Truss’s mini-budget looks likely to cost the Tories the next election

<span>Photograph: Tolga Akmen/EPA</span>
Photograph: Tolga Akmen/EPA

Liz Truss has long channelled Margaret Thatcher – echoing her rhetoric, her free market instincts and even her clothes – but as the Tory conference kicked off in Birmingham on Sunday many in her party were hoping that she would relinquish ambitions to be the next Iron Lady and drop her mini-budget plans.

There were early glimmers of hope. In an article for the Sun, she admitted her proposals would cause “short term disruption” but that she had an “iron grip” on the country’s finances. Then she told the BBC she understood public concerns. “I do accept we should have laid the ground better,” she said.

She even said she wanted to try to win over the “hearts and minds” of jittery Tory MPs, while she and Kwasi Kwarteng have been hitting the phones and holding meetings with colleagues, and her chief of staff Mark Fullbrook has been trying – albeit not hugely successfully – to get the backbenches on board.

But any hopes MPs may have had that an imminent U-turn was on the cards were soon dashed when she reaffirmed her plans to cut the top 45p rate of tax and remove the cap on bankers’ bonuses, and refused to rule out welfare cuts and another round of austerity.

These proposals, in particular, are regarded as electorally toxic. They’re a gift to Labour, which has consistently asked of the government: “Whose side are they on?” When asked whether the “nasty party” was back, one senior Tory admitted: “Nobody is saying those words, but it’s basically what everybody is thinking when they look at what we’re proposing.”

Yet Truss appears to lack even the slightest hint of self-doubt that she may be on the wrong track. “She has supreme self-confidence – she’s brave, determined, doesn’t flinch,” one former cabinet minister says. “But that’s the generous interpretation.”

Others find her iron-clad rigidness unfathomable, and fear her hubris will be the party’s downfall. “She loves the Thatcher comparison, but Thatcher was ultimately a pragmatist,” says one MP. “But, far from rolling back the state, she never let public spending drop much below 40% GDP.”

She shrugs off suggestions that she doesn’t have the electoral mandate for a radically different economic approach. “How many people voted for your plan?” she was asked by Laura Kuenssberg. There was an awkward pause before Truss, looking baffled by the question, replied: “What do you mean by that?”

It isn’t just Tory MPs who are questioning how serious this has got for the party. A gloomy pall hung over the fringe events on the first day of the conference. At one, Rachel Wolf, the co-author of the Tory election manifesto, predicted that Truss would lose the next election because, despite presenting herself as the “continuity Boris” candidate, she had junked everything he stood for.

Pollster James Johnson, a former aide to Theresa May, claimed that up until the mini-budget the Tories still had a chance of winning in 2024. But he said the mini-budget had irretrievably broken the Tories’ reputation for sound management of the economy. “When economic competence goes, the Conservatives lose their advantage,” he said.

No 10 aides look downbeat, but dutifully defend the strategy. “Wait and see,” one says. “The tax cuts were just part one, she’s only announced about 20% of what she wants to do. The supply side reforms come next and when they see her comprehensive plan and have the OBR forecasts they’ll view it differently.”

They believe that they have until March – the last moment they can have a vote on some of the more controversial aspects of the mini-budget – and that the political landscape will look different by then, if only they can keep calm and carry on.

But as Truss has so dramatically lost control of the politics she may never get the chance to prove the economics can work. “If you double down too far you risk sticking your head in the sand,” one minister warns. While the prospect of her being ousted is still an outside bet, her position is extremely precarious.

Her team angered MPs further on Sunday when party chair, Jake Berry, threatened to strip MPs of the whip if they rebelled in the Commons, leading to muttering that she had only won the support of 50 MPs in the first round of the leadership contest.

Truss looks increasingly isolated, as more and more MPs feel emboldened to speak out publicly against her plans. She has surrounded herself with advisers that rose through the ranks of rightwing thinktank the Institute for Economic Affairs, who are encouraging her to stick to her guns.

Her relationship with Kwasi Kwarteng, her ideological soulmate, is already strained after she resisted his appeal to issue a statement when the pound tanked last Monday. She eventually relented.

Then on Sunday she appeared to throw the chancellor under the bus over the 45p tax rate cut, suggesting: “It was a decision that the chancellor made.”

Allies claimed she had not intended to point the finger of blame, a small consolation to Kwarteng.

Tory insiders suggest that Truss’s deputy prime minister, Thérèse Coffey, is the only minister she will listen to. “Thérèse isn’t ideological,” says one. “She’s an old friend who can say things to Liz that others wouldn’t get away with,” adds another. But Coffey is nothing if not a loyalist.

Truss is the longest serving cabinet minister, having served in Tory cabinets from Cameron’s onwards. “She’s always done what was asked of her in those roles,” one ally says. “It’s her turn now.” Tory MPs hoping to hear soon that the lady is, after all, for turning are likely to be disappointed.