Liz Truss plans Thatcherite shake-up of the Treasury

Liz Truss - Charlotte Graham for The Telegraph
Liz Truss - Charlotte Graham for The Telegraph

Liz Truss is drawing up Thatcherite plans to give Number 10 more control over the economy, The Telegraph understands.

The Tory leadership frontrunner has vowed to challenge Treasury orthodoxy and is understood to have identified a quartet of key allies expected to act as her economic team.

She is understood to be considering installing Kwasi Kwarteng, the Business Secretary, as Chancellor, with Simon Clarke likely to stay on in the Treasury, where he is currently chief secretary.

Jacob Rees-Mogg and John Redwood, who are also influential, may take formal roles. Mr Redwood, Margaret Thatcher’s head of policy in the 1980s and key to pushing through her policy of privatisation, on Friday night described Ms Truss as a “breath of fresh air”.

He added: “It’s refreshing that we can have tax cuts at a time of a massive hit to people’s incomes. She has come up with the right measures.”

Asked whether he would take a role if she became PM, he said: “I wish her every success and I will help her in any way. But I'm not an adviser to the campaign or anything.”

If Ms Truss becomes prime minister, she intends to beef up the number of economic advisers in Number 10 to give her more power to work with her chancellor to challenge Treasury “groupthink”, according to sources.

That is reminiscent of Thatcher’s reliance on economic advisers such as Sir Alan Walters, who helped her push forward her agenda against institutional opposition.

It comes as Ms Truss said she would target 2.5 per cent of economic growth a year, and laid out plans to boost home ownership by encouraging the Bank of England to allow rent payments to be used as part of mortgage assessments.

A senior campaign source told The Telegraph: “Liz rightly thinks we can’t have failed, business as usual economic policy and won’t be captured by Treasury groupthink. She will be bold on the economy and will lower taxes, keep tight control of spending, and push through supply-side reforms that will create higher growth and more sustainable growth.

“Liz’s message to the Treasury will be simple – prioritise economic growth, deliver on the promises we made to the electorate in 2019 and enact her economic plan.”

In an interview with the Conservative Home website on Friday, the Foreign Secretary said she was an optimist on the economy, adding: “I hate this declinist stuff. There’s too much talking the country down, saying ‘you can’t do this’, saying ‘if we do this it will all be a disaster’. That’s why I’m in politics.”

Her comments echoed those made by Thatcher in 1979, when she said: “I can’t bear Britain in decline. I just can’t.”

Ms Truss emphasised her focus on growth, saying she wanted to lay out a “10-year plan for public service reform, and a 10-year plan to change Britain’s economic growth rate”, adding that “we should be growing on average at 2.5 per cent”.

The Tory leadership frontrunner restated her intention to look again at the Bank of England’s mandate, saying: “It was set in 1997 in completely different times, and one of the issues around controlling inflation is around monetary policy. That’s not just about interest rates, it’s also about quantitative easing that is taking place.

“And I want to look at the best practice of central banks around the world, look at which banks have been best at controlling inflation, and revisit the mandate.

“I haven’t made any decisions, and the chancellor hasn’t made any decisions, about exactly how that mandate would change. But I think it’s important that we review our monetary policy and the monetary policy settings and the mandate of the Bank of England, and make sure it is delivering for the times we’re in now.”

Ms Truss also dismissed warnings from Rishi Sunak, her leadership rival, that interest rates would soar under her tax plans.

“Frankly, this is just scaremongering,” she said. “Inflation is projected to come down next year, and the Bank of England is independent – it makes decisions about interest rates completely independently of the Government.”

It is understood that a Truss government would seek to abolish the joint Number 10/Number 11 economic unit established by Dominic Cummings because she does not believe it has led to effective economic policy-making.

Ms Truss plans to work closely with her chancellor and work as one team, according to sources, but with a strong economic presence within Number 10.

During a visit to Norfolk on Friday, she said she was committed to “challenging the current orthodoxy around investment spending”, adding: “We need more of it going into rural areas, more of it going into left-behind areas, more of it going into parts of Britain that don’t have a good infrastructure yet, and that’s what I’m committed to do.”

On Friday night, the Foreign Secretary pledged to “unlock” home ownership for thousands more young people by helping renters prove they are ready to take on a mortgage.

She said she would encourage the Bank of England to allow rent payments to be used as part of the affordability assessment for a mortgage.

According to the Government, more than half of today’s renters could afford the monthly cost of a mortgage, but various constraints mean only six per cent could immediately access a typical first-time buyer mortgage.

The Truss campaign said this is because the majority of lenders do not currently take someone’ s ability to pay a certain amount of rent as proof that they can afford to pay a higher mortgage, pricing them out of buying a home.

Ms said she intended to “rip up the red tape that is holding back house-building” by “scrapping top-down, Whitehall-imposed housing targets”, adding: “People are getting older and older before they get their foot on the property ladder.

“As prime minister, I would break down barriers and unlock the opportunity of homeownership for millions of hard-working renters across the nation. I will also rip up red tape that’s holding back house-building.”

Writing in the Countryside Alliance magazine, Ms Truss said she would remove red tape in the inspection regime for food producers in an attempt to improve Britain’s food security.

She vowed to “unleash the potential of our rural communities” and “place planning powers back in the hands of local people who know their communities best, allowing them to grow organically and meet local needs”.