After allowing her chancellor to rewrite the government’s energy price plan, Liz Truss has just removed one of her biggest remaining arguments for staying in power.
Yes, reversing the Kwarteng income tax cut, abolishing the dividend tax changes and the VAT-free shopping scheme are very politically painful.
But abandoning the existing energy price cap scheme from April is on a different level of significance and leaves this government holed below the waterline.
Now people’s energy bills will be going up from April, just as millions face bigger mortgage payments too, but this is only one of several problems this decision causes.
Boris Johnson always attempted to make the argument that he got big calls right. This is now all but impossible for Liz Truss.
The prime minister has clung on relentlessly to the wisdom of her energy price plan: praising it again on Friday in the awkward mini-press conference, over the weekend in an article in The Sun, and allowing government ministers – like Treasury minister Andrew Griffith on Sky 24 hours ago – to point to it as the one government success.
It wasn’t even part of the mini-budget – announced 48 hours after she entered office – and over a fortnight before Kwasi Kwarteng’s calamitous statement.
Yet politically the Truss team allowed it to morph into the mini-budget’s biggest triumph, even as other parts were thrown in the dumpster.
Truss’s MPs like Robert Halfon could see the folly, but she could not until the very last moment. She clung on to it when everyone else could see the warning lights.
It is hard to overstate what a big deal this is because of the wider signal it sends.
This will be seen as the day when bailout Britain ended. Starting in the pandemic, getting a nation used to bailouts with the furlough scheme and business support schemes, there has been an assumption government will step in when external shocks take place.
This is no more.
Liz Truss had exposed the public finances to near unlimited liability for two years, because she cannot have known the cost of gas rises resulting from Putin’s war.
One of the most dangerous fiscal policies of modern times has been consigned to the bin.
It is for her MPs now to judge whether she still has enough credibility to remain in office after this particular U-turn.