Truss sends Starmer cease and desist letter over claim she ‘crashed the economy’

Liz Truss has sent a cease and desist letter to Sir Keir Starmer demanding that he stops claiming she crashed the economy, it can be revealed.

In the letter, a copy of which has been seen by The Telegraph, lawyers acting on behalf of the former prime minister argue the statement is “false and defamatory”.

The lawyers even suggest that the assertions from Sir Keir before the July general election contributed towards Ms Truss losing her battle to be re-elected as the MP for South West Norfolk.

At the core of the row are the weeks after Ms Truss’s so-called mini-Budget in September 2022, when financial markets reacted negatively to its set of major tax cuts funded by borrowing.

The legal letter argues that the financial movements did not amount to an economic crash, since there was no fall in economic output or rise in unemployment – the usual signifiers of such an event.

To back up their claim, Ms Truss’s lawyers cite a report from Andrew Lilico, a fellow of the Institute of Economic Affairs, a Right-leaning think tank.

Mr Lilico explains his findings on a new episode of Planet Normal, the podcast from Telegraph columnists Allison Pearson and Liam Halligan, released on Thursday.

He calls the claim “manifestly false”, saying: “There wasn’t any crash in the economy. The economy actually grew faster in the period immediately following the mini-Budget.”

The row comes as current borrowing costs spiral, potentially wiping out the so-called “fiscal headroom” that Rachel Reeves, the Chancellor, left in her tax-raising Budget in October.

Ms Reeves is expected to recommit to her fiscal rules aimed at reducing borrowing in the coming weeks and will stress spending squeezes, not fresh tax rises, will be the focus.

The pound has plunged to a nine-month low, while the yield on 10-year gilts – a measure of the British Government’s borrowing costs – climbed to 4.8 per cent, its highest level since 2008.

Meanwhile, a quarterly survey by the Confederation of British Industry suggested that profits in financial services will fall in the coming months at their fastest rate since the depths of the financial crisis.

Leading Labour figures including Sir Keir used Ms Truss’s seven-week record in office to attack the Tories’ economic credibility during the election campaign.

The letter from Ms Truss’s lawyers opens by saying: “We are writing in relation to statements you have made publicly in respect of our client which have caused and will likely continue to cause serious harm to her reputation.

“Of particular concern are the false and defamatory public statements you made about our client in the lead-up to the UK general election from late May 2024, at a time when you knew or ought to have known that those statements were false and the statements were likely to materially impact public opinion of our client whilst she was standing as the parliamentary candidate for the Conservative Party in South West Norfolk.”

The letter makes reference to how Sir Keir claimed on numerous occasions during the election campaign in June that “Liz Truss crashed the economy”.

The letter ends: “The statements are defamatory and are causing continuing damage to our client’s reputation.

“Accordingly, our client requests that you immediately cease and desist from repeating the defamatory statements at any point, from causing them to be repeated or from otherwise re-publishing the defamatory statements or any part of them.

“We sincerely hope that this matter can now be resolved and that you will refrain from causing any further damage to our client.”

The core of Ms Truss’s argument is that the movements in the gilt and currency markets did not lead to economic output falling and therefore it cannot be claimed she “crashed the economy”.

The letter also points the finger of blame at the Bank of England and its handling of so-called “Liability-Driven Investment” or LDI from pension funds, which left the companies unusually sensitive to movements in interest rates for gilts.

The letter claims: “Those rate movements were caused by the Bank of England, and in particular by its poor handling of the LDI crisis, and its regulatory failures.”

Mr Lilico says on Planet Normal: “It’s not as though the economy was expected to go really fast and Liz Truss made it go a little bit slower than was expected.

“The thing that happened immediately following the mini-Budget was that the economy performed well. So it’s just preposterous to claim that she crashed the economy. Exactly the opposite happened. The economy did better than had been expected.”

No 10 was approached for comment.

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