The senior Downing Street official who worked under Theresa May said it remained “very, very difficult to recover” after the disastrous mini-Budget which sparked a backbench rebellion.
Mr Timothy said some of the MPs who decided to avoid the Tory conference are “having that conversation” about her leadership. “MPs are openly talking about it,” he told LBC LBC’s Tonight with Andrew Marr.
However, he cautioned that discussions were at a very speculative stage. “I think anybody who makes the assumption that therefore she might be removed or have to leave as PM, I think is over-egging it at this stage.”
The former No 10 official added: “They’ve dug themselves in an absolutely enormous hole and it’s going to be very difficult to get out of it.”
Tory backbenchers previously told The Independent that some were talking about moving against Ms Truss and how a leadership contest might work, with one suggesting it was “not ridiculous” to suggest she may be “gone by Christmas”.
Tory rebels told The Independent on Monday that they hope to block Ms Truss’s plans for public spending squeeze and real-terms benefit cuts, after the humiliating U-turn on the plan to abolish the 45p top rate of tax.
One former minister said moderate opponents of the PM’s radical economic policies had been “invigorated” by the sight of Truss “blinking” on the tax break for the wealthiest.
But many remain in despair about the party’s electorate outlook – and the chances of keeping their seats – after the enormously damaging market turmoil over the past week. The latest Savanta ComRes poll gives Labour a 25-point lead.
Boris Johnson’s sister told LBC that that another fall in Sterling this month could mean the end for Ms Truss and her chancellor Kwasi Kwarteng.
Rachel Johnson said that another round of market turmoil after the Bank of England stops its emergency bond-buying scheme on 14 October could spark a general election.
“I think they will go down with the pound if we see the pound falling on October 14 … there won’t be anything else to do apart from having maybe a general election I think,” she said.
Mr Kwarteng is set to bring forward its fiscal plan from 23 November, under pressure from Tory MPs to provide speedier reassurance to the markets, according to the BBC. The chancellor told the conference that his plan for borrowing would be provided “shortly”.
Meanwhile, senior Truss backer David Frost said the prime minister should now focus on less controversial economic reforms after the shock U-turn.
The former Brexit negotiator said the PM should “err away from things we know are going to be highly controversial and the losers are going to be extremely visible”.
He recommended relaxing trade tariffs and cutting regulation of small businesses as policies that would not “obviously create a coalition of losers more quickly than they would create a coalition of winners”.
Lord Frost admitted that it would now be difficult to build popular support for Ms Truss’s policies would be as society had become “more collectivist”.
He said: “You can’t simply throw out a load of free market reform ideas and assume everyone will just get with the programme. There needs to be much more explanation, much more effort to persuade, to make the arguments, to bring people along with you.”
At the same event, Ms Truss’s right-wing economic adviser Gerard Lyons struck an optimistic note, saying the economy would “probably be on the way up” by 2024.
He said: “The policies need to be registering by the end of the next year. You still have two and a quarter years, probably, until the next election. January 2025 is when the election needs to be held by.”