An unfunded tax cut plan. Market turmoil. Soaring interest rates. One finance minister fired, and another hired to reverse his own boss’s agenda. U.K. Prime Minister Liz Truss’s government is coming apart at the seams.
In office for barely six weeks, U.K. Prime Minister Liz Truss is now desperately clinging to power after a disastrous tax cut plan sent markets into turmoil, forcing her to fire her finance minister and install a replacement who immediately reversed nearly her entire agenda.
- New U.K. finance minister Jeremy Hunt said Monday he was scrapping “almost all” of the tax cut package announced just weeks ago, ripping the heart out of the policy agenda his new boss Liz Truss campaigned on.
- In his statement, Hunt said the United Kingdom needed to raise taxes and cut spending – the antithesis of “Trussonomics” to rebuild investor confidence and restore economic stability. It’s clear: “Trussonomics” is dead.
- The pound and British bond markets “soared” after Hunt’s announcement as his appointment indicated a steady hand was back on the tiller after weeks of uncertainty.
- Hunt was appointed Chancellor of the Exchequer on Friday after Truss fired his predecessor, Kwasi Kwarteng, after less than six weeks on the job. Truss and Kwarteng jointly announced the tax cut plan that threw financial markets into turmoil and Truss’s government into crisis.
- Truss campaigned as a “disruptor,” and disrupt she did. Her plan for massive tax cuts paid for with borrowing triggered “a financial crisis, emergency central bank intervention, multiple U-turns” and sparked a “mutiny” among her own Members of Parliament (MPs).
- To paraphrase another Conservative big beast brought down by a botched economic policy, Liz Truss may be in office but she is no longer in power.
- BBC News described the Truss ministry as a “hand-to-mouth government, living hour by hour” forced to “say whatever we can, as quickly as we can, to reassure the markets.”
- The Guardian wrote, “This is perhaps the most extraordinary start to any UK premiership in generations. With the prime minister nowhere to be seen, the new chancellor has announced he will reverse almost the entire platform that Liz Truss stood on to win the Conservative leadership…Truss’s entire raison d’etre as UK prime minister is effectively removed.”
- The New York Times said the fact the pound and British government bonds rallied after Hunt’s statement could “buy Ms. Truss a few days of breathing space” but even so her political survival remains “in deep doubt.”
- The Telegraph reported Tory MPs are actively plotting a “coup” to remove Truss from office as her credibility is “shot through” and she may be “just days away from being forced out of 10 Downing St.” New Chancellor of the Exchequer Jeremy Hunt is already being seen as the “de facto PM” after barely four days on the job.
- The Wall Street Journal noted financial markets “cheered” Hunt’s U-Turn on economic policies. The pound rose against the dollar and U.K. borrowing costs were down after the new Chancellor’s Monday morning statement.
- President Joe Biden decided to weigh in on Truss’s budget while eating ice cream in Oregon on Saturday, according to Fox News. “I was not the only one that thought it was a mistake,” Biden said. “I think the idea of cutting taxes on the super-wealthy at a time when — anyway, I disagreed with the policy.” By comparison, Biden said the U.S. economy is “strong as hell.”
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© Dominic Moore, 2022