The Liz Truss cabinet was a fleeting government
The Liz Truss cabinet was a fleeting government. Liz Truss resigned due to controversy over financial maneuvers. Her term as Prime Minister is the shortest in British history.
Only 45 days after taking office, Liz Truss stepped down as the leader of the Conservative Party. In a brief statement from 10 Downing Street, she announced that the government had achieved good results regarding energy bills and outlined a vision for a low-tax, high-growth economy that would capitalize on Brexit freedoms. However, she acknowledged that given the circumstances, she could not complete the mission for which she was chosen by the Conservative Party.
The downfall of the Prime Minister, who had taken over after a fierce internal party election following Boris Johnson, was a whirlwind she helped create. Her mini-budget, an ultra-liberal economic package based on tax cuts for higher incomes, support for families, and aiding debt-financed businesses, was intended to revive the economy but instead caused panic in financial markets. This led to a drop in the pound’s value and forced the Bank of England to intervene to save the pound and pension funds.
Never before had the start of a new executive branch caused such a political and financial earthquake—a true tsunami that left no room for her return. After days of pressure, even from many of the Prime Minister’s party colleagues, the ‘Ice Lady,’ a nickname given to Truss by The Economist, finally resigned, as they had bet that her government would not last long.
A predictable disaster
It wasn’t supposed to go this way. Truss managed to outpace her rival Rishi Sunak in the Conservative Party leadership race and promised to revive the economy by cutting taxes on higher incomes and corporations and supporting citizens struggling with inflation. The mini-budget, initially welcomed by her supporters as a true Conservative budget, included the biggest tax cuts proposed since 1972 and provided economic support that, according to its creators, was supposed to lead to rapid economic growth with positive outcomes across all sectors.
Economists opposed to the idea that a £45 billion tax cut for the wealthy could spur economic growth strongly criticized this move. Even the International Monetary Fund intervened, which is very unusual, asking the government to abandon this maneuver.
With the highest inflation rate in 40 years, increasing recession risks, and the burden of Britain’s debt interest that had exploded under the Johnson government, investors were fearful of the sustainability of public finances and fled. The market’s reaction was swift and surprising: a sharp drop in UK government bonds and a decline in the pound’s value against the dollar to its lowest level. Without the Bank of England’s emergency interventions, many funds and financial institutions would have gone bankrupt within days.
Welcome to Britaly
To reassure markets and institutions, Truss had to request the resignation of her minister, Kwasi Kwarteng, and appoint the moderate Jeremy Hunt in his place, who reversed the vast majority of the financial measures the Prime Minister had based her mission on. However, even these actions were not enough to shield the Prime Minister from further failures.
The resignation of Suella Braverman, the Home Secretary, who called Truss’s management inefficient and inadequate, was a new and unexpected shock that made the government’s survival even more uncertain. Ultimately, the Prime Minister’s resignation confirmed the speculations.
Welcome to Britaly is not a very flattering headline for Italy, which The Economist dedicated to the Truss affair and the chaos in which British politics is collapsing. The cover depicts Liz Truss as a British character with a three-colored pizza as a shield and a fork twirling spaghetti.
This English weekly reminds us that Liz Truss, along with Kwasi Kwarteng, were the authors of a pamphlet called ‘Britannia Unchained,’ which warned about the danger of becoming like Italy—a country with low growth, low productivity, and chaotic and disorganized accounts.
The Economist notes that ten years later, Ms. Truss and Mr. Kwarteng, in their unsuccessful attempt to create a different path, contributed to the inevitability of this confrontation.
The time of Rishi Sunak
Rishi Sunak is considered the first non-white Prime Minister in British history and faces a very challenging path ahead. Almost everyone was decisively waiting for Sunak’s victory, especially when on September 23, Boris Johnson withdrew from the election candidacy due to a party, paving the way for Rishi Sunak to Downing Street.
Rishi Sunak, 42, of Indian-origin parents who migrated from East Africa, graduated from Oxford. His distinct characteristic compared to other Conservatives is that he is the only non-white Prime Minister in British history, and perhaps for this reason, Conservative voters did not respond positively to his ‘Ready for Rishi’ slogan in the competition with Liz Truss.
After the severe defeat of his former rival, he got the chance to be the first child of Indian immigrants to enter 10 Downing Street. Considered one of the wealthiest politicians in Britain, he is married to Akshata Murthy, heir to a wealthy Indian dynasty of tech entrepreneurs. Sunak entered politics in 2014 and is regarded as a pragmatic politician.
From 2020 to June 2022, he was the Chief Secretary to the Treasury in the Johnson government, and during this period, he gained significant popularity for his precise economic management in the emergency conditions during the COVID pandemic.
Sunak has a tough path ahead. Inflation in the country has exceeded 10%, and government bond yields remain high. These are signs that the financial crisis in England continues, with skepticism and tension in the markets. The voices of those fearing that the Brexit-induced spiral might eventually turn the country into the ‘sick man of Europe’ are multiplying, as are the number of people who think serious consideration should be given to leaving the European Union and its consequences.
After the pandemic and the onset of the war in Ukraine, Conservative governments focused everything on economic growth and productivity. A hyper-liberal shift aimed at preventing rising living costs and an imminent recession. However, proposed measures like tax cuts and increased public spending had the opposite effect, heightening investor fears and, along with it, the fears of British families.
In 2023, this country will be at the lowest level of GDP growth among G7 economies. Problems and slow transportation, along with the relative shortage of some key raw materials, certainly create a negative combination for a country heavily reliant on importing goods from the rest of the continent.
Other articles about Liz Truss have been exclusively published in Iran Gate.
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