Truss sends cease and desist to Starmer demanding he stop saying she crashed the economy

Liz Truss has sent Sir Keir Starmer a cease and desist letter, warning him to stop saying she “crashed the economy”.

The former prime minister’s lawyers have said the remarks - made since the lead-up to the general election - are likely to “cause serious harm to her reputation”, claiming they are “false and defamatory”.

They also suggest that assertions made by the Labour leader before the July general election contributed to Ms Truss losing her South West Norfolk seat.

Sir Keir has repeatedly claimed the former prime minister crashed the economy, referring to the weeks after her 2022 mini-budget which sparked gilt market freefall and a run on sterling after she introduced unfunded tax cuts.

The letter, originally seen by the Telegraph, argues that the fallout did not amount to an economic crash, since there was no fall in economic output or rise in unemployment.

Ms Truss’s lawyers reference a report from Andrew Lilico, a fellow of right leaning think-tank the Institute of Economic Affairs. Mr Lilico argues there was no crash after Ms Truss’ budget, instead claiming the economy actually grew faster in the period immediately following the fiscal event.

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The letter from the former PM’s lawyers reads: “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.”

Referring to statements made by Sir Keir and other senior members of the Labour Party, claiming the former PM “crashed the economy”, the letter adds: “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.”

But Downing Street indicated Sir Keir would not change his language, saying the PM “absolutely stands by” his comments on the previous government’s record.

“You can ask people up and down the country what the previous government’s impact was on their mortgages, on inflation and I think you’ll get similar answers on that”, the prime minister’s spokesperson said.

The letter also heaps blame on the Bank of England for its handling of “liability-driven investment” (LDI) from pension funds, which left the firms more 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.”

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It comes amid growing concern over the new Labour government’s first budget after borrowing costs struck their highest level for almost 17 years on Wednesday amid a continued sell-off in the bond market and investor concerns over the threat of stagflation.

The rise in the cost of servicing government debts could cut into Labour’s expected financial headroom in a potentially worrying sign of how investors see fiscal sustainability in the UK.

This also contributed to a slump in the value of the pound, which dropped to its lowest level since April last year.

Rachel Reeves will face questions from shadow chancellor Mel Stride over the growing pressure of borrowing costs on the public finances in the Commons on Thursday.

Meanwhile, a new survey from the Confederation of British Industry indicated that optimism among financial services firms has declined at the sharpest pace in more than two years, amid concerns that Budget tax measures could weigh on investment plans.