Liz Truss sends authorized letter ordering Starmer to cease saying she crashed financial system | Liz Truss

Liz Truss has despatched a authorized letter to Keir Starmer demanding he stops making “false and defamatory” claims that she crashed the financial system.

The previous prime minister despatched a six-page “stop and desist” letter accusing Starmer of harming her repute and contributing to her shedding her South West Norfolk seat within the normal election.

The row got here because the UK’s long-term borrowing prices hit their highest degree because the 2008 banking disaster, and the worth of the pound reached its lowest level in a yr.

Truss’s authorized letter argued that the market meltdown that adopted her disastrous mini-budget in October 2022 couldn’t precisely be described as “a crash of the financial system” as a result of it didn’t contain a fall in GDP or rise in unemployment.

Citing a report by the economist and rightwing commentator Andrew Lilico for Europe Economics, the letter mentioned the financial turmoil was the results of elements over which Truss had “no management”.

It claimed that the dramatic rises in rates of interest and long-term authorities borrowing prices throughout her short-lived premiership have been the results of failures by the Financial institution of England, and that describing them as an financial crash prompt an “ignorance of fundamental economics”.

Pension funds managing huge sums got here near collapse on account of the meltdown in authorities bond markets after Truss’s mini-budget. Outlined-benefit pension funds, which assure a set earnings in retirement regardless of how investments carry out, have been caught out as a result of that they had relied closely on LDI (liability-driven investing) hedging preparations, which contain holding authorities bonds as collateral.

When the worth of presidency bonds dropped dramatically after the disastrous mini-budget, pension trustees have been pressured to promote their holdings at pace to boost money, which additional drove down the worth of bonds, making a “doom loop”.

Crediting Lilico’s report, Truss’s authorized letter argued that “the LDI disaster would have occurred in some unspecified time in the future in any occasion” and that it couldn’t be described as “a crash of the financial system”.

Lower than two weeks after her mini-budget, Truss ditched its central plan to scrap the 45p prime fee of earnings tax, in an try and cease the financial meltdown it had created. Inside three weeks, she had changed her chancellor, Kwasi Kwarteng, with Jeremy Hunt, who instantly ditched virtually all her financial insurance policies.

Senior Conservatives, together with Rishi Sunak, have been scathing of her dealing with of the financial system. In response to Starmer criticising Truss’s mini-budget at prime minister’s questions, Sunak advised the Commons in April: “Everybody is aware of that two years in the past I wasn’t afraid to repeatedly warn about what her financial insurance policies would result in, even when it wasn’t what folks needed to listen to on the time.”

Truss’s letter, first reported by the Day by day Telegraph, marks the most recent try by Britain’s shortest-serving prime minister to salvage her political repute.

A reference to “the disastrous Liz Truss mini-budget” was excised from official Cupboard Workplace briefing doc in July after Truss wrote to Simon Case, the then cupboard secretary, to complain.