British Prime Minister Liz Truss has announced her resignation, just a month and a half after taking office.
Thursday’s development came after her new Chancellor of the Exchequer, Jeremy Hunt, rolled back virtually all of her economic agenda.
Hunt’s move was supposed to be an impetus for growth, but it became Truss’s declaration of political bankruptcy.
At the beginning of this month, at the Conservative Party Conference in Birmingham, Truss had still attempted to rally the party around her controversial approach of boosting Britain’s economy.
“I have three priorities for the economy: growth, growth, growth,” she said.
But what was supposed to be a change from the tumultuous era of former Prime Minister Boris Johnson, a sense of chaos under Truss unravelled at a pace that is almost unprecedented in British history, Nicholas Allen, professor of politics at Royal Holloway, University of London, told Al Jazeera.
“Previous prime ministers’ central policies have unravelled very quickly, for instance – Neville Chamberlain’s leadership during the spring of 1940, Sir Anthony Eden’s Suez adventure, and David Cameron’s campaign to remain in the EU. I can also think of the backlash to Gordon Brown’s decision not to call a general election in the early autumn of 2007,” Allen said.
“But no new prime minister’s position has unravelled so early into their premiership or so catastrophically as Truss’s has over the last few weeks.”
The 47-year-old, who entered parliament in 2010, found herself in a first cabinet position in 2014 as secretary of state for environment, food and rural affairs under former Prime Minister David Cameron.
She has since served under Theresa May and Johnson in various positions.
In 2021, she was handed the top role of foreign secretary. After Johnson’s announcement to step down, she entered the leadership contest and won the race to succeed the latter with 57.4 percent of the members’ vote (against Rishi Sunak, who obtained 42.6 percent) over the summer by promising radical tax cuts, and high spending to curb energy prices, her very own version of supply-side economics.
According to her plan, one that her role models former British Prime Minister Margaret Thatcher and former US President Ronald Reagan both successfully implemented in the 1980s – albeit under very different circumstances – lower taxes, particularly for the wealthy, lead to investments that, at the same time, benefit the lower income brackets via the trickle-down effect, thus generating substantial economic growth.
However, when then-Chancellor of the Exchequer Kwasi Kwarteng presented Truss’s plans, including a mini-budget, a few weeks ago, the financial markets reacted in shock and incredulity, with a devastating effect. The pound sterling weakened significantly while UK government bond yields skyrocketed.
The Bank of England (BoE) even felt compelled to intervene with bond purchases to reassure investors. Moreover, rising interest rates on home loans exacerbated what has already been a significant cost-of-living crisis for many Britons.
“The uproar surrounding hers and her then-chancellor’s mini-budget was driven by three factors: the sheer boldness in terms of what was being proposed; the perceived trickery surrounding the cuts, including the sacking of Tom Scholar, the Treasury permanent secretary, the absence of costings, and the decision to call it a mini-budget in order to avoid the scrutiny of the Office for Budgetary Responsibility; and the understandable reaction of the markets,” Allen said.
When the BoE announced it would cease its bond purchases, Truss felt compelled to act, and she dismissed Kwarteng last Friday before announcing a U-turn on plans not to raise corporation tax – an approach she had previously labelled as anti-growth – part of the aforementioned, largely unfunded mini-budget, that had sparked the turmoil in the markets and shredded Truss’s credibility.
The same day, Truss also appointed Hunt as the new chancellor of the exchequer. Only three days later, on Monday, Hunt would reverse what was left of Truss’s initial plans. However, it was too little, too late, for Truss, who seemingly was impervious to challenging her own economic dogmas.
“Truss seemed to take no notice of those who warned of the dangers – refusing, for instance, to let the OBR’s forecast be published and sacking some key experienced government advisers,” Louise Thompson, senior lecturer in politics at the University of Manchester, told Al Jazeera.
“She seemed to be shoring up her power base without really understanding the damage,” she said. “Even the best prime minister needs people around them to challenge their ideas and until Hunt’s appointment as chancellor this week, Truss didn’t have any.”
Under Hunt’s plan, most of Truss’s 45 billion pounds ($50.4bn) of unfunded tax cuts were gone, and the two-year energy subsidy scheme for households and businesses – expected to cost more than 100 billion pounds ($112bn) – will now be curtailed in April.
“We will reverse almost all the tax measures announced in the growth plan three weeks ago that have not started parliamentary legislation,” Hunt said during his announcement.
The country must now raise taxes and limit spending with the aim of rebuilding trust and ensuring stability, he also noted.
According to Hunt, halting the planned tax cuts would raise 32 billion pounds ($35.8bn) yearly. After his announcement, the pound soared by as much as 2.3 percent – a trend that began with Kwarteng’s dismissal.
Damage is done
For Truss, however, the damage had already been done. Her credibility was simply lost with Hunt scrapping the policies that secured her election by party members.
“Hunt’s announcements on Monday were a sign that the prime minister got it very wrong and has been forced into a huge undoing of everything that was announced just a couple of weeks ago, including the energy price guarantee, something which dominated the leadership campaign over the summer,” Thompson said.
“The U-turns announced on Monday were undoubtedly necessary but gave the impression that the prime minister is being led by her chancellor,” she added.
For the past few days, rumours in and around the Westminster bubble about Truss’s demise had already been circulating, ranging from Hunt being in charge to a potential vote of no confidence. With her resignation, Truss seemingly only avoided the inevitable.
However, her tenure was not merely costly for the country. Her own reputation has suffered tremendously during these past weeks.
“Until six weeks ago, Liz Truss had a pretty solid reputation as MP and a safe pair of hands in the government. Her time as prime minister has done nothing to steady the ship and has made the Conservative Party look even more unsteady and out of touch with the public than they were under Boris Johnson,” Thompson said.
“Future historians would be fair if they described her tenure as brief and multidimensionally ruinous,” Allen added.
Moreover, Truss’s resignation will not necessarily ameliorate the situation for the Tories, as the party seeks to prevent new elections at all costs, based on the almost certain defeat it would suffer.
“Polls suggest Labour has a massive lead, so an election is an incredibly risky strategy which could bring catastrophic results for the Conservative Party. It’s in every sitting Conservative MP’s best interests to keep the government going and delay the inevitable electoral hit, but with each passing day, the potential for a Conservative wipeout across England is increasing,” Thompson said.
Indeed, a recent poll found the Tories trailing Labour by 17 percentage points – numbers not seen since 2001 under Labour leader Tony Blair.
With dozens of Tory MPs potentially losing their offices, the spiral of British politics will continue to turn for a while,
“The Tories are left up sh*t creek without a paddle and without a boat,” Allen summed up the situation post-Truss.