When Liz Truss ran for Prime Minister of the United Kingdom this summer, an ally predicted that her first weeks in office would be turbulent. Few, including Truss, were prepared for the magnitude of the sound and fury. In just six weeks, the prime minister’s libertarian economic policies have precipitated a financial crisis, an emergency central bank intervention, multiple U-turns, and the firing of her Treasury chief.
Truss is now facing a mutiny within the ruling Conservative Party, which threatens her leadership. On Sunday, Conservative lawmaker Robert Halfon lamented that the last few weeks had been “one horror story after another." “The government has looked like libertarian jihadists and treated the whole country as kind of laboratory mice on which to carry out ultra, ultra free-market experiments," he told Sky News.
But according to a report by the Associated Press, this wasn’t completely unexpected. During the Conservative leadership election campaign, Truss described herself as a disruptor who would challenge economic “orthodoxy," promising to cut taxes and cut red tape in order to boost Britain’s sluggish economy. Her opponent, former Treasury Secretary Rishi Sunak, argued that immediate tax cuts would be reckless in the face of the coronavirus pandemic and the war in Ukraine.
The 172,000 Conservative Party members, who are mostly older and wealthier, preferred Truss’ upbeat vision. On September 5, she was elected leader of the ruling party with 57% of the vote. The next day, Queen Elizabeth II appointed her as Prime Minister, in one of the monarch’s final acts before her death on September 8.
A Bad Start
Truss’ first days in office were overshadowed by the queen’s state funeral. Then, on September 23, Treasury Secretary Kwasi Kwarteng unveiled the economic plan he and Truss had devised. It included 45 billion pounds ($50 billion) in tax cuts, including a reduction in income tax for the highest earners, but no assessment of how the government would pay for them. Truss was doing exactly what she and her allies had promised. Mark Littlewood, CEO of the Libertarian think tank, predicted “fireworks" this summer as the new prime minister pushed for economic reform at “absolutely breakneck speed."
Nonetheless, the magnitude of the announcement surprised financial markets and political experts.
The pound fell to a record low against the US dollar, raising the cost of government borrowing. The Bank of England was forced to intervene by purchasing government bonds in order to prevent the financial crisis from spreading to the rest of the economy. The central bank also warned that interest rates would have to rise faster than expected to combat inflation, which is currently running at around 10%, leaving millions of homeowners facing significant increases in mortgage payments.
As the backlash grew, Truss began to abandon pieces of the package in an attempt to reassure her party and the markets. The top-earner tax cut was scrapped in the middle of the Conservative Party’s annual conference in early October, as the party rebelled. It was insufficient. Truss fired Kwarteng on Friday and replaced her longtime friend and ally with Jeremy Hunt, who served as health secretary and foreign secretary in David Cameron’s and Theresa May’s Conservative governments.
Focus on Hunt
And on Monday, the UK’s new Treasury Secretary ripped up the government’s economic plan, dramatically reversing most of the tax cuts and spending plans announced by new Prime Minister Liz Truss less than a month ago. The move raises further concerns about how long the beleaguered British leader can remain in office, though Truss has stated that she has no plans to resign.
Chancellor of the Exchequer Jeremy Hunt said he was cancelling “almost all" of Truss’ tax cuts, as well as her flagship energy policy and her promise — reiterated just last week — that no public spending cuts would be made. While the policy change helped to restore the government’s economic credibility, it also weakened the prime minister’s rapidly eroding authority and fueled calls for her to resign before her despairing Conservative Party forces her out.
The focus has now shifted to Hunt. A long-serving Cabinet minister, he has held positions such as foreign secretary and health secretary. He is regarded as a centrist among Conservatives and as a “safe pair of hands" to guide the government through its current self-inflicted crisis.
It’s a remarkable comeback for a man who twice ran unsuccessfully for Conservative Party leadership. Earlier this year, Hunt was defeated in the first round of the race to succeed Boris Johnson as party leader and Prime Minister of the United Kingdom. Hunt received only 18 votes, falling far short of the 30 required to advance in the competition. He later backed Truss’ opponent, Rishi Sunak, who finished second in the election.
He also ran against Johnson in the Conservative Party’s leadership election in 2019. Hunt attempted to position himself as the “serious" candidate in contrast to Johnson in that race, but he was defeated and removed from the Cabinet.
Hunt was defeated in part because he supported the losing “remain" side in the 2016 Brexit referendum on leaving the European Union, a position that became politically untenable in the right-leaning, Eurosceptic party.
Hunt is now regarded as the most powerful person in government, with one of his allies, Conservative lawmaker Steve Brine, last week comparing him to the government’s “chief executive," while Truss remains “chairman."
However, Hunt has dismissed speculation that he will run for president again.
“I think that after running two leadership campaigns — and failing in both of them — the desire to be a leader has been clinically excised from me," he told the BBC on Sunday. “I want to be a good Chancellor. It’s going to be very, very difficult, but that’s what I’m focusing on."
With inputs from the Associated Press
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