UK leader Liz Truss goes from triumph to trouble in 6 weeks
LONDON (AP) — When Liz Truss ran for leader of Britain this summer, an ally predicted her first weeks in office would be turbulent.
But few were prepared for the scale of the sound and fury – let alone Truss herself. In just six weeks, the Prime Minister’s libertarian economic policies triggered a financial crisis, emergency central bank intervention, multiple reversals and the dismissal of his Treasury chief.
Now Truss faces a mutiny within the ruling Conservative Party that leaves his leadership hanging by a thread.
Conservative lawmaker Robert Halfon fumed on Sunday that the past few weeks had brought “one horror story after another”.
“The government has looked like libertarian jihadists and has treated the whole country like some sort of laboratory mouse to run ultra, ultra free market experiments on,” he told Sky News.
It’s not like the party was left unannounced. During the summer contest to lead the Conservatives, Truss called herself a disrupter who would challenge economic “orthodoxy”. She promised she would cut taxes and bureaucracy, and stimulate growth in Britain’s sluggish economy.
His rival, former Treasury chief Rishi Sunak, argued that immediate tax cuts would be unwise amid economic shockwaves from the coronavirus pandemic and war in Ukraine.
The Conservative Party’s 172,000 members — who are largely older and well-off — preferred Truss’ amplified vision. She won 57% of members’ votes to become leader of the ruling party on September 5. The following day, she was appointed Prime Minister by Queen Elizabeth II in one of the monarch’s last acts before her death on September 8.
Truss’ early days in office were overshadowed by a period of national mourning for the Queen. Then, on September 23, Treasury Chief Kwasi Kwarteng announced the economic plan he and Truss had drawn up. It included 45 billion pounds ($50 billion) in tax cuts – including an income tax cut for top earners – with no assessment of how the government would pay for them.
Truss was doing what she and her allies said she would do. Libertarian think tank leader Mark Littlewood predicted over the summer that there would be ‘fireworks’ as the new Prime Minister pushed for economic reform at ‘absolute speed vertiginous”.
Still, the magnitude of the announcement took financial markets and policy pundits by surprise.
“Many of us mistakenly expected her to pivot after winning the leadership race like many presidents do after winning the primaries,” said Tim Bale, a politics professor at the University. Queen Mary University of London. “But she didn’t do that. She really meant what she said.
The pound plunged to a record low against the US dollar and the cost of government borrowing soared. The Bank of England was forced to step in to buy government bonds and prevent the financial crisis from spreading throughout the economy. The central bank also warned that interest rates will need to rise even faster than expected to rein in inflation which is hovering around single digits, leaving millions of homeowners facing steep increases in mortgage payments.
Jill Rutter, senior fellow at the Institute for Government think tank, said Truss and Kwarteng had made a series of “unforced errors” with their economic agenda.
“They shouldn’t have shown their contempt for economic institutions so clearly,” she said. “I think they could have listened to advice. And I think one of the things they got wrong was to announce part of the package, the tax cuts…without the spending side of the equation.
As the backlash grew, Truss began dropping pieces of the package in an effort to reassure his party and the markets. The tax cut for high earners was scrapped in the middle of the Conservative Party’s annual conference in early October as the party rebelled.
It wasn’t enough. Truss fired Kwarteng on Friday and replaced his longtime friend and ally with Jeremy Hunt, who served as health secretary and foreign secretary in the Conservative governments of David Cameron and Theresa May.
In a brief pessimistic press conference, the Prime Minister acknowledged that “parts of our mini-budget have gone further and faster than the markets had expected”. She canceled a project to lower corporate tax, another pillar of her economic plan, to “reassure the markets about our budgetary discipline”.
Truss is still prime minister in name, but power in government has passed to Hunt, who has signaled he plans to tear up much of his remaining economic plan when he makes a mid-term budget statement on October 31. . He said tax increases and cuts in public spending will be needed to restore the government’s fiscal credibility.
Still, Hunt insisted on Sunday: “The prime minister is in charge.”
“She is listened to. She has changed. She was ready to do the hardest thing in politics, which is to change course,” Hunt told the BBC.
The Conservative Party still has a large majority in parliament and – in theory – has two years until national elections are held. Polls suggest an election would be a wipeout for the Tories, with Labor winning a large majority.
Conservative lawmakers are debating whether they should try to replace their leader for the second time this year. In July, the party ousted Prime Minister Boris Johnson, who led them to victory in 2019, when a series of ethics scandals ensnared his administration.
Now many of them have buyer’s remorse about its replacement. Under party rules, Truss is immune from a leadership challenge for a year, but some Tory lawmakers believe she may be forced to step down if the party can agree on a successor. Defeated rival Sunak, House of Commons Leader Penny Mordaunt and popular Defense Secretary Ben Wallace are among the names mentioned as potential replacements. Johnson, who remains a lawmaker, still has supporters as well.
Deputy Treasury Minister Andrew Griffith argued on Sunday that Truss should be given a chance to try and restore order.
“This is a time when we need stability,” he told Sky News. “People back home are tearing their hair out at the level of uncertainty. What they want to see is a capable government that does (the) job.
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