Eight minutes. Liz Truss, 47, couldn’t stand it any longer for journalists at Westminster as she announced her turnaround in tax policy and change at the top of the Treasury. Friday’s performance on London’s Downing Street seemed uncomfortable and unreasonable.
Shortly before that, the prime minister had fired her finance minister, Kwasi Kwarteng (47), after the two’s tax plans had collapsed in reality. Former Secretary of State and Health Jeremy Hunt will now take over.
Can Truss survive the crisis?
But the question is whether the head of government can survive the crisis. Truss Friday recouped the corporate tax cut it had previously announced as the centerpiece of its pro-growth agenda. This should bring 18 billion pounds (about 20.7 billion euros) into the treasury’s coffers. It is already the second course correction after the cabinet has canceled the abolition of the top rate.
But that still leaves a huge hole of around £25bn in her budget, which she tore herself apart through far-reaching tax breaks.
But Truss was anything but insightful. She insisted she was on the right track. Portions of their so-called mini-budget were “further” and “faster” than markets expected, Truss said. She added: “We need to act now to convince the markets of our fiscal discipline.”
Financial markets in turmoil
Jeremy Hunt (55), who has many years of government experience, must undoubtedly contribute to this. Critics, however, pointed out that he himself had promised even bigger tax breaks when he ran for Johnson’s successor in the summer.
The problem: investors had simply lost faith in the British government. As a result, both the pound’s exchange rate against the dollar plummeted and government bond yields rose. That means that the government has to pay more to borrow money on the capital market. This, in turn, accelerated the rise in interest rates on real estate loans. The central bank was forced to buy bonds worth £19 billion to stop the trend.
On Friday night, there was no sign that Truss’s hesitant performance on Downing Street had regained the confidence of the financial markets. On the contrary, bond yields rose again. A sign that the turnaround was not enough for investors.
Tory party wants to drive them out
If it stays that way, it would soon be tight for Truss. The Daily Mail headlined on Saturday: “How much more can she (and can we) have?” There is already rumblings in the Tory party. Sky News reporter Beth Rigby quoted an inside source as saying that a significant number of letters had been received by the chairman of the so-called 1922 committee.
The faction is the mood barometer of whether a prime minister still has the confidence of his fellow MPs and can possibly force Truss to resign.
Should Truss be impeached, Britain could soon have its fifth prime minister in the past six years. The expectation is that an early election will then be inevitable, because Truss does not have his own mandate. This is actually a red rag for the Conservatives as the opposition Labor party leads by more than 30 points in some polls. (SDA/euc)