Liz Truss is doomed. The only question now is who will take over

The policies that informed the abandoned Budget were not called Kwasinomics. Nor did they go by the name of Philponomy. To advocates and sceptics alike, they were known as Trussonomics. Yet while Kwasi Kwarteng and Chris Philp have been relieved of their duties in the Treasury, the true author of the disastrous experiment – the Prime Minister – remains in Number Ten.

Liz Truss has sacked her Chancellor, accepted the critique of her leadership rival, Rishi Sunak, and abandoned her policies. She has replaced Kwarteng with Jeremy Hunt, who promises an entirely different fiscal prospectus, and in so doing has made Hunt the most powerful figure in Whitehall. Until Truss departs, it will be the new Chancellor who really runs the Government.

And so Conservative MPs are asking what is the point of Truss without Trussonomics? It is a rhetorical question: while in public few admit that the Prime Minister is a busted flush, in private almost all know she is doomed. The conversations in Parliament are not about if Truss can survive, but how to remove her and who should take over.

There are several subplots and myths that need to be dispelled. The crisis was not caused by MPs supposedly unreconciled to the leadership of a woman imposed on them by party members. It began with the Budget, which created a fiscal hole and suggested the Government cared little about filling it. The currency and bond markets reacted, prompting higher borrowing costs, a crisis for pension funds and an emergency Bank of England intervention.

It is true that the Government’s energy bailout is expensive and might have been better targeted. It is also true that the increase in interest rates in America has sucked credit out of the international financial system. And it is true that after years of loose monetary policy, interest rates here were going to increase anyway, although not as far and fast as the Budget made likely. But nobody, excluding perhaps those with reason to delude themselves, can doubt that the Budget caused the crisis of confidence in the British public finances.

The reason for the recklessness was ideology. Libertarian campaigners and think tanks are now doing their best impressions of dogs chasing their own tails, denying that Truss is a libertarian and claiming they did not really support the Budget. This is very silly, since their statements are all online (“if this was the mini-Budget, I look forward to the maxi-Budget”), and of course Truss and Kwarteng made no secret of their libertarian inspiration.

But it is worth dwelling on some of the arguments. Some say if the Conservative Party cannot cut taxes, then conservatism is dead, as if the breadth and depth of conservatism could be reduced to one specific aspect of fiscal policy. Some accuse Conservative MPs of being social democrats, as if politics were a binary choice between libertarianism and Labour policies. Some claim the Tories are no different to Gordon Brown, who introduced the top rate of tax, as if the pandemic, energy crisis, inflation and old-age dependency ratio were just figments in the imaginations of those they write off as socialists.

Each is a ridiculous proposition. And now some are making common cause with unlikely allies. On the Right, some libertarians argue that the promise of Brexit has been squandered, that if we cannot radically reduce the size of the state, deregulate and slash taxes, we might as well have stayed in the European Union. On the Left, others are clambering to argue that the seeds of the crisis lie in Brexit itself. Leaving the EU, they say, has left us less capable of protecting our sovereignty in a complex world.

Both arguments are wrong. For some ideologues, Brexit might have been an opportunity to remove rights, shrink the state and seek freer trade with poorer economies, but most Leavers were voting to restore democratic control, national sovereignty and the solidarity of citizenship.

And whatever you think of the decision to leave the EU, such a reckless Budget would have sparked a crisis with or without Brexit. Fiscal policy remains a national responsibility, and Trussonomics would have left us exposed to bond markets inside or outside the European Union.

So where do the Tories go from here? Jeremy Hunt has already signalled a new austerity: taxes may rise, not fall, and departmental budgets will be cut. Beyond the crisis, the party will need to find a third way, based on active government, long-term investment, economic rebalancing and domestic production, which goes beyond the choice between deficit-funded tax-cutting and the austerity of Osbornomics. The real problems with the British economy are not overall tax rates, but poor productivity, regional disparities and an unsustainable trade deficit.

For now, however, Tory MPs agree there is little to be gained by holding Truss hostage, making her sign off Sunak policies like a forced confession. They realise that if they want to restore market confidence and show the public that its competence and values are better than the Budget suggested, they need to change their leader.

As they contemplate their choice, they must accept that now is the time for pragmatism, not factionalism, and compromise, not purity. The Tories need to save the economy from the worst, and save themselves from a crushing defeat – risking a decade out of power – at the next election. They need to find the leader who can keep the show on the road.

That requires competence: the judgment to win back market confidence. It demands the ability to communicate: for the next prime minister will need to bring the country with them even as they take tough decisions. It necessitates moderation: for we need two years of diligence and quiet competence, not ideological fervour.

And on top of each of these things, it requires conviction – a genuine belief in what they are doing – and a proven track record of delivery.

The time for the next generation of talented Tories will come. Libertarian ideology has smashed the credibility of the party and the government into little pieces. It will take time – and proven political skill – to even try to put things back together.