentially more impactful options have significant drawbacks for Beijing.
It could, for instance, target high-profile American companies such as Apple and Tesla, but this isn’t ideal at a time when China is trying to attract more foreign investment, and some devaluation of the currency is possible, but it would also come with adverse effects.
Other options are more political and come with the risk of escalation beyond the economic arena.
In an opinion piece this morning, the editor of Xinhua, China’s state news agency, speculated that China could cease all cooperation with the US on the war against fentanyl.
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This has been a major political issue for Mr Trump, and it’s hard to see it would not constitute some sort of red line for him.
Other options touted include banning the import of American films, or perhaps calling for the Chinese public to boycott all American products.
Anything like this comes with a sense that the world’s two most powerful superpowers might be teetering on the edge of not just a total economic decoupling, but cultural separation too.
There is understandably serious nervousness about how that could spiral and the precedent it sets.
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