British Prime Minister Liz Truss dies after ‘trickle economy’ U-turns

British Prime Minister Liz Truss dies after 'trickle economy' U-turns
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British Prime Minister Liz Truss held a press conference in the Downing Street Briefing Room in central London in October. 14, 2022.

Daniel Leal | AP | Getty Pictures

LONDON — British Prime Minister Liz Truss’s term in office is just six weeks away, and the political future of another Conservative leader seems at stake.

On Monday, Truss said he regretted the mistakes made by his government and accepted the responsibility of going “too far and too fast” with him. contentious “drop-down” economics approach.

The “lowered economy” theory is that tax cuts and benefits for the rich will eventually trickle down to everyone. The approach has been harshly criticized by political opponents in the UK – and even US President Joe Biden – At a time when the UK is facing a deepening cost of living crisis.

Truss’s apology, whose “Trussonomics” political stance has been likened to that of his political idols Ronald Reagan and Margaret Thatcher, followed one of the most extraordinary U-turns in modern British political history.

On Monday, newly formed Finance Minister Jeremy Hunt dramatically Smashed nearly all the tax cuts Truss had promised, cutting its flagship energy policy short and made it clear that there would be cuts in public spending – something Truss said “definitely” don’t plan until last week.

The Volte face shatters Truss’s economic vision, with five of his own Conservative lawmakers now openly calling for his resignation.

Truss insisted he would stay in office. I’m telling the BBC He intends to fend off criticism from across the political spectrum and steer the Conservatives to the next general election.

Britain’s new Finance Minister Jeremy Hunt made big financial statements on Monday.

House of Commons – PA Images / Contributor / Getty Images

Kallum Pickering, senior economist at Berenberg Bank, said in a research note that Hunt’s end to “Trussonomics” now means that Conservative lawmakers will sooner or later replace the prime minister.

“The scrapping of much of the policy manifesto shows that he is in power only in name,” Pickering said, adding that it would not be surprising if British politics “get louder” in the coming days as the Truss government collapses.

“We’ve been here before with previous prime ministers. When the resignations begin and the credentials go to the party’s plenary, it’s usually a matter of time before the Prime Minister resigns.”

Pickering said that when choosing Truss’ replacement, Conservative lawmakers would likely choose someone with the confidence of the financial markets.

This may include former Finance Minister Rishi Sunak, who lost to Truss in the last leadership contest“She looks like her star is rising from her last performance,” Pickering said.

Growth outlook ‘pretty bleak’

Hunt reversed nearly all controversial tax measures announced in September by his predecessor, Kwasi Kwarteng. 23 Seen as calming investor concerns earlier in the week.

sterling rose against dollar On Monday, along with government borrowing prices.

Truss and Kwarteng sought to turbocharge Britain’s stagnant economic growth with forecast of unfunded tax cuts this total is roughly £45 billion ($50.7 billion). The so-called “mini-budget” has triggered chaos in financial markets, an emergency response from the Bank of England, and several humiliating U-turns.

cage Kwarteng was sacked last week The slump in markets continued until Hunt stepped in on Monday, though amid mounting political pressure.

Economist: Jeremy Hunt's announcement to restore macro stability does not change growth outlook

“The growth picture is pretty bleak,” Daniel Vernazza, Unicredit’s chief international economist, told CNBC’s “Street Signs Europe” on Tuesday.

Vernazza said Hunt’s statements were designed to restore market stability, but did little to improve the UK’s growth outlook.

Vernazza said: “We’re having a huge problem with real incomes and high interest rates. There are a lot of headwinds facing the UK economy over the next 12 months.”

Is it a regular pass?

Opinion polls show that only 10% of Britons view Truss favorably. According to a recent survey by market research firm YouGovSupport for the Conservative Party collapsed.

For now, the ruling Conservatives still have a large parliamentary majority, and there is still another two years before a national election is held, in theory at least, Truss said.

However, analysts at political risk consultancy Eurasia Group give only a 10% chance of Truss remaining as prime minister.

“The consensus in Westminster is now too weak for the Prime Minister to do anything without the approval of the Chancellor. He can’t afford to lose another one. Dismissal of his close ally Kwasi Kwarteng has not stabilized his position as he had hoped,” said Eurasia Group analysts.

KPMG head of tax policy says Truss' scrapped tax cut plan couldn't come at a worse time

“Given these pressures, Truss may admit that he is unfit for the job and inform the 1922 committee chairman, Sir Graham Brady, that he wishes to leave with dignity, with a regular pass to the party at a convenient time,” they added.

“Despite being inevitably shaken by events, the allies insist that Trussonomics is determined to continue its ‘duty,’ even though it is an open secret that it has destroyed itself. But the odds may rise if things go badly.”

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