Liz Truss: UK Is Heading for Calamity, & Inside the Mini-Budget

Summary

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Podcast Summary: The Master Investor Podcast with Wilfred Frost

Episode: Liz Truss: UK Is Heading for Calamity, & Inside the Mini-Budget
Date: September 3, 2025
Guest: Liz Truss, Former UK Prime Minister
Host: Wilfred Frost

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Episode Overview

This episode features former UK Prime Minister Liz Truss in a candid, in-depth conversation with host Wilfred Frost. Truss reflects on her tenure, the infamous 2022 mini-budget, the UK's institutional structure, economic decline, and her call for sweeping reforms. The discussion is rich with Truss's philosophy on government size, fiscal policy, her critiques of the British establishment, and her vision for Britain's future.

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Key Discussion Points & Insights

1. Life After Politics & Personal Philosophy [01:43–03:00]

• Adjustment to Life Outside Politics:
  • Truss reveals the challenges and freedoms of life outside government, noting the “consuming” nature of political office versus the value in having room "to think" and make change from outside.
  • Quote:

    “Politics is where things get done, but if you're just in politics, you can become almost imprisoned by it. ... You need a bit of insider and a bit of outsider.” (A, 01:58)

2. The Case for a Smaller State & Critique of UK Economic Policy [03:00–06:24]

• Advocacy for Small Government:
  • Truss doubles down on her small-state ideology, arguing both government and welfare state are too big and restrictive.
  • Ideal tax burden: “about 30%” of GDP—comparable to US levels, aiming for less than a third of GDP as public sector share.
  • She criticizes UK’s economic stagnation and the “museum” Europe is becoming.
  • Quote:

    “The welfare state is too big. It is a drain on our kind of national resources, but also our resilience and our ability to be successful.” (A, 03:21)

3. On Brexit, EU, and Britain’s Institutional Failures [06:24–10:10]

• Reform and Remain:
  • Truss shifted from Remain (out of loyalty and priority to domestic reform) to a “loud Brexiteer”; blames both UK and EU for regulatory burden.
  • Critiques the Town and Country Planning Act (1947) as a root cause for housing and industrial decline.
  • Argues that the UK adopted “Europeanization” of its institutions, making them “unaccountable.”
  • Quote:

    “Our institutions got Europeanized, and that is why they've become so unaccountable... The idea of making the bank of England independent, in my language, unaccountable, was started in the Maastricht Treaty.” (A, 08:12)

4. Institutional Power and the Limits on Political Leadership [10:10–12:00]

• Cabinet Powerlessness:
  • Truss says modern cabinet ministers lack real authority over permanent bureaucracy, and the Prime Minister has become too “presidential.”
  • Criticizes inability of ministers to hire their own permanent staff and the ossification of Whitehall.

5. Policy Achievements: Trade Deals and Trump [12:00–13:33]

• Praises the Labour government for securing a US-UK trade deal.
• Notes Trump’s shift to bespoke trade agreements, arguing these reflect American “driving seat” economic power.

6. Gender in Politics & the Economic Establishment [13:33–16:20]

• Truss discusses challenges of being a woman in politics, but ultimately dismisses identity-based explanations, stressing establishment resistance to her policies instead.
• Quote:

  “Reeves and Starmer [are] part of the sort of economic orthodoxy that has ruined this country. And we are heading for a calamity because of that... I feel angry that I was prevented from pursuing policies that would have been much better for this country.” (A, 14:48)

7. The Conservative Party, Blairism, and Institutional Inertia [17:40–19:15]

• Critiques Conservative Party’s drift into “Blairism” and failure to challenge institutional status quo; argues for radical reform.
• Quote:

  “What's the point of power if you allow the country to drift to the left? I didn't want to get elected as a Conservative MP to be a Labour Party. Blairite stooge.” (A, 19:01)

8. Aftermath of the Mini-Budget: Narrative, Blame, and Institutional Resistance [24:15–49:33]

a. Truss’s Perspective on the 2022 Market Crisis [24:15–28:54]

• Truss insists the “economic blob”—Treasury, Bank of England, Office for Budget Responsibility (OBR), and media—torpedoed her agenda.
• Claims two-thirds of the market turmoil was due to pre-existing pension fund vulnerabilities (LDIs), not just her fiscal package.
• Quote:

  “My mistake… was underestimating the sheer malevolence of the economic blob in Britain.” (A, 24:37)

b. Accountability and Responsibility Debate [30:00–36:10]

• Wilfred presses Truss on the inevitability of market forces and the expectations on Prime Ministers to anticipate risks.
• Truss repeatedly counters that she lacked critical information (LDI risk) and real control, arguing the BoE failed its mandate.

c. On Sequencing Policies and Hypotheticals [39:36–46:07]

• Discusses whether tax cuts should have been phased or contingent on spending cuts/reforms.
• Admits political obstacles:

  “There were political problems…in spending restraint…in implementing some of the supply side policies because of the Conservative parliamentary party.” (A, 39:36)

• Insists tax cuts, especially on corporations, would have spurred more growth and ultimately increased revenues.

d. Institutional Bias & Impossible Reform [46:07–51:28]

• Claims institutional bias—particularly in the OBR and Bank of England—meant delivering her brand of “Conservative economic policy” was “pretty much impossible.”
• Critiques British economic journalism (“FT snark,” “lack of analysis”) and argues the media is complicit in the UK's “doom loop.”
• Quote:

  “The reason that I want to say all this, Wilf, is because I want people to understand this so that we can actually change the country in the right way.” (A, 48:33)

9. Faith in Britain’s Future [51:51–52:57]

• Despite pessimism on institutions, Truss is optimistic about a coming “revolution” in British political life, inspired by the people’s frustration with stagnation.
• Quote:

  "Britain is the...home of freedom, parliamentary democracy, free enterprise. Adam Smith, all these great ideas came from Britain...there is going to be massive pressure for institutional change in this country." (A, 51:56)

• Dismisses John Maynard Keynes as someone who “let the side down.” (A, 52:55)

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Notable Quotes & Memorable Moments

• On the economic establishment’s power:

  “I was so concerned about the future of Britain and wanted to try and do things and I did not understand...how brutally they would brief against me, smear me, contact their mates in the Financial Times and the financial press.” (A, 24:37)

• On Conservative Party failings:

  “Much of the Conservative government from 2010 to 2024 is effectively more Blairism. And now we're in the sort of final days of Blairism where Blairism has run out of money.” (A, 17:52)

• On media and public debate:

  “The mainstream media...suppresses stories, doesn't focus on the truth... It's taken the FT three years to acknowledge that [about the LDI crisis]. I mean, utterly pathetic for an alleged economic newspaper.” (A, 21:18)

• On her own policy rigidity:

  “What I know is that there were people and institutions actively against our agenda. That is the conclusion I've come to. They're actively against our agenda and they don't believe in the agenda.” (A, 42:06)

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Timestamps for Key Segments

• Life after politics, small-state ideology: [01:43–05:22]
• Brexit and institutional critique: [06:24–10:10]
• Discussion on trade deals, Trump, and US power: [12:00–13:33]
• Women in politics and economic establishment: [13:33–16:20]
• Mini-budget crisis, blame, and market reaction: [24:15–36:13]
• Sequencing policy, counterfactuals, lessons learned: [39:36–46:07]
• On institutional resistance and British reform needs: [46:07–51:28]
• Britain’s path forward/closing remarks: [51:51–52:57]

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Tone & Language

Throughout, Liz Truss is candid, combative, and unapologetic. She is passionate about her vision, trenchant in her criticism of British institutions and media, and resolutely refuses to accept that core aspects of her economic strategy were in error. She attributes her failure to deliver to unaccountable, entrenched institutions rather than personal misjudgment or political naivete.

Wilfred Frost’s tone is measured but challenging; he fact-checks, pushes on responsibility, and gives a balanced platform for critique and clarification.

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This episode offers a rare, direct insight into the thinking of a former Prime Minister still keen to shape the debate on Britain’s economic future—and unsparing in her assessment of the forces that, in her view, limit democracy and progress in the UK.

Transcript

[A]

I want Britain to be a great nation again and I'm depressed about how far we've sunk, the dire state our economy is in, and I want to help fix that in any way I can. I still believe what I put forward in 2022, and frankly, what I've believed for most of my life. I think the government is too big. I think one of the big problems over the past 30 years is it's become increasingly unaccountable as well. What I feel is broader public do want to see change, and that is the change I was trying to deliver. You know, you said I was captain of the ship. The fact is, I wasn't captain of the ship because I wasn't running monetary policy. The bank of England were running monetary policy. I'm very happy to take responsibility for things provided I have the full ability to actually control them. I didn't have the ability to control them.

[B]

Welcome to the Master Investor Podcast with me, Wilfred Fross, where we celebrate and learn from the success of the greatest investors, business leaders and politicians in the world, giving you, our listeners, the edge. This week we have our first British politician on the podcast, and a former Prime Minister, no less. Liz Truss is here with me, who was also a minister in the government for a decade, straddling six different cabinet posts, including Chief Secretary to the Treasury, Minister for Trade and Foreign Secretary, amongst other roles. Liz, I am delighted to welcome you to the Master Investor Podcast.

[A]

Good to be on.

[B]

There's so much we want to get to. The first question with you sitting here relaxed and smiling. Is the extent to which the pros of being outside of politics outweigh the cons?

[A]

That's a very hard question. Politics is where things get done, but if you're just in politics, you can become almost imprisoned by it. So it's very, very draining on your entire life. It's very consuming, particularly if you're a government minister. But also you don't have the space to think as much and connect with people. So it's difficult to make major change from within politics. So I think you need a bit of insider and a bit of outsider.

[B]

In terms of enjoyment. Is it nicer on the outside than the inside?

[A]

I like both, actually, to be honest. I always enjoy life. We're very fortunate to be here on this earth. We're fortunate to be in a great country like Britain. What is not to love? So I'm a very positive person who wants to get things done, whatever I'm up to.

[B]

Well, that's a great sentiment towards life, particularly when you've had big challenges and we'll get to some of the big challenges in a moment. In terms of snapshot where we are today, do you believe more or less or in a different way in your general argument towards the need for a sort of smaller state, a smaller government?

[A]

I still believe what I put forward in 2022 and frankly what I've believed for most of my life. I think the government is too big, I think we're over regulated, I think the welfare state is too big. It is a drain on our kind of national resources, but also our resilience and our ability to be successful. So I think, yes, we've got a big government. I think one of the big problems over the past 30 years is it's become increasingly unaccountable as well. So not only is it colossal, it's also very, very hard to change in.

[B]

Terms of the sort of tax and spend picture, you know, rough numbers here, but the tax burden here in the UK overall is approaching about 40%. The EU average is higher than that, it's about 45%. In the US, it's more like 30%. And obviously it's steadily risen in recent years across the G7, in part because of COVID In a perfect world, clearly spending cuts are hard to put through. But in a perfect world, what is the ideal overall tax burden for the UK?

[A]

I'd say it's about 30%. I'd say you want to get to a state where the government is less than a third of the nation's GDP and ultimately tax catches up with spending because spending just either goes into debt or tax and you've ultimately got to pay back the debt. So to me, the spending figure is the important figure and it should be about 30%. And of course, what we've seen happen in the last 25 years is back in the year 2000, Britain was almost catching up with the US in terms of our GDP per capita, the US is now 50% higher. So what those percentages partly reflect is the lack of economic growth because it's as a proportion of gdp. So if we grown faster, if the economy was bigger, the tax burden would be lower.

[B]

Do you expect though, long term we will always spend a bit more and tax a bit more than the us because we have aspects of the welfare state that you would always want to keep?

[A]

No, I don't want us to necessarily decide to be a higher tax country than the US at all. I'd rather we. Look, there are problems with some things in the way they run in the U.S. i wouldn't want to adopt the U.S. health Service. I think other countries do it better, like Japan, for example, has an excellent health service. So I'm not saying ape everything in the us, but the US is by far the most successful country economically in the west and over the past few decades it's completely outperformed Europe. This isn't just a British problem. The whole of the European continent is becoming a museum. Manufacturing industry's dying, growth is stagnant, lots of countries are having debt problems. France has got a very big problem as well as Britain.

[B]

Let's touch on that then, because in your book 10 Years to Save the west, which I really enjoyed reading last week, I was really interested in when you talked about Brexit and obviously relatively well known that you backed Remain at the time, that was in part through loyalty to Osborne and Cameron before pivoting to be quite a loud Brexiteer later. But in the book you kind of actually framed the biggest reason for why you supported Remain was it was just after a 2015 Conservative majority and that there was a lot of work you wanted to focus on, on reforming the uk and you thought that the whole departure of the EU would be a distraction, which of course it was. I was really struck by that, because the same sorts of reforms you said you wanted to do pre Brexit you wanted to do in 2022, you still sort of talk about now, lower taxes, less regulation, less bureaucracy. So I guess my question there really is, are we the problem, not the eu?

[A]

We're both the problem. So I think what I've learned about now is the. Because what I was looking at, I was very involved in things like education and economic policy. So I was just seeing all the issues in the uk, like the Town and Country Planning act, which basically socialized land planning and has made it very, very hard to build new houses for generations. It's made it hard to build new factories, facilities.

[B]

It's a huge problem which the Labour government are trying to do more about.

[A]

Than they've done absolutely nothing. And construction is at an all time low. I mean, they've done absolutely nothing. They're not even willing to take on the environment, NGOs WHO and the sort of battered new stuff, they're not really willing to do anything about it.

[B]

Well, we'll see. The bill is processing through Parliament. I guess my point is I don't think that the Conservative government did much about that.

[A]

No, that's certainly true as well. I totally accept that. I think you need to go back and repeal the 1947 Act. I think the way that we organize land use in our country is terrible, but that's one example. So I was looking at that from that point of view, and I hadn't really involved myself in Europe very much. It was only when I became a minister, a senior minister, I started attending European meetings. I'd begun to understand the negative impact that was having as well. And some of these things, like the Natural Habitats Directive and the bats and newts, emanate from Europe. And one of the big failings since 2016 is we haven't actually got any of these laws off our statute books. So we've got all the bad stuff about Europe still is with us, and that is a complete failure to really create something that is more dynamic, more entrepreneurial, because that was the opportunity Britain had. But I wanted to mention one more thing about Europe, which is I think our institutions got Europeanized, and that is why they've become so unaccountable. So the idea of making the bank of England independent, in my language, unaccountable, was started in the Maastricht Treaty, which was actually signed by the John Major government, but then it was put into practice by Gordon Brown. The idea of a separation of powers, which has never been part of the British Constitution. Again, that was an idea that was promulgated through the European Union and led to Blair inventing a Supreme Court, which has made the judiciary unaccountable. So what we actually saw is the Europeanization of our bureaucracy, which was never great in the first place. I'm a massive critic of the British bureaucracy, has made it even worse.

[B]

We're definitely getting into the bank of England in a little bit. I guess, just to round this part off, something again, that comes up in your book a lot is do you think cabinet ministers lack expertise to get things done? Do they lack the authority? Do they lack. At one point, you talk about funding. Do they need more money? Not so much as a salary, but as a kind of ability to hire people.

[A]

I think they lack authority and I think they lack freedom to do things. But I also think that in reality, in Britain, the Prime Minister has become treated as a president, and the idea of cabinet government has not been a reality for some time. So I think we have to accept the fact that the Prime Minister is the boss, that other cabinet ministers work to him. They're not independent in the way that the whole concept of cabinet government used to be, that you had. Everybody had to agree. So I think. But they need much more authority over the people that work for them. And this is the problem. You've got a permanent bureaucracy that isn't chosen by the ministers, that has a lot of power in the system and that doesn't work. And even Keir Starmer is struggling with it. You can see by the constant reshuffles that he doesn't think it's working.

[B]

Yeah, it's interesting, the sort of growing consensus perhaps, towards needing to rewire things, which we'll touch on. I want to talk about the current government. Just quickly, do you commend their ability. You've done a lot of trade deals yourself as trade minister, commend their ability to get some of the trade deals they've done at a tricky time in the world for free trade?

[A]

Well, I do support the trade deal that Keir Starmer has done with Trump, and having been Trade Secretary for Trump's first term and dealing with the Trump administration over the tariffs they put on whiskey, I know it's tough getting a deal, so I do commend the Labour Party for that. I think they did a good job on the US trade deal. They got a deal before the eu. It showed the benefits of being able to be more nimble. But, yes, I would say they've done a good job on trade overall.

[B]

Are you surprised by Trump? Mark 2. Because you talk about Trump being loquacious about the opportunities for a trade deal in Trump term one. Are you surprised he's so anti trade now or not?

[A]

He's just done a trade deal with Britain. So he is.

[B]

His global approach, then.

[A]

He's a deal man. He wants to do deals. But what he's done is he's completely upended the World Trade Organization. He's upended the global system, which was essentially giving China a free ride. And now he's doing bespoke deals with each country, which I think is a good strategy. And it's working. These countries are coming to the table. The EU is coming to the table. The EU has frankly had to suck it up, whereas they were threatening retaliatory tariffs and now they're having to go along with Trump, which shows the relative economic power now of the EU versus vis a vis the us. The US is in the driving seat in a way it wasn't 30 years ago.

[B]

Let's touch on the Chancellor, Rachel Reeves, who, I imagine you're not a massive, correct me if I'm wrong, fan of DEI and initiatives like that, but.

[A]

That'S an understatement.

[B]

But is politics harder for a woman?

[A]

It's very hard, and I always answer this question by saying, I. I've never been a man, so I don't know. I mean, how do I know? I think there are all kinds of factors, you know, where you're from, you know, your background, that affect the way people behave towards you. You know, whether you're a sort of creature of the establishment or somebody who is rebellious towards. All of these things have a bearing on how people treat and deal with you. And it's very hard to think, well, somebody acted like this because I'm a woman, or they acted like this because I'm not from a public school. Whatever. You just can't tell. And I think if you spend your life thinking about that stuff, you're gonna go mad.

[B]

Do you have sympathy for the.

[A]

No, none at all, really.

[B]

I mean, what about when you see her in tears? No sympathy.

[A]

Well, look, these are people who bought into everything the economic establishment said. Reeves herself worked at the bank of England. Keir Starmer was part of the establishment as well, working for the CPS. They know what happened in 2022, and politically they sought to blame me, even though the bank of England has subsequently said two thirds of the spike in the market was down to their failures to regulate pension funds. They've used it relentlessly politically against me. They've repudiated all the ideas I put forward, like keeping taxes low, getting on with fracking, doing necessary deregulation, and now guilt yields are higher than they were when I was in office. The economy is in a much worse state, debt has risen, and I just see Reeves and Starmer as part of the sort of economic orthodoxy that has ruined this country. And we are heading for a calamity because of that. So I'm not quite sure why I should feel any sympathy. I feel. I feel angry that I was prevented from pursuing policies that would have been much better for this country and would have left us in a much better position now.

[B]

And I can understand the lack of sympathy, given what you've personally been through. I mean, just again, I was going to come to this at the end, but kind of going back to where I started. You've been criticized by the government and Labor. That perhaps isn't a surprise, but also by many in your own party, many in the Reform Party and other political persuasions. I mean, it must have been incredibly tough. It must be isolating.

[A]

Well, there are people who out there agree with what I tried to do. And I do get a lot of people coming up to me and saying, you were right, I supported you. So it's not like I've got nobody on my side, but it's definitely true that the establishment did not support my policies. And the establishment exists in the Labour Party, it exists in the Conservative Party and it exists in the institutions. And I think this is why the Conservative Party got such a massive drubbing at the 2024 election. It's also why Keir Starmer is very, very unpopular because people are fed up with it. Say what I feel is the broader public do want to see change and that is the change I was trying to deliver.

[B]

Let's talk about the Conservative Party because in the book you talk about the need for a bigger Conservative bazooka with a small C. Is that reform?

[A]

Well, what I'm talking about is in talking about a Conservative bazooka is the institutions in Britain need to change. The head of the Office of Budget Responsibility who is appointed by Rishi Sunak is ex Resolution foundation, the same place that Torsten Bell came from. You've got the former deputy governor of the bank of England now working for Keir Starmer. There's an interchangeable group of people who have a particular worldview and who aren't just in politics. They're also in charge of our institutions. So I would argue that much of the Conservative government from 20, you know, from 2010 to 2024 is effectively more Blairism. And now we're in the sort of final days of Blairism where Blairism has run out of money. But the Conservative Party's big failing was not seeing what Blair had done to the Constitution, to the economy and really seriously trying to change that. Instead people wanted to be the heir.

[B]

To Blair and obviously your party did have power for a long period of time. Even if you.

[A]

But what's the point of power if you allow the country to drift to the left? I didn't want to get elected as a Conservative MP to be a Labour Party. Blairite stooch, I'm afraid. Two men are my colleagues dead. That's the bottom line.

[B]

No, I get that. I guess that's the point in terms of the Labor v Conservative point. And obviously there was decent growth during those Blair years as well, which is.

[A]

This is economic growth is quite a lagging indicator because if you change planning laws, it takes a few years for investment to come in, for factories to get built, it takes a good five years for a lot of long term supply side measures to work or taxes. If you lower tax, you need to wait for the investment to come, the companies to establish. So what I'm saying is a lot of the early Blairite stuff was just reaping the rewards of the previous Conservative government. And what they did is basically squander all that.

[B]

He did have a good economic inheritance, just to round it off on Conservatives and reform. You said in the past you would have wanted Nigel Farage to join the Tories. Would you now want to join reform?

[A]

What I am absolutely concerned to make happen is that the British state itself needs to change. It doesn't matter who's in number 10, if the same people are still in charge of the treasury, the Office of Budget Responsibility, the Bank of England, the Supreme Court, it doesn't matter. So I am very focused on how do we actually change Britain from the ground up? And I want political parties to adopt that, I guess.

[B]

Do you think Nigel Farage is more likely to deliver that than Kemi Badenoch for the country?

[A]

Well, I think the way the Conservative Party is going, they're unlikely to win the election because they're not prepared to acknowledge what happened over the past 14 years and the failings to really take on what I would describe as the leftist establishment. So I don't think she's gonna be Prime Minister at this stage.

[B]

And are you out of frontline politics for good or would you wanna be an MP again?

[A]

I never rule anything out. Why would I do that? Why would I? Come on this. What I've always been obsessed with is I want Britain to be a great nation again. And I'm depressed about how far we've sunk. The dire state our economy is in, the deindustrialization, the fact that we don't make things the same way we used to. We're not a leader in many areas and I want to help fix that in any way I can. But what I did learn in politics is you can't just fix it from politics. And we've got a huge problem with the media. The mainstream media is, I think, suppresses stories, doesn't focus on the truth. I think we've lost a lot of journalistic capability. I mean, only, I think it was yesterday the FT admitted in the case of the bank of England and the LDIS, that they could have avoided the crisis in 2022. It's taken the FT three years to acknowledge that. I mean, utterly pathetic for an alleged economic newspaper.

[B]

I saw your tweet on that and the full article, I think, was, if anything, lent the other way.

[A]

It's full of FT snark.

[B]

Well, I'm just. I don't think the FT's conclusion in that article was that we'll come to that after a bit. In a moment. Obviously, I.

[A]

The point I'm making is there's not serious analysis, even if people don't know about that, don't agree with me. It's full of snarky comments.

[B]

The snarky comments I don't support. I do push back on the mainstream media here, obviously. I'm a fully signed up member of it and I think we do. Amazing.

[A]

I'm trying to convert you, Will. That's what I'm working on.

[B]

Sky News.

[A]

That's why I've decided to do this podcast.

[B]

Sky News comes first. The podcast is a bonus on the side. But I really do think we do. Amazing.

[A]

I can't tell you to say that in your contract.

[B]

Of course not. Of course not. No, I really believe it. And I think that we all get things wrong. But I think that everyone resolutely tries to do their best to be impartial.

[A]

If you look at the grooming gang scandal and the way that's being covered by the mainstream media or the protests about asylum seeker hotels, there are lots of stories that do not get good, honest coverage on mainstream media.

[B]

I disagree with that. But we could spend the whole time arguing about that. And I want to focus in on economic stuff when we look back at the mini budget. And I've listened to lots of things you've said since and obviously read your book, which I thoroughly enjoyed. I wonder, three years on, if you dwell and think that politics ultimately isn't just about having good ideas, it's about delivery and ultimately you failed to deliver your economic ideas, is that fair or unfair?

[A]

Well, I think that if I look at it in retrospect, given the forces I was up against, including malign forces within the Conservative Party as well as the economic institutions, it was a pretty tough thing to try to deliver.

[B]

But isn't it the job of the Prime Minister to overcome all possible hurdles in your way?

[A]

Well, ideally, yes. But some tasks are extremely difficult. And if the people who are allegedly supporting you are not supporting you, it's very difficult as a Prime minister with a parliamentary party who fundamentally don't want to change things. And that was true of the Conservative parliamentary party. And you saw under Rishi Sunak's premiership that they just didn't really want to do anything. And even now they don't really want to change anything. So you might ask the question, why did I bother running for the leadership knowing that I wouldn't have the support of those people? But I thought it was worth it because I was so concerned about the future of Britain and wanted to try and do things and I did not understand when I, even though I understood that the bank of England had a particular WorldView and the ABR had a particular worldview, I didn't realize how brutally they would brief against me, smear me, contact their mates in the Financial Times and the financial press. I didn't quite understand how ruthless they would be in undermining me. So I think my mistake, if you want to put it like that, was underestimating the sheer malevolence of the economic blob in Britain.

[B]

But you see, you can argue all day long and some would agree with you, some wouldn't, about there being a bureaucracy or the civil service or this institution maybe didn't agree with your ideas. But with the greatest respect, I don't think you can argue against the market. The market is made up of millions of participants who judge what is put in front of them. And they saw your mini budget and they said, we're worried about this, we're not sure the country can afford this.

[A]

Let's look at what happened the night before the mini budget. The bank of England announced the sale of £40 billion worth of gilts, which is hardly sending a positive signal. Then, then after the mini budget took place, which was well received by business, you know, positive comments at the time, the following Monday, there was a concern in the Asian markets and what happened was, and I didn't know about it beforehand, they were concerned about these ldisc. This was these liability driven investments that pension funds had invested in which was essentially betting on interest rates being low forever. And we all knew that they weren't going to be low forever and they were going to go up. Essentially the bank of England's role is financial stability. They had failed to properly ensure financial stability. They'd allowed these pension funds, they'd allowed this liability to develop and they themselves admit, and there's a report they produced in 2024, that 2/3 of those market movements were about the ldis. So it's just not true. And this is very, very frustrating that the narrative that was pushed by treasury officials by the bank of England who are very influential with the City of London, they're very influential with the banks. The bank of England pay the banks interest on their deposits. You know, these, this is not some unconnected people, these are people with huge amounts of influence, huge amounts of briefing power on the press and they decided to put all the blame on me. They decided to put all the blame on me. That was not True, it wasn't right. And there was a massive lack of analysis by the British mainstream media. And in fact, the Wall Street Journal have produced a documentary on the subject. They produced a number of articles which says like this. I find the American media, maybe because they're one step removed, is much better at being objective than the British media.

[B]

There's quite a lot to unpack in there. And look, I've read the report the bank of England has done. You're referring, I think, to the bank of England staff working paper number 1089, released in July 2024, and it's as boring as the title.

[A]

I think it was actually earlier in 2024 than that.

[B]

I think that was the summary report when it fully came out. It was drafted in May. Either way, it does say that two thirds of the market move was down to forced selling linked to pension funds holding LDI Liability Driven Investments. But it doesn't absolve you from having triggered that move. And it's quite clear on that point. Forgive me just for one second, just to expand on this a second, Liz, because you say you weren't aware of the LDI problem that had built up. And that I would argue is biggest down to the fund managers that bought the products that carried risks more than the regulators. But the regulators have a role, albeit the fca, and it's the FCA and the patent.

[A]

The bank of England is responsible for financial systems.

[B]

Excuse me one, let me just finish one second by mailers because the biggest point on this as to whether the LDI was a cause or not for the size of the move that you triggered is comes back to the point that you were captain of the ship. We'd had a decade and a half of very low rates juiced further by an enormous amount of borrowing during the pandemic. And I would argue anyone involved in the markets knew that our finances were in a perilous state. So you have to gauge how much of a risk you take with them. And to say the LDI problem wasn't my fault would be like the captain of the Titanic saying it's not my fault that there are icebergs out there.

[A]

So this report says that two thirds of the market movement was down to the issues with VLDIs. The bank of England, a night before the Mini budget, announced the sale of £40 billion worth of gilts. Another thing that can help trigger such a market move. The markets were already moving, interest rates were already rising. They were rising internationally. This tinderbox was going to be set on fire at Some point.

[B]

So shouldn't you have been more careful? The bank of England had a meeting the day before your mini budget. It was delayed because of the Queen's death. Unfortunate that it was only 24 hours beforehand. But they did make that announcement the day before. You could have readjusted your plans.

[A]

Last time I looked, it's the Prime Minister who is the democratically accountable person that runs the country, not the bank of England. Of course, this is the bank of England's role, is to work with the government to ensure financial stability. And they weren't doing that. They were pursuing their own agenda. This is what you know, you said I was captain of the ship. The fact is I wasn't captain of the ship because I wasn't running monetary policy. The bank of England were running monetary policy. I'm very happy to take responsibility for things provided I have the full ability to actually control them. I didn't have the ability to control them. It was information I didn't have. There was a Bank of England governor who did not take responsibility for financial stability, which is part of his mandate. He hasn't been held to account for that at all. And the fiscal announcement we made in 2022 was smaller than fiscal announcement that Rishi Sunak made during COVID It was smaller than the spending review that Rachel Reeves made this year. The fact is, the bank of England, whereas they go out of their way to support what Rachel Reeves is doing. And you can see that with things like the interest rate cut, even though inflation was going up, they went out of their way to blame me for what happened. Even though their own report says that two thirds of the market spike was down to the issues with LDIs.

[B]

Now, we had already acknowledged you triggered that spike.

[A]

Let me just say we had been through all our numbers with officials in the treasury since checking is that how is this going to work with the markets? The treasury officials did not know about the LDI issue. Now, I think that is a massive problem for Britain's financial institutions that the treasury officials who said, and we talked to them about the package, otherwise they wouldn't have signed off doing it. This package, it will cause some movement in the market, but it is not going to affect it wildly. That was the view of the treasury officials who did not know about the LDI issue. This was not some crazy package. As I've said, it was smaller than Rishi Sunak's fiscal package. It was smaller than Rachel Reeves.

[B]

Of course it was smaller than.

[A]

And it was going to generate economic growth. And we've Seen the counterfactual, which is when the taxes were put up. What it did was drive business away from the uk, drove rich people away from the uk, has damaged our economic growth. So I've been proven right by the counterfactual. But at the time, the treasury officials whose job it is to look at these packages did not say no, there's this problem because of LDI fragility. It could send everything haywire. Nobody told us. I'm not sure why.

[B]

But again, you've been saying the authorities should be in the elected leaders, not in civil servants. It's up. But surely you take responsibility. If someone gives you the wrong advice, you still make the final decision.

[A]

As you say, I did not make the final decision to announce the sale of £30 billion worth of guilts. I didn't make the final wilf. I didn't make the final decision to announce a cliff edge of two weeks on sorting out the LDI issue. I had no say over that. And the level of scrutiny that politicians get is immense. The level of scrutiny that Andrew Bailey has got over those decisions is zero, absolutely zero.

[B]

Obviously he goes quarterly in front of Parliament, but he, obviously, I accept, has a long term and is unelected. But that is a sort of another debate whether the bank of England mandate should change or not. But again, I just come back to this point though, because I do think it's a very important one as to what was triggered or not. Even if you say you only caused 2/3 of the market move.

[A]

Sorry, the LDIs were 2/3 of the market move.

[B]

Even if you say it's only 1/3, you're still talking about a 0.5% move in borrowing costs in six days. That's an extraordinary market move.

[A]

The LDIs were 2/3.

[B]

1/3 would be that much.

[A]

The LDIs were 2/0. But we don't know how much the announcement of the sale of gilts were or how much contributory factor, the fact that the bank of England didn't raise interest rates as much as the Fed. The point is, the majority of this was the LDI issue. That was the bank of England's responsibility. Any package announced, which is a fiscally loosening package, which this was, is going to have some impact. The point is, I did not understand or know about the knock on effect that would have. Of course we knew that it could in the short term raise bond yields a bit, but we were showing and demonstrating the positive impact of having lower taxes, of making the changes we were going to be making to spending of fracking but the chain reaction was a result of the LDIs and this has been acknowledged. I mean, as I said, even the Financial Times yesterday said if the bank of England had actually done what they're meant to do, which is ensure financial stability and dealt with this LDI exposure, the doom loop probably wouldn't have happened. That's the, that's the Financial Times, which is not my biggest fan.

[B]

That was one paragraph in a long article in the ft. I don't think that sums up the gist of the whole article.

[A]

I mean, by the way, can we just touch on. I think we've just got a problem with the bank of England and the treasury. We have a problem with our overall economic reporting in this country, with the positions taken by papers like the Times, the Financial Times, they are all part of the problem and it's why this country is in an economic doom loop. And it's, as I've said, very different from the attitude taken by papers like the Wall Street Journal in the us. I think it is a British problem. I think there has been a Keynesian takeover not just of Britain's financial institutions but also our media.

[B]

But we again and they love public spending and they hate tax cuts wholeheartedly for the media. And again you could say it's politicians role to convince us of the arguments or the Civil Service of the arguments. I just want to, Can I just dwell on this?

[A]

Were meant to have the independent ability to analyze things but they seem to.

[B]

Have given up on that as politicians are, despite what advice might reach you from the Treasury. I just want to dwell on one final point on this because I am really interested if you stick to this point overall, which is, do you look back and think we should have done? Because all summer you talked about a lot of the supply side reforms leading up to 2022, the fracking, childcare reform, welfare reform, other supply side reforms that would have allowed you to cut spending a lot, I guess, to offset the cuts in taxi you announced. Do you not regret, in light of everything, the fact that those LDI problems, those icebergs were under the water, whether you should or shouldn't have known about them to have done it in a different order? Could you have sequenced it slightly differently such that you made clear these spending cuts are coming too?

[A]

Well look, we made it clear that we wanted to reduce the welfare budget by increasing welfare only by wages, not prices and Conservative MPs objected to that. So there were political problems in spending restraint. There were political problems frankly with fracking, which many Conservative MPs also didn't want to vote for. So there was an issue in implementing some of the supply side policies because of the Conservative parliamentary party. But on the timing issue.

[B]

But aren't you therefore just announcing that the market was right to look at it and say actually these tax cuts aren't going to be followed by spending cuts? Because you're admitting you wouldn't have got it through in that Parliament.

[A]

I'm saying it would have been very difficult. The welfare changes.

[B]

And by the way that's kind of what's just happened.

[A]

The laborer found exactly the same thing.

[B]

Do you not acknowledge therefore that the market reaction was somewhat legitimate?

[A]

I want to make another point which is related to this, which is the tax cuts were good in themselves. The biggest tax change was not raising corporation tax from 19 to 25%. Now I believe over a five year time horizon having corporation tax at 19% would have raised more money than having tax at 25%. So regardless of the spending cuts which I accept were difficult to get from through and things like the supply side reforms which are also difficult because MPs don't like voting for difficult stuff even on its own merits. The tax not raising taxes was the right thing to do and we've had the counterfactual of raising taxes and the debt still going up. So we have had the implementation of the treasury bank of England OBR agenda in full and we are now facing higher guilt rates than in 2022. We're facing an existential crisis for the British economy. So what I'm saying is that the idea that raising corporation tax to 25% was going to improve Britain's debt position over the medium term was wrong and I've been proved right.

[B]

But why not do just the corporate tax cut first then and sequence the others to come. Do you not look back at it and think we could have done this in a cleverer way?

[A]

No, because what I know is that there were people and institutions actively against our agenda. That is the conclusion I've come to. They're actively against our agenda and they don't believe in the agenda. And I was not able partly because I didn't have time to do primary legislation to do things like abolish the obr. I was not able to challenge those people directly. But the corporation tax was by far the biggest part of the mini budget package. And if you remember what happened after the whole market ructions was the OBR leaked the fact that there would be a 70 billion pound hole in the in the public finances and that I was thinking about reversing the corporation tax. So that is the thing that the OBR wanted me to reverse. That is the, the tax that I was under pressure to reverse. I wasn't under pressure to reverse getting rid of the health and social care levy, which I did. I wasn't under pressure to reverse the energy package. It was specifically the corporation tax change that I was under pressure to reverse. And that pressure was put on me by the bank of England, by the Office of Budget Responsibility. That's the reality. They thought I was wrong to keep corporation tax at 19% and not.

[B]

Do you regret listening to them then? Well, I had to regret firing Quasi Kwateng.

[A]

Well, I had to. Essentially, I received a letter from the cabinet secretary saying there would be a meltdown if I didn't agree to this. And unfortunately, due to the way that the bank of England had already and the institutions already been blaming me, smearing me, I thought that was a real threat. And I couldn't, I couldn't take that risk. I'm not going to play chicken with the nation's finances. I wasn't going to do that. So I had to accept that.

[B]

And I guess the final question in that is you don't think, given that you didn't have that much time, as you said, you didn't have necessarily a majority that was fully behind you. And we were in a fairly perilous state in terms of all the borrowing that had been racked up during the pandemic and the long rates.

[A]

We're even more parlor state now.

[B]

We might be.

[A]

And the gilt rates are higher. I mean, this is.

[B]

No, no. But this is my question to you again, because there are lots of legitimate arguments you've made throughout the first half of this interview. And I've said many times on Sky News that to say you crashed the economy is misleading because for me that definition should say we have a sharp recession to follow, which didn't happen. I think you triggered a sudden spike in interest rates which could have had repercussions if it had remained. But if you want to make those arguments, I think a lot of people listening will be thinking, acknowledging all those limiting factors. Very short space of time in Parliament, a parliamentary party that weren't going to back your spending cuts, lot of debt already and low rates which would have built up problems. Do you not look back and think, I didn't have a pair of aces and yet I went all in? There's no acknowledgment I'm hearing that you could have Done things a slightly different way.

[A]

What could I have done differently?

[B]

You could have sequenced things. You could have done some of the supply side reform and only some of the tax cuts in the first step and signaled to business the rest was going to come. And that it's not my job to come up with that. I'm just saying if you look at the point, what was the outcome? The outcome wasn't what you wanted and yet you're saying you did everything the way, the only way that it could have been done.

[A]

I'm saying that with the economic institutions constituted the way they are, it is pretty much impossible to deliver what I would describe as a conservative economic policy. I'm saying that what I learned from my time as Prime Minister is these unaccountable institutions are extremely powerful. They have a worldview which they seek to impose. And going into it, I did not realize the extent to which they would do things like blindside me by sell, you know, the announcing the sale of £40 billion worth of guilts the night before the mini budget. I mean, this is not the behavior of a central bank that wants to work with the government to deliver economic policy. It's not the behavior. This is a big problem. And I'm not somebody who went into number 10 having no experience. I had 10 years of experience working as a government minister, being a cabinet minister. And I saw the way the bureaucracy behaved and the way that I constituted what we were doing in number 10 was to try and deal with that. It was to try and deal with that. And I think with all respect to people like you who have not worked in government, the constraints on ministers now are massive, absolutely massive. And the ability of officials to push their own agenda has got worse and worse and worse. And I was trying to deliver the policies that I believed were good for the country. I think the counterfactuals proved me to be correct. And what I faced was huge, huge resistance. And you're saying to me, well, why didn't you try and do it in this different order? It wasn't possible. I literally considered every possible alternative of how to deliver this. Bear in mind that we needed to alter to the corporation tax cut. Sorry, the corporation tax raise had already been legislated for and it was due to come in in April 2023. That's why we needed to act quickly because all the investment that might have come into Britain was leaving. You don't have time to sort of wait until the OBR changes its mind. Bear in mind the OBR at the time because it is a biased institution. It was predicting a 70 billion pound hole. I would have been waiting until 2024 not to. That's just the reality of the situation. I'm not. And the reason that I want to say all this, Wilf, is because I want people to understand this so that we can actually change the country in the right way because we can see what's going on now with Keir Starmer and the constant reshuffles that he is not actually able to implement the policies he want. Now, I don't approve of his policies, but I've got no doubt that with the machine as it is, it's pretty much impossible to get anything done.

[B]

The final thing on the bank of England, obviously their meeting the day before the mini budget was largely in line with consensus. I do acknowledge consensus.

[A]

Sorry, what does that mean?

[B]

It was not a wildcard announcement. It was in line with what people had expected to be announced, albeit it came the night various investment banking.

[A]

Well, you see, this is what I'm saying about this is.

[B]

Yeah, but my point is you could.

[A]

Economic orthodoxy is the problem.

[B]

I don't want to revisit. You could have known that sort of thing was coming is my point. But what I do accept entirely, as you said, there is. I don't know what it's like to be a politician. I get to view it from the outside a bit and I do think it looks absolutely miserable and very, very hard and I really appreciate.

[A]

But it's not just them. This is not like a sob story. This is saying we've had 25 years of economic policy that has failed. The bank of England has failed on inflation massively more than other countries. They failed on financial stability. We just talked about that. We have a country that is about to possibly get into an IMF style crisis. We've had economic stagnation, our public services don't work, it's a disaster zone. And yet why are people not looking at things like the bank of England Act 1998 and whether that's been a success? Why aren't they looking at the establishment of the Office of Budget Responsibility? Has the Budget got more responsible since it was introduced in 2010? No, it hasn't. And it's like, well, I am the person who has said all this about these institutions, about their failure for a very long time. Everybody else, what's their answer? Well, they didn't have an answer.

[B]

Well, I was. We do really appreciate you coming on because I know it's not always easy when you're in the job or after the job. And you're sharing your time with us and your candor is much appreciated. And my final question to you, Liz, and as I said beforehand, half our listeners are overseas for this podcast. Are you still a believer in Britain long term?

[A]

Yes.

[B]

Sell it to our listeners overseas.

[A]

Well, Britain is the. It is the home of freedom, parliamentary democracy, free enterprise. Adam Smith, all these great ideas came from Britain, the industrial revolution. There's no doubt we've lost our way. There's no doubt we've lost our way. But I think what is happening now in Britain is the people are now realizing how bad the situation is. And I think there is going to be massive pressure. There is going to be massive pressure for institutional change in this country, and that is what we need. In a similar way to Trump delivering the revolution in the US that is what we need. And I think that will happen. And what I want to encourage is anybody who supports that to help us achieve those changes in Britain. But it is going to take the blowing away of quite a lot of the existing orthodoxy.

[B]

I noticed you didn't list John Maynard Keynes as one of the great Britons.

[A]

He rather let the side down.

[B]

Well, either way, Liz, thank you so much for your time.

[A]

Thank you.

[B]

We really appreciate it here on the Master Investor Podcast. And remember that next week on the podcast we'll be talking to the former Facebook number two and UK number two, Sir Nick Clegg. The Master Investor Podcast is produced by Paradine Productions and Master Investor Podcast Ltd. In association with Birdlime Media. If you've enjoyed the podcast, please do subscribe on YouTube or click follow on your podcast platform and then you'll be automatically notified each time a new episode drops. And we'll see you next week. Liz Truss, thank you again so much.

[A]

Thank you.