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December 3, 2022

Bopaak

Bopaak

U.K. Prime Minister Truss abandons her agenda to stem market meltdown

U.K. Prime Minister Liz Trussis still officially in charge, but hardly seems to be in control.

The big picture: Truss unleashed chaos in the financial markets three weeks ago with a plan to slash taxes while simultaneously funding massive energy subsidies. Her finance minister is now gone, along with most of that plan and arguably her authority.

Driving the news: It was not Truss but House of Commons leader Penny Mordaunt who appeared before Parliament today to explain the departure of Truss’ close ideological ally Kwasi Kwarteng as Chancellor of the Exchequer.

  • Mordaunt said Truss had been detained by “urgent business,” then later clarified, perhaps unhelpfully, that “the prime minister is not under a desk.”
  • Kwarteng’s replacement, Jeremy Hunt — a relative moderate picked in part because he’s not loyal to Truss — then stepped up to the dispatch box to explain that “nearly all” of Truss’ trademark tax cuts would be reversed. Truss did turn up and sit silently at Hunt’s side for a time before departing to jeers.

How it happened: Truss won the inter-party race to replace Boris Johnson by promising “bold” tax cuts, including for the rich, in order to boost economic growth.

  • Truss’ leadership rival Rishi Sunak had warned that she risked supercharging inflation and forcing up interest rates — claims she dismissed as “project fear” from the “anti-growth coalition.”
  • In practice, the Truss-Kwarteng package spooked the markets so badly that the Bank of England staged an emergency intervention to ease a run on the pound.
  • Unable to steady the situation, Truss took the humiliating step of handing economic policy over to Hunt. ReadMore
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