Liz Truss has had a difficult beginning in her position as prime minister of the UK. Her first significant policy decision resulted in a humiliating U-turn and financial catastrophe. As the nation’s economic problems worsen, her position is already under question.
Over the past few years, many who follow the political and economic situation in the UK have become accustomed to the chaos. The last two weeks might be the best of all.
It’s important to start at the beginning. The September 23 “mini-budget” marked Liz Truss’s new administration’s first significant policy decision. The goal was to create a plan to steer the nation out of various economic problems.
Distractions, U-turns, and climbdowns
The plans were only in place for a little more than a week until there was too much uproar and criticism. Truss and Kwarteng made a spectacular climbdown announcement on October 3.
Kwarteng tweeted, “We get it, and we have listened,” announcing that the so-called 45p tax rate, which targeted top earnings, will no longer be abolished.
Truss and Kwarteng both frequently said in their media talking points that the elimination of the top rate of tax had turned into “a diversion.”
The situation was considerably clearer, according to Andrew Goodwin from Oxford Economics.
The optics of tax cuts for the wealthy at a time when the poor are suffering greatly from high inflation and there are rumors that the government may increase benefits by less than the rate of inflation, he told DW, are unfavorable.
He doesn’t think that the government’s about-face will change people’s perceptions of the UK’s
Growing discomfort and the potential for infection
The pound has regained some of its losses since the government changed course, and the markets for UK government bonds have also stabilized.
However, confidence in the Truss administration’s ability to address the UK’s core economic issues appears to be destroyed. Truss had made it clear throughout her run for the Conservative party leadership that her top priority was to get the UK economy growing again. She will reiterate this objective in her speech at her party’s annual convention on Wednesday, despite the commotion her plans have provoked.
Following the mini-budget, several economists revised their projections for UK economic growth in 2023 downward. The average of projections, Consensus Economics, predicts that the UK economy would decrease by about 0.3% in 2019.