After a catastrophic start to her premiership, the country is clamoring for Truss to quit.
If you’ve had trouble keeping up with the political chaos across the pond lately, you’re not alone.
In the weeks since she assumed office, Britain’s new Prime Minister Liz Truss has announced a massive swathe of tax cuts that crashed the pound and saw mortgage rates skyrocket, fired the finance minister who implemented her financial plan, and replaced him with a new minister who’s already being called the country’s de facto leader. How did it all go so wrong — and can Truss survive? Here’s what we know.
So, how did all this start?
When disgraced former Prime Minister Boris Johnson announced that he would resign the leadership of the ruling Conservative party in July, several prominent Conservative MPs launched (in some cases, suspiciously well-prepared) leadership bids.
Among these were former Chancellor (aka, finance minister) Rishi Sunak, and then-Secretary of State for Foreign Affairs, Liz Truss. After a fierce summer-long battle, Sunak and Truss were the final two candidates selected by Conservative MPs to face the final vote by party members.
Whereas Sunak’s campaign policies were relatively cautious, including tax cuts only when inflation was under control, Truss ran on a bolder ticket promising massive tax cuts across the board. Pitching herself as the new figurehead for “true” Conservative values, Truss promised to cancel a planned rise in corporation tax and reverse an increase in National Insurance rates, as part of a “long-term plan to bring down the size of the state and the tax burden.” She assured voters that these measures would boost economic “growth,” and ultimately leave everyone better off.
Despite being thin on details as to how she’d actually pay for all these tax cuts, Truss’s promises of a bright Conservative future proved too tempting for members to resist. On September 5, it was announced that she’d beaten Sunak with 57.4% of the vote, and she became the new Prime Minister.
The much-hyped “mini-budget”
Among Truss’s prominent appointees was MP Kwasi Kwarteng, who she made Chancellor (finance minister) on September 6. The pair stressed that their ideological and financial visions were completely in sync, and on Friday, September 23, Kwarteng announced an ambitious “mini-budget” that was pitched as the realization of that vision.
The tax-slashing budget — which though announced by Kwarteng, was backed to the hilt by Truss — abolished the top 45p top income tax rate, cut the base income tax rate, canceled a planned rise in national insurance contributions (an additional tax paid by the British public), lowered corporation tax, and cut stamp duty (a land tax). Kwarteng and Truss planned to fund these changes, which came with an eye-watering £45 billion ($51 billion) price tag, through borrowing, and by slimming down state spending.
The pair didn’t specify where state savings were expected to come from, and the plan was not accompanied by an assessment by the government’s official spending watchdog — the Office for Budget Responsibility (OBR) — as is typically the case.
A disaster from every angle
From a PR point of view, abolishing the top 45p tax rate, effectively a tax cut for the richest people in the country who earn more than £150,000 per year, was a particularly strange move. The overwhelming majority of the British public, who don’t earn that much, is currently under a major financial strain and isn’t receiving support from the state to cope with the soaring cost of living.
As almost all financial analysts predicted, the budget’s impact was disastrous from the get-go. By the following Monday — September 26 — the pound had fallen to a record low against the dollar. The cost of borrowing in the UK rose sharply relative to other G7 countries, and mortgage rates skyrocketed, resulting in a huge number of products being withdrawn from the market. Practically overnight, millions of Brits already facing a dire cost-of-living crisis saw their hopes to purchase property go up in smoke — or their chances of keeping the home they have placed in serious jeopardy.
Though she initially defended the mini-budget and insisted she’d never back down on any of its measures, Truss instructed Kwarteng to undo the abolition of the 45p tax rate on October 3. Asked who’d originally had the idea for that policy, Truss said it was Kwarteng’s. When Kwarteng was asked whether he’d had Truss’s backing, he replied, “of course”.
Sacking Kwasi Kwarteng
On October 14, a source from Number 10 told the BBC that in spite of the upheaval of the previous weeks, Prime Minister Liz Truss and Chancellor Kwasi Kwarteng remained “in lockstep.” Just hours later, Truss sacked Kwarteng.
Truss replaced Kwarteng with MP Jeremy Hunt, a Conservative heavyweight who’d launched his own leadership bid when Boris Johnson stepped down. A former Health Secretary with strong party backing, Hunt was immediately dubbed the “de facto leader” of the Conservative party — and therefore, of Britain, by at least one senior Conservative, as well as much of the British press.
A “ghost leader”
Jeremy Hunt is now Britain’s fourth Chancellor in four months, an unprecedented turnover that’s thrown the country into political and financial chaos. Because Truss’s record in office has been so disastrous already, and it would be unthinkably embarrassing — not to mention politically suicidal — to get rid of Hunt, Truss is now effectively a hand puppet for her new Chancellor.
Hunt has already ripped up almost all of Truss’s economic strategy in an attempt to reassure the markets. As a result, Britain is now on course to bear its highest tax burden since 1950.
In an interview with the BBC on the evening of October 17, Truss acknowledged — finally — that she’d made mistakes, but insisted that she had no intention of resigning. Pushed on the fact that her decisions had directly impacted millions of people’s mortgages, she replied “I understand it is very difficult for families across the country.”
As of October 16, Truss’s popularity rating stood at -70, far lower than her predecessor Boris Johnson (who currently scores -36), and nearly as low as Prince Andrew, who’s sitting at -80.
For all her increasingly weak bravado, the choice as to whether she stays or goes may soon be out of Truss’s hands. Today, she’ll meet with her cabinet and attempt to regain some semblance of authority. Tomorrow, she’ll face opposition leader Keir Starmer in Prime Minister’s Questions, a weekly battle in the House Of Commons that’s broadcast live to the nation. If she falters then, it could mean game over.
