The time Liz Truss insisted her economic plans were not doomed to fail

Liz Truss has been noticeably quiet since her chancellor delivered a "fiscal event" on Friday that saw the pound tank, markets panic, a warning from the International Monetary Fund and emergency action from the Bank of England.

It came less than three weeks after Truss won the Tory leadership contest at the beginning of September and became prime minister.

Throughout two months of campaigning she repeatedly pledged to "challenge Treasury orthodoxy" and kickstart the UK's anaemic economic growth by implementing huge tax cuts that many criticised as uncosted.

Read more: Pound falls further in value against US dollar - slumping 1.5% to $1.0570

Her economic policies became the key dividing line between her former chancellor Rishi Sunak - who ruled out unfunded tax cuts warning it would make inflation worse and send interest rates soaring.

"Your own economic adviser has said that [your tax cuts] would lead to mortgage rates, interest rates going up to 7%," Sunak said at an ITV leaders' debate in July.

"Can you imagine what that's going to do for everyone here, and for everyone watching? That's thousands of pounds on their mortgage bill.

"[It's] going to tip millions of people into misery. And it's going to mean we absolutely have no chance of winning the next election."

Liz Truss (front centre) stands with her supporters as she arrives for a hustings event at Perth Concert Hall in Perth, Scotland, as part of the campaign to be leader of the Conservative Party and the next prime minister. Picture date: Tuesday August 16, 2022.
Liz Truss said her tax cuts for the richest Brits were necessary for economic growth. (PA)

Truss, however, defiantly accused Sunak of talking down the UK

"I don’t believe in this negative, declinist language", she said. "I have lots of economists that are backing my plans."

When approached by Yahoo News UK to identify the economists who had backed her plans, Truss' team has yet to respond.

Among the economic bombshell the government announced on Friday, was:

  • a cut to the top rate of tax, from 45p to 40p at a cost £6bn per year;

  • a cut of the basic rate of tax from 20p to 19p at a cost of £5 billion per year;

  • reversing the corporation tax hike pledge back to 19% from 25% at a cost of £17bn per year; and

  • reversing the 1.5% national insurance hike at a cost of £12bn per year

Read more: IMF urges Truss to reverse top rate tax cut in rare intervention

As the markets reacted - and the pound slumped - senior economists have since lined up to criticise the plans.

One of the most notable comments came from Danny Blanchflower, who previously sat on the Bank of England’s monetary policy committee for three years. He said Truss and Kwarteng's credibility was now "completely trashed". He added: "I've never seen such raging incompetence."

Institutions have also stepped in.

The IMF made an unprecedented intervention on Tuesday, warning the UK government to veer away from its trajectory.

"Given the elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture, as it is important that fiscal policy does not work at cross purposes to monetary policy," the IMF said on Tuesday.

"Furthermore, the nature of the UK measures will likely increase inequality."

Elsewhere, the UK's stock and bond markets have lost around $500bn since the prime minister took office just over three weeks ago amid tanking investing confidence due to the government's economic strategy.

And on Wednesday afternoon, the pound slumped again to 1.057% after the Bank of England announced emergency action and said it would buy government bonds to help stabilise the market.

However, the government has doubled down on their strategy.

Financial secretary Andrew Griffith told Sky News late on Wednesday afternoon: “We think they are the right plans because those plans make our economy competitive.”

He added: “Get on and deliver that plan. That’s what I, the chancellor and my colleagues in government are focused on is getting on and delivering that growth.