Dead on Arrival: The Truss and Trusonomics Experiment Is Almost Over


Things have been turbulent in the UK since the 2016 ‘Brexit’ vote to leave the European Union – but the upheaval of the past six weeks could be one of the most volatile episodes in modern British politics.

A summary. Newly installed Tory Prime Minister Liz Truss presented a tax cut plan – aka Trussonomics – last month to try to stimulate Britain’s inflation-plagued economy through a ripple effect by lobbying for £45 billion ($50 billion) in tax cuts. But she failed to convince voters, markets and even her own party that it could be paid for or successfully solved the cost of living crisis. Market turmoil and widespread criticism ensued.

In response, Truss backtracked on corporation tax cuts, then on Friday sacrificed his longtime ally and political soulmate, British Chancellor Kwasi Kwarteng. She replaced him with Jeremy Hunt, a conservative centrist who is the fourth person to take on the role since July. But many fear that Hunt will not be able stabilize the steps.

While the the opposition smells of blood and conservative support plummeting, the chaos has also drawn international criticism. US President Joe Biden openly called Truss’ plan a mistake on Sunday. The United Kingdom also becomes the end of jokes publicly cracked by world leaders.

Indeed, Truss’s policy-making on her own — she did not consult the independent watchdog that scrutinizes budget plans — and botched U-turns sparked the beginning of a mutiny on the conservative benches. Just two months into a term that began with the unceremonious dismissal of former Prime Minister Boris Johnson, Truss’s days as Prime Minister appear numbered.

Goodwill hunting. While Truss and the Conservative Party support the bleeding, new Chancellor of the Exchequer Jeremy Hunt insisted over the weekend that nothing was “off the table” when asked if he would further abandon the Prime Minister’s tax cut proposals. This declaration was a coup confirming him as the new financial boss – and another challenge for Truss, who on Friday called for his other proposals to be taken up. Hunt says he supports Truss’s premiership, but admitted “errors” and structural flaws in his politics.

Hunt is in the hot seat. While some have praised the moderate, anti-Brexit ‘remnant’ who now rule the Exchequer from 11 Downing Street, critics point out that Hunt did not do well in the last Tory leadership race. Moreover, while he ultimately endorsed Rishi Sunak in this race, Hunt himself had backed higher corporate tax cuts than Truss. As a former health secretary, his performance in preparing the UK for the pandemic has also fallen short.

Money moves. Hunt seems to be burying Trussonomics and moving quickly towards orthodoxy. Within 48 hours of taking office, he warned that taxes could rise and government spending would fall. But he also referred to a “compassionate” Conservative government that would not implement the kind of austerity measures seen in 2010.

Not everyone is convinced: Goldman Sachs downgraded its economic growth outlook for the UK on Sunday, and everyone is looking forward to Monday’s market performance. After Truss gave his press conference on Friday, gilts (UK government bonds) fell further, with the sale approaching the reference “line in the sand” which triggers the intervention of the Bank of England. The pound, which hit a record low three weeks ago – the weakest pound since 1985 – has fallen further.

What are the choices? Hunt must act quickly to stop the bleeding. He has two weeks before presenting a new fiscal policy to the country on October 31. This must include plans to help Britons pay their energy bills – which have climbed 96% since last winter – over the next two years, and a plan to finance £25bn ($28bn) of tax cuts to achieve medium-term debt sustainability.

He locked horns with Truss on Sunday at the Prime Minister’s country residence, Checkers. He also met with the head of the Bank of England over the weekend to get on the same page with the institution, which Kwarteng failed to do. But Hunt has limited room to manoeuvre: leaders of the powerful National Health Service, the nation’s largest employer, warned him that if his spending cuts also include cutting NHS funding, it will have “major consequences for patient care”. In a country where support for the national health system enjoys rare bipartisan political support, this can only create problems.

Can Truss hold on? Letters of defiance are reportedly already filed against Truss by MPs. But Mujtaba Rahman, Eurasia Group’s senior analyst for Europe, says removing Truss will be difficult. “Although MPs are openly talking about finding a way to replace Truss without re-involving the party’s 160,000 members [for intra-party elections]it won’t be easy,” he said.

Like last summer, there will likely be disagreements over who should take the helm. “Some Truss supporters and Boris Johnson allies will try to block a return to power by Rishi Sunak,” Rahman said.

Some lawmakers, Rahman says, believe Truss will be kicked out before Hunt’s Oct. 31 announcement. The consensus is that his performance will now speed up talks among senior Tories for a deal on a ‘unity candidate’. But party rules for choosing a prime minister should be rewritten to raise the threshold a candidate would have to meet to be in the running. The likely candidates, Rahman says, are Rishi Sunak, the former chancellor, and Penny Mordaunt, the leader of the House of Commons.

While many fear the appointment of another Tory leader will make the party look ridiculous, “the growing opinion in Westminster”, says Rahman, “is that it might be a better alternative to retain a prime minister who has clearly failed to achieve the ‘mission’ for which she set out.”


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