Former UK Prime Minister Liz Truss has issued a cease and desist letter to Labour leader Sir Keir Starmer, demanding he stop claiming she “crashed the economy.” Truss’ legal team argues that such statements are both “false and defamatory,” alleging that they have caused “serious harm” to her reputation, particularly during the recent general election campaign.
Legal Action over Economic Crash Comments
The letter, revealed by The Telegraph, accuses Sir Keir of making these assertions in the run-up to the May 2024 general election, contributing to the Conservative loss of her South West Norfolk seat. Truss’ lawyers dispute the term “economic crash,” claiming the fallout from her 2022 mini-budget—which saw a gilt market freefall and a sterling dip following unfunded tax cuts—did not meet the criteria for such an event.
They argue no fall in economic output or rise in unemployment occurred, citing analysis by Andrew Lilico of the Institute of Economic Affairs, a right-leaning think tank. Lilico contends that the economy instead showed growth in the aftermath of the fiscal event.
The letter states that these remarks from the Labour leader “likely impacted public opinion” of Truss as a parliamentary candidate and contributed to her political defeat.
“Of particular concern are the false and defamatory public statements you made about our client in the lead-up to the UK general election…at a time when you knew or ought to have known that those statements were false,” reads the letter from her legal team.
Accusations Against the Labour Party and the Bank of England
Truss’ legal representatives take further aim at Labour, urging Sir Keir and other party members to refrain from repeating what they claim are defamatory remarks. The letter warns that continuing such statements could cause ongoing damage to Truss’ reputation.
“Accordingly, our client requests that you immediately cease and desist,” the letter demands.
Interestingly, the statement also attributes the gilt market volatility to the Bank of England’s “poor handling” of the liability-driven investment (LDI) crisis linked to pension funds. The letter cites regulatory failures at the Bank of England instead of Truss’ fiscal policies as the root cause of the interest rate movements that triggered market instability.
Economic Challenges Shadow New Labour Government
The controversy comes as the Labour government faces mounting financial pressure. Borrowing costs have climbed to their highest level in 17 years, amid investor concerns around fiscal sustainability and stagflation risks. This has created potential squeeze points for Labour’s initial plans, as the cost of servicing government debt threatens to erode its expected financial flexibility.
The economic turbulence has also weighed on the British pound, which fell to its lowest value since April 2023 earlier this week.
Chancellor Rachel Reeves now faces intensified scrutiny, with Shadow Chancellor Mel Stride set to question Labour’s fiscal strategy in the Commons this Thursday.
Growing Economic Pessimism
Adding to the challenges, the Confederation of British Industry (CBI) has reported declining optimism among financial services firms. Its survey shows the steepest drop in confidence in over two years, partly influenced by concerns that Labour’s proposed tax measures could deter new investments.
The current state of the UK economy has drawn further comparisons to the fallout from Truss’ own fiscal decisions, reigniting debates over responsibility and mismanagement.
Downing Street has yet to issue a formal comment on the matter.