With just over a month in the office, UK PM Liz Truss is finding it difficult to stay in power. Her proposed plans have failed to calm the inflation-stricken markets or assuage lawmakers’ concerns.
On September 5, Conservative Party leader Liz Truss won the UK PM race, defeating her rival Rishi Sunak to win the Tory leadership contest. With her election promises of immediate action on energy prices and reforms to stabilise economy, many believed in Liz Truss’s bold post-poll proclamation of “we’ll deliver, we’ll deliver, we’ll deliver”. However, after just 41 days in the top post, Liz Truss seems to be barely clinging to power, as rumours swirl of possible rebellion among the Tories.
Liz Truss is the Conservatives’ fourth prime minister since the Brexit referendum in June 2016. After David Cameron stepped down in June 2016, Theresa May took over as UK PM. But the Brexit agreement became a contentious point for Theresa May, who resigned in June 2019 over the stalled deal. Amid the uncertainties over Brexit and no deal with the European Union, Boris Johnson came to power in July 2019. But three years later, the mass desertion of the prime minister, as well as other controversies around his term, forced Boris Johnson’s ouster in July this year. And after a bitter Tory leadership contest with Rishi Sunak, Liz Truss was elected the prime minister of UK.
THE PROBLEMS LIZ TRUSS INHERITED
All hopes were pinned on Liz Truss to bring stability to the nation grappling with inflation, soaring energy prices, and the heightened cost of living.
Liz Truss inherited all these problems when she assumed the charge of prime minister. The energy crisis triggered by the Russia-Ukraine war had pushed energy bill to unaffordable levels, threatening businesses and domestic lives alike. Liz Truss was expected to unveil immediate financial support for households while also trying to solve the deep-rooted problems exposed by the impacts of Covid-19 pandemic and the war in Ukraine.
Liz Truss was also expected to quickly get a handle on rising inflation. In July, Britain’s annual inflation stood at 10.1 per cent, with high dependency on import of gas as well as the fast-weakening Pound plaguing the economy.
Liz Truss was also expected to navigate the tumultuous UK-EU trade negotiations.
HOW AND WHEN THE CRISIS STARTED
But in just over a month, what has led to the Conservative Party’s MPs holding a less than favourable view of Liz Truss? Here’s a brief timeline of the event:
1. Two days after winning the UK PM race, Liz Truss appointed her new Cabinet on September 7. In UK’s most diverse Cabinets unveiled, Liz Truss appointed Kwasi Kwarteng as finance minister — the first first Black man at the post.
2. With an aim to break the “cycle of stagnation” in the British economy, Kwarteng unveiled a mini-budget on September 23. The budget was intended to cut household taxes and energy bills.
3. However, the sweeping tax cuts and energy freeze, which was intended to boost the UK’s troubled economy, did not have the desired effect on the market. The traders warned of ballooning debt and soon after the mini budget was unveiled, the UK government’s bond yields soared and currency hit a record low.
4. The trouble did not end there for the Liz Truss government. With the markets already raising an alarm over the government’s plans, the International Monetary Fund (IMF) also criticised the UK government over its proposal for tax cuts. The IMF warned that the proposal would likely fuel the cost-of-living crisis, increase inequality and add to pressures pushing up prices.
5. The burgeoning crisis forced the Bank of England (BOE) to step in. In September, the BOE said that it would buy as many long-dated government bonds as needed between then and October 14 to stabilise financial markets.
6. Liz Truss defended her government’s action and argued that the market turbulence following the announcement of planned was a result of global problems due to Ukraine war. She said that it was important that monetary and fiscal policy are coordinated, adding that she would stick to her plan to try to boost growth.
7. However, the UK PM was soon forced into a humiliating U-turn, reversing a cut to the highest rate of income tax after it sparked turmoil in financial markets and a rebellion in her party. Finance Minister Kwasi Kwarteng said the decision to scrap the top rate tax cut had been taken with “some humility and contrition”.
8. Under fire over the economic turmoil, Liz Truss sacked Kwasi Kwarteng and appointed Jeremy Hunt as the new finance minister. Kwarteng took to Twitter to confirm that he had been asked to “stand aside” as chancellor.
THE POSSIBLE ROAD AHEAD
With Truss’s first budget being a resounding failure that saw the pound fall and mortgage and government debt interest rates rise, the confidence in her leadership is faltering.
The panicked lawmakers are contemplating a leadership change. The UK MPs are said to be considering a joint team of Rishi Sunak and Penny Mordaunt where the former is the prime minister and the latter his deputy. The other option is for Penny Mordaunt to take the roles of party leader and prime minister with Rishi Sunak as Chancellor.
With Liz Truss’s finance minister lasting for just 38 days in office, questions are being raised as to how long she can last as the prime minister. With Liz Truss failing to assuage either the UK market or Conservative Party MPs, there is increasing unease among the lawmakers. It remains to be seen what final steps the Conservative leadership takes, but the winds do not seem to favour Liz Truss at the moment.