Ground zero

Liz Truss has narrowly survived her first month in office.

Fresh off the heels of a controversial mini-Budget which saw markets tumble, the pound plummet and rising mortgage rates exacerbate the already sky-rocketing cost of living, the Conservative Party held its annual Party Conference.

Conference is a crucial moment for any new leader. It's a test of their ability to bring their Party together and unite its members around a single vision, providing MPs and Ministers with the confidence they need to push ahead with a new agenda.

But Liz Truss' first Conference saw open dissent from prominent backbenchers, a humiliating U-turn on one of the Government's hero policies and even its own ministers offering up 'freelance' opinions on policy direction. If collective responsibility and message discipline are the hallmarks of a strong government, it's safe to say things are looking delicate.

Do or die

Truss knows that the mini-Budget was an unforced error – it burnt through her political capital and the goodwill from overseeing the national mourning period. The next 100 days will be crucial to whether the Government can survive. Here's how it breaks down:

October 11: Parliament returns

On Tuesday, Parliament returns and the Prime Minister faces her first real test of governance as she attempts to pass the legislation required to implement her agenda.

The week kicks off with the first Treasury Questions since the mini-Budget at 2.30pm on Tuesday, just minutes before the IMF publishes its annual World Economic Outlook.

The IMF’s predictions are unlikely to paint a more optimistic picture than at the last update in April, which will make for an-all-the-more gruelling Wednesday for Liz Truss as she takes to the dispatch box for PMQs, right after the latest monthly GDP figures are released.

Over the coming weeks, the Government will seek to regain control by legislating for its growth agenda. Investment Zones will see a heavy billing, as will Ukraine, new frameworks for planning, English devolution, and health service reforms.

With MPs and Ministers already going on the record opposing various policies, we can expect a bumpy ride for Liz Truss' policy agenda. Expect pinch-points over benefits, energy, and social care.

November 31: The Budget

After the starter went down so badly, there's a lot riding on the main course. On October 31, Kwasi Kwarteng will publish his full Budget (three weeks earlier than planned and, this time, alongside an OBR forecast) which will set out the Government's plan to steady the ship and support families through the same cost-of-living-crisis that his last statement helped to exacerbate.

This is undoubtedly the most crucial moment for the new Government. If Conservative MPs can't support the Chancellor's measures, confidence will be lost in Truss' ability to govern and it is likely that MPs will seek to remove her.

At any point: by-elections

As if that wasn't enough, Truss' authority could be challenged as a result of by-elections in seats where Parliamentary investigations are concluding or where the sitting MP might be offered a peerage in Boris Johnson's resignation honours list. A loss in seats with whopping Conservative majorities (such as Romford and Frome) would almost certainly trigger revolt in the Parliamentary Party.

Can she survive?

Liz Truss faces an almighty challenge to recover from a damaging first month in office. That being said, many in the Conservative Party believe it is in their best interests to give her a chance to recover. A strong outing in Parliament and success with the November Budget could be enough to put the turmoil of the last month behind her, and she still has a (Treasury) reshuffle up her sleeve if necessary.

If any of the pinch points over the next 100 days should go badly, however, there are a number of options for outing Liz Truss:

1. Letters of no confidence

Under the current rules, Liz Truss is safe from a no confidence vote for another 11 months, even if 15% of the Conservative Parliamentary Party submit letters of no confidence. However, the rules could be changed by the 1922 Committee if it suspends the 12-month rule, amends it to a shorter period, or gets rid of it altogether. If this were to happen (and the 15% threshold is met) a vote of no confidence would be held in the Prime Minister’s leadership.

2. A failed Government confidence motion

The Government could also trip itself up through a failed confidence motion. In an attempt to strong-arm backbenchers into supporting its position, the Government could designate a particular vote (such as on the Budget) a 'matter of confidence' in the Government, threatening to remove the whip to those who don't support it. If enough MPs are willing to call the Whips’ bluff and the Government loses its own confidence motion, it must either resign in favour of a new Government or dissolve Parliament for a General Election.

3. Cabinet revolt

It's unlikely at this stage, but Truss could prove to have more in common with Margaret Thatcher than she bargained for if enough of her ministers decide they are unable to command the authority of the Parliamentary Party with her at the helm. Watch closely for message discipline in senior positions.

Who would replace her?

It is widely accepted that the Conservative Party wouldn't put itself through another formal leadership contest so soon after the last one. The options to replace the Prime Minister are, therefore:

1. A leadership contest decided by MPs alone
2. A ‘coronation’ by the Parliamentary Party of one candidate (as was the case in 2003 with the election of Michael Howard)

Don't expect to see any new names in the waiting room to become the next Prime Minister. As there is no formal mechanism for choosing a leader in this circumstance, talk in Birmingham last week was that the Party would be likely to choose the previous runner up, Rishi Sunak, or even – whisper it – fall back on the previous Prime Minister, Boris Johnson. There are no surprises in the other names doing the rounds, which include: Michael Gove, Penny Mordaunt, Sajid Javid, Jeremy Hunt, Ben Wallace and Kemi Badenoch.

How likely is a Labour Government?

The clear winner in all this is the Labour Party, which is finally in a position to take advantage of Conservative masochism with an impressive lead in the polls. We can expect Keir Starmer and his top team to agitate for a General Election at every opportunity, but even then the path to No. 10 is far from certain.

Labour needs a seven-to-eight-point swing from the Conservatives to deliver the 80-plus gains in seats needed to become the largest party in the House of Commons. Even then, a swing of this scale (which would be larger than Thatcher’s in 1979) would still only deliver a minority Labour Government, relying on the SNP for support. Labour would then need a further 30 seats to free itself from the SNP, and 30 more on top of that to win an outright majority.

Labour must win back Scotland, the 'red wall', and make inroads into middle England to achieve a victory of this scale.

What next for business?

For the time being, Liz Truss and her cabinet remain in their positions, so companies should continue to engage on a "business as usual" basis. The next full Budget, scheduled for November 23, is a key moment and the window to influence is open now.

With the prospect of a Labour government looking ever likelier, businesses would also be wise to increase their engagement with the opposition to build strong relationships in good time.

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