Just a month and a half after taking office, British Prime Minister Liz Truss is faced with her politics being in tatters. Her new Treasury Secretary, Jeremy Hunt, reversed virtually all of the tax breaks announced by Truss in London on Monday. Even the duration of the state energy price cap was reduced from two years to six months. The 47-year-old leader of the Conservatives has only been in office since the beginning of September. There is now open speculation about her imminent resignation.
The new Finance Minister Hunt – himself only at the head of the department since Friday – expressed himself in a statement scheduled at short notice. The background is the chaos on the financial markets that the government under Truss had unleashed with tax cuts announced without counter-financing. “The most important goal for our country now is stability,” Hunt said.
Despite the humiliating about-face, Truss wanted to remain in office and “deliver,” a spokesman for the conservative head of government told journalists. However, it is considered extremely questionable whether it can hold up. Ex-Treasury Secretary Rishi Sunak, Minister for Parliamentary Affairs Penny Mordaunt and Secretary of Defense Ben Wallace are being traded as possible successors. There is even speculation that ex-Prime Minister Boris Johnson will return.
Mordaunt represented Truss in an hour on the government crisis requested by the opposition Labor Party on Monday. Her justification for the Prime Minister’s absence, saying that she was “essential because of urgent tasks”, was met with laughter by the opposition. Labor leader Keir Starmer scoffed: “I assume that in this (conservative) Tory government everyone can be prime minister for 15 minutes.”
Truss had prevailed over the summer in the race to succeed Johnson by promising radical tax cuts to members of the conservative Tory party. According to their strategy, also known as “Trussonomics”, lower taxes should lead directly to strong economic growth. But that turned out to be a pipe dream and is now considered a failure.
Instead, investor confidence in the UK government was completely lost. The pound plummeted against the US dollar. After the announcement of radical tax cuts at the end of September, the Bank of England had to intervene several times and buy government bonds on a large scale. Rising interest rates on home loans exacerbated the cost of living crisis for many homeowners.
When the Federal Reserve phased out its bond purchases on Friday, Truss felt compelled to act. She sacked her finance minister, Kwasi Kwarteng, announced a partial departure from her tax policy, and appointed Hunt. Now she followed suit. Whether Truss can save her office is open. In particular, the capping of energy prices for households and companies was considered their most important political project. In the past few weeks she had always sold that as an achievement. The fact that she now has to backtrack here is considered an admission of a total failure.
“Self-Caused Crisis of Liz Truss”
The conservative magazine “Spectator” wrote of the “biggest self-inflicted political mistake” since the Suez Crisis in 1956. “Your intellectual and political project is at an end,” according to the paper. By Wednesday at the latest, the prime minister has to answer questions from MPs during weekly Question Time in the House of Commons. Should she fall, an early general election is considered almost inevitable. According to polls, the Labor Party could win a large majority at the moment.
Tax cuts that have since been reversed included a reduction in the base rate of personal income tax from 20 percent to 19 percent and a lower corporate tax. Scottish Prime Minister Nicola Sturgeon, who is currently presenting her campaign for Scotland to be independent of the United Kingdom, spoke of a “self-inflicted crisis by Liz Truss”. The sooner the prime minister vacates the space, the better.
