‘We have to change. The status quo isn’t an option’

In her first newspaper interview since becoming PM, Liz Truss tells Edward Malnick why her colleagues must hold their nerve despite the plummeting polls

It is hardly the backdrop Liz Truss might have hoped for as she sits down for her first newspaper interview as Prime Minister. With polls putting the Conservatives as many as 33 points behind Labour and figures from across the political spectrum lining up to denounce her tax-cutting plans, she is effectively under siege less than 30 days after entering 10 Downing Street.

But the extent of the onslaught does not appear to come as a great surprise to the Prime Minister, who has spent more than a decade preparing for this moment. “Often, I think, people feel politicians talk, and they don’t necessarily ‘do’. I’m very focused on doing, and getting these changes happening in the British economy, enabling people to keep more of their own money, keeping bills low,” she says. “I campaigned on this basis in the leadership election campaign, I said I would do these things. And I’m determined to follow through on things because I see that this is what will make Britain more successful.”

Almost 10 days ago, Kwasi Kwarteng, the Chancellor and a close friend of Truss, delivered a mini-budget which preceded a sharp drop in the value of the pound, now recovered, higher borrowing costs and a major intervention by the Bank of England to calm gilt market turmoil. Since then, the Prime Minister has faced a growing backlash from institutions ranging from the opposition parties to the International Monetary Fund (IMF) as well as public demands from some of her own MPs to scale back her tax-cutting plans.

But, sitting in the Thatcher Room of No10 on the eve of the Conservatives’ annual conference in Birmingham, Truss insists that she will not bow to the demands. Asked if she is planning to retain the entire package, including the most controversial proposal to scrap the 45p rate of income tax, the Prime Minister simply replies: “Yes.”

Truss, who rode out previous storms, albeit of a lesser magnitude, in stints at the Ministry of Justice and Foreign Office, appears calm – although the weight of her new responsibilities seems to have at least tempered her characteristic buoyancy.

She dismisses claims that Kwarteng could be sacked over the financial

‘Often people think politicians talk and they don’t “do”. I’m very focused on “doing”’

‘We want to help people get on in life – get on the housing ladder, get good jobs’

statement, making clear that the measures were agreed jointly between them. One ally described the Chancellor as “the architect” and the Prime Minister as “the philosopher behind all of this”. Ms Truss says: “The Chancellor is doing an excellent job and we are working very closely together. The decisions that have been taken are the right decisions that had to be taken in a hurry.”

Those opposed to the Prime Minister’s reforms had some advance warning about what was coming.

During the leadership campaign, Ms Truss set out her vision for tax cuts, supply-side reforms and reductions in public spending in an early interview with this newspaper, in which she said she wanted to bring about “the biggest change in our economic policy for 30 years”. The Prime Minister believes that the combination of radical tax cuts and deregulation is key to economic growth, which in turn would mean higher wages and more jobs.

Reflecting on the events of the last week, she says: “I always expected there would be resistance to change, because there always is. But we do need to change. And I think the public feel that there has been a failure to address some of the fundamental issues that affect our country.

“It takes too long to get things done. We haven’t been as pro-business as we could have been. We haven’t changed things as much as we should have. And of course we’ve had Covid, which put a sort of deep chill on the economy. And we’ve had the war in Ukraine that has pushed up energy prices.

“But we made promises to people in 2019 that things would be different. And what does that mean? It means more opportunities, higher wages, more investment – and those are all the things that I am seeking to unlock. Of course, there will be resistance to that because there is quite a strong consensus around what I describe as a high-tax, lowgrowth economy. But ultimately [with] a high-tax, low-growth economy the country becomes poorer.”

She adds: “We cannot continue on the current trajectory of managed decline ... We must take a new direction.”

No10 is at pains to highlight the mammoth package of measures to help households with energy bills, which was announced days into her premiership and largely overshadowed by the death of the Queen hours later.

With a portrait of Margaret Thatcher looming large over the room the first female prime minister used as her study, Truss appears to invoke a mantra often associated with her predecessor – that “there is no alternative” to economic liberalism.

“We have to look at what the alternative was to the Government acting,” says Truss. “The alternative was people and businesses going into this winter not able to pay their fuel bills, and going out of business, a rising tax burden, just as the global economy was slowing, and also inflation that was rising. I felt it was very important that the Government acted decisively to deal with all these issues, but also to put the UK on a better long-term path. The fact is, we have had low growth for several decades. Ultimately, that means people across the country not having the opportunities they deserve, it means not being able to have the pay rises they need, and we won’t be able to afford the standard of living we want in this country. So we had to act.”

The economic crisis is a “global problem”, she says. The US Federal Reserve, for example, has raised interest rates, and other countries have been implementing tax cuts and their own packages to help with energy bills. “We have to do this,” she insists.

Alluding to the departure of Boris Johnson and a two-month Tory leadership contest, Truss continues: “What’s unique about Britain is that because of various circumstances, we were only in a position to act at this point. And we had to act quickly.”

She declines to admit to any regrets about how the mini-budget was handled, after even some allies said that the Government could have better communicated its plan to the markets in the hours before and after the announcements. Similarly, asked about the decision not to commission figures from the Office for Budget Responsibility (OBR), she says: “During Covid we acted quickly on things like the furlough scheme without an OBR forecast, because the situation was urgent. And the Chancellor and I believe that the situation is equally urgent, now, and here.”

She does, however, face a significant problem as a result of markets and many households taking fright at the scale of fiscal loosening and a potential increase in the budget deficit – partly because of claims that the Government is placing less weight on institutions such as the OBR, which will instead produce a forecast to coincide with Mr Kwarteng’s “medium-term fiscal plan” next month.

How will she reassure those who have been spooked? “The UK has the second lowest debt in the G7. We’re in a relatively strong position on that, we are in a relatively strong position on employment. I believe the economic fundamentals are positive.

“The problem we’ve had as a country is a lack of dynamism. And alongside the tax cuts and the energy package, we also announced a series of supply-side reforms to get the economy going. And that’s ultimately what will make our economy more dynamic and drive economic growth.”

The Prime Minister does, however, acknowledge genuine concerns among people worried about a radical shift from the “consensus” position of an economy based on high taxes and high levels of government spending.

“It’s always difficult, after a period of consensus – which there has been – to change. But what I’m fundamentally saying is we do have to change, and the status quo isn’t an option. If we had not acted and let this situation drift we would have been seeing businesses go out of business, we would see inflation up to five points higher than it would have been. And we’re looking at a very severe economic slowdown. So we’re not dealing with a neutral situation here. We’re dealing with a situation which has ultimately been caused by Putin’s war and the aftermath of Covid.”

Truss has no truck with political opponents such as Labour and former mandarins who have been railing at the principles of her plan to grow the economy. “It’s a declinist mentality, the idea that Britain’s best days are behind us and that all this is about is managing the distribution between people, rather than growing the size of the pie. I believe we can grow the size of the pie. But we need to take the tough decisions to do that.”

Today, Truss reveals that the first of her supply-side reforms intended to dovetail with her tax cuts will be lowering the threshold for firms to qualify as a small business and therefore benefit from an exemption to regulations. “One of the things we’ll be announcing is raising the definition of a small business, in terms of regulation, from 250 employees to 500 employees. And this will mean an additional 40,000 businesses will get that regulatory relief and it will make it easier for them to get on with their business.”

The change will apply to all new regulations from tomorrow and be gradually incorporated into existing

EU-era rules as they are reviewed by ministers over the next year.

Other crucial areas of reform for the Government include planning, childcare and immigration. As well as introducing new “investment zones” with liberalised planning rules, Truss says, “We’ll also be looking at other measures to improve the planning system and speed it up while removing the top-down targets. This is about the more locally driven decisions that deliver what people want on the ground.”

Asked about the Government’s promise of childcare reforms, she adds: “The Education Secretary [Kit Malthouse] is working on that. Childcare is too expensive in this country. The system is too complicated for parents, and we want it to be more affordable.”

Today, The Sunday Telegraph reveals that one plan being worked up is to increase the number of childminders by boosting the number of specialist agencies. The agencies are registered to be inspected by Ofsted, reducing the administrative burden on individual workers. Truss championed the idea while childcare minister between 2012 and 2014.

In the spirit of her pledge to return to a less presidential style of government, she says: “I’m not going to go into the details. That’s for the Education Secretary to announce in due course. But it is a massive focus ... we want to help people get on in life. We want to help families who are struggling with energy bills, with the cost of childcare. We want to help people get on the housing ladder. We want to help people get good jobs.”

Truss rejects claims that she wants to relax immigration rules to increase the number of low-skilled migrants coming to the UK, as part of her plan to boost growth. “That’s not true,” she insists, with a frown.

But she appears to confirm that the Government will increase the number of seasonal agricultural workers and other “high-skilled people” given permission to work in Britain.

“What we want to do, and the Home Secretary will be laying out more details on this, is make sure we’ve got the right mix of people coming into the country. I have previously mentioned getting seasonal agricultural workers, for example, to help with farming. But this is not about getting lots of lowskilled workers in, it’s getting people who will contribute to the economy.”

Still, the Prime Minister faces a battle to win over MPs beginning to speak out against her approach. Polls have given Labour comfortable double-digit leads and one retiring backbencher went as far as to claim that the only question about the next election is: “How much do we lose it by?”

Truss’s response will include urging colleagues to hold their nerve. “I want to bring people with me on this journey. What matters to people ultimately when it comes to voting in a general election is: ‘Do I have a good job? Are my kids getting a good education? Do I feel safe?’ So what is important is that we take the firm action we need to take in order to get our economy back on track, in order to weather this storm.”

On Thursday, following the Conservative conference, Ms Truss will travel to Prague for the inaugural gathering of the “European political community”, an initiative proposed by Emmanuel Macron.

The move has raised eyebrows among some Brexiteers, but Truss insists that her involvement in the forum is designed to help Britain tackle the energy and migration crises.

“I want to be talking to counterparts across Europe, including ones that are in the European Union and ones that aren’t about migration, and how we collectively deal with migration. It’s not a problem Britain can solve on its own … We need to deal with the problem upstream, so that’s what we’ll be talking about, but also energy. Europe became too dependent on Russia and one of the things Russia has been doing is weaponising Europe’s dependence on its gas.”

Following the death of Elizabeth II last month, Ian Blackford, the Scottish National Party leader, was the unlikely figure who made a point of telling the Commons that his thoughts were with Truss, who “just days into her term in office” was “having to come to terms with the enormousness of the loss of the Head of State, and show the leadership that is now required in her position”.

Truss had, of course, entered No10 expecting to hold weekly audiences with the late Queen.

“It was a huge honour to be asked to form a government by Her Majesty and I think it was a huge shock to all of us when she died,” she says. “What we saw during the mourning period is the huge love and affection for Her Majesty across the country, but also a warm welcome to King Charles.

“It’s been momentous. I’m not sure I have had time to fully compute it. She was the rock on which modern Britain was built and it does feel like we are now entering a new era.”

The Prime Minister has moved into the flat above Number 11 Downing Street along with her husband Hugh O’Leary and two daughters Frances, 16, and Liberty, 14.

Truss previously lived in the family’s home in Greenwich, south-east London, while foreign secretary, and admits that now “it’s a strange life living above the shop”. But she adds: “It’s a 24-hour job anyway. So you might as well be here.”