The rise and fall of Britain’s shortest serving Prime Minister

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Liz Truss’ speech of being a “fighter, not a quitter” clearly did not age well, as the former Prime Minister resigned a day after those famous words. This u-turn on her words, however, is just one of the several policy reversals that have characterized her disastrous premiership. A short tenure of 45 days threw British politics and markets into turmoil, leaving the country looking more like an emerging market than an established member of the G7.  What exactly happened during Liz Truss’ time in office?

Death of Queen Elizabeth II

On the 8th of September, the nation’s monarch of over 70 years, Queen Elizabeth II, passed away, triggering a period of national mourning just as Truss began her tenure as PM. These first two weeks were politically muted, as all media coverage focussed on the monarchy and politics came to a standstill.

“Trussonomics” proved to be more of an ideological fever dream

Kwasi Kwarteng’s “Mini-Budget”

In a dramatic turn of events, Kwasi Kwarteng unleashed his ‘mini-budget’ upon the country,  representing a significant shift in the country’s economic strategy. The budget was meant to cut household taxes and energy bills whilst driving economic growth. Several key taxes such as national insurance, stamp duty and corporation tax were cut, with a proposed increase in government borrowing to pay for it. This clashed with the Bank of England’s policy to reduce the economy’s money supply to try and curb inflation. 

This mini-budget made not just the British public, but perhaps entire world, lose confidence in the Truss administration. In the words of Benjamin Graham, “in the short-term, the market is a voting machine”. The markets did indeed vote, with chaos in the gilt markets, soaring government bond yields and a plummeting pound in the aftermath of the mini-budget. The central bank was forced to hike interest rates, raising the costs of living and exacerbating the record-high inflation. “Trussonomics” proved to be more of an ideological fever dream than an enforceable policy plan.

New Chancellor, Reversed Strategy

The pressure from the public and global markets finally got to the Truss administration. Kwasi Kwarteng reversed the plan to cut the country’s highest rate of income tax, in order to prevent any distractions from tackling the top challenges facing the country. In a series of further humiliating reversals, Kwarteng was sacked as chancellor and replaced by Jeremy Hunt, and corporation tax cuts were reversed and actually made higher by the administration. 

It seemed that Truss’s insistence on the importance of “difficult decisions” could not last when faced with negative reactions from the financial markets. Hunt scrapped most of the mini-budget in order to rebuild investor confidence. 

In the next few days, Home Secretary Suella Braverman quit, using her resignation letter to express concerns over the nature of Truss’ government.

It seemed that Truss’s insistence on the importance of “difficult decisions” could not last when faced with negative reactions from the financial markets.

Truss’ Resignation 

After one of the most turbulent premierships in British history, Liz Truss resigned as Prime Minister on October 20, saying she could not deliver on the mandate through which she was elected. Despite her aim to improve the economy, it seems she could only achieve this by resigning, sending the pound’s value shooting up. . 

Rishi Sunak as Prime Minister

Once again, the Conservative Party, despite only representing a fraction of the population, have elected a leader for the country. Rishi Sunak has become the nation’s Prime Minister through clearing, as it was cleverly put, after Boris Johnson dropped out of the race and Penny Mordaunt failed to secure enough votes. The backdrop against which Britain gets its first British-Asian Prime Minister is hardly a rosy one, with government borrowing costs sky high after the mini-budget, soaring energy bills and a bearish financial market. While Sunak may be a free marketeer at heart, he will have to show the world that the UK is a credible financial destination by making tough choices to cut spending and hike taxes. 

Sunak’s election has enraged the opposition and many members of the public who are now calling for a general election.  A long-term plan for his administration needs to restore democratic accountability and a clear vision of Conservative policy. 

Image: Number 10 via Flickr

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