Post by Admin on Oct 20, 2022 17:06:53 GMT -4
An economic crisis, a stunning reversal and a chaotic end: How Liz Truss’ premiership collapsed
“It’s a slow-motion car crash that turned into a head-on collision,” one analyst said of Truss’ downfall.
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LONDON — Her tenure as Britain’s prime minister began in the early days of fall, but it didn’t even last until winter.
After her flagship economic policy sent the markets into a tailspin and was then almost entirely scrapped, Liz Truss was forced out by members of her Conservative Party on Thursday.
“Reality and the Conservative Party have not been best mates from 2015 onwards. They have a long record of ignoring economic forecasts,” said Anand Menon, director of the U.K. in a Changing Europe think tank, based in London.
“It would have come to a head at some point,” he added, alluding to the unsteady state of the country’s economy.
But even by the chaotic standards of contemporary British politics, the events leading up to Truss’ departure will be remembered as a high watermark of dysfunction, with resignations and allegations of bullying and “manhandling” in the House of Commons.
Here’s how it all fell apart for Truss and what comes next.
How did we get here?
It started with a 25-minute speech former Finance Minister Kwasi Kwarteng gave in Parliament on Sept. 23, when he upended several long-standing fiscal rules by announcing 45 billion pounds ($50 billion) of unfunded tax cuts, including a tax break for the richest. The plan was criticized not only by the opposing Labour Party, but also President Joe Biden and the International Monetary Fund.
The cuts, an expression of Truss and Kwarteng’s libertarian ideology, were aimed at shrinking the state and empowering entrepreneurs and big business to create jobs and spread prosperity through higher wages.
But the plan left investors and fund managers wondering how Britain would pay the money back. The pound crashed to historic lows against the dollar, and the U.K.’s cost of borrowing ballooned, spooking pension markets and prompting the central Bank of England to step in and buy government bonds.
“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to U.K. financial stability,” the Bank of England said in a statement.
With markets in revolt and despite his close relationship with Truss, Kwarteng was pushed out and replaced Monday by Jeremy Hunt, who reversed almost all the economic reforms in a humiliating climbdown.
The prime minister said “sorry” in a TV interview later that day.
What happened on Wednesday?
Truss told Parliament on Wednesday, “I am a fighter, not a quitter,” after repeatedly being told she was unfit for office by opposition lawmakers.
That claim would be tested hours later, when Home Secretary Suella Braverman resigned, becoming the second high-profile government minister to leave Truss’ team within a week.
Braverman’s successor, the experienced politician Grant Shapps, had just hours earlier been among Truss’ most vocal critics — a sign that Truss’ authority was gone.
Experts say Wednesday night’s events showed Truss no longer had the support to continue.
“Ultimately you need to be able to command a majority in Parliament. She would be flouting convention to stay,” said professor Tim Bale, an expert on British politics and the Conservative Party at Queen Mary University of London. “It’s a slow-motion car crash that turned into a head-on collision.”
Newspapers still hold political sway in Britain and largely support the Conservatives, normally referred to by their old nickname, the Tories. But this week, usually sympathetic publications had savagely turned on Truss, mirroring the rock-bottom ratings in opinion polls. The Sun went with a single word for Thursday’s front page: BROKEN.
“It’s a slow-motion car crash that turned into a head-on collision,” one analyst said of Truss’ downfall.
After her flagship economic policy sent the markets into a tailspin and was then almost entirely scrapped, Liz Truss was forced out by members of her Conservative Party on Thursday.
“Reality and the Conservative Party have not been best mates from 2015 onwards. They have a long record of ignoring economic forecasts,” said Anand Menon, director of the U.K. in a Changing Europe think tank, based in London.
“It would have come to a head at some point,” he added, alluding to the unsteady state of the country’s economy.
But even by the chaotic standards of contemporary British politics, the events leading up to Truss’ departure will be remembered as a high watermark of dysfunction, with resignations and allegations of bullying and “manhandling” in the House of Commons.
Here’s how it all fell apart for Truss and what comes next.
How did we get here?
It started with a 25-minute speech former Finance Minister Kwasi Kwarteng gave in Parliament on Sept. 23, when he upended several long-standing fiscal rules by announcing 45 billion pounds ($50 billion) of unfunded tax cuts, including a tax break for the richest. The plan was criticized not only by the opposing Labour Party, but also President Joe Biden and the International Monetary Fund.
The cuts, an expression of Truss and Kwarteng’s libertarian ideology, were aimed at shrinking the state and empowering entrepreneurs and big business to create jobs and spread prosperity through higher wages.
But the plan left investors and fund managers wondering how Britain would pay the money back. The pound crashed to historic lows against the dollar, and the U.K.’s cost of borrowing ballooned, spooking pension markets and prompting the central Bank of England to step in and buy government bonds.
“Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to U.K. financial stability,” the Bank of England said in a statement.
With markets in revolt and despite his close relationship with Truss, Kwarteng was pushed out and replaced Monday by Jeremy Hunt, who reversed almost all the economic reforms in a humiliating climbdown.
The prime minister said “sorry” in a TV interview later that day.
What happened on Wednesday?
Truss told Parliament on Wednesday, “I am a fighter, not a quitter,” after repeatedly being told she was unfit for office by opposition lawmakers.
That claim would be tested hours later, when Home Secretary Suella Braverman resigned, becoming the second high-profile government minister to leave Truss’ team within a week.
Braverman’s successor, the experienced politician Grant Shapps, had just hours earlier been among Truss’ most vocal critics — a sign that Truss’ authority was gone.
Experts say Wednesday night’s events showed Truss no longer had the support to continue.
“Ultimately you need to be able to command a majority in Parliament. She would be flouting convention to stay,” said professor Tim Bale, an expert on British politics and the Conservative Party at Queen Mary University of London. “It’s a slow-motion car crash that turned into a head-on collision.”
Newspapers still hold political sway in Britain and largely support the Conservatives, normally referred to by their old nickname, the Tories. But this week, usually sympathetic publications had savagely turned on Truss, mirroring the rock-bottom ratings in opinion polls. The Sun went with a single word for Thursday’s front page: BROKEN.
