In late August when it was announced that the UK Conservative Party leadership run - off would be between Rishi Sunak and LizTruss all three main contributors to this blog expressed our horror at the prospect that Liz Truss looked likely to become our Prime Minister.
While Sunak, who managed state finances as competently as anyone could through the insanity of the COVID era, was tainted by his and his family's vast wealth and the air of privilege that surrounded him, Truss presenyed herself as the girl from an ordinary family who rose to prominence through hard graft.
Two months later, with the death of the Queen and the acclamation of King Charlie behind us, Ms. Truss has shown she is the bad prime minister everyone expected her to be. Her appointments to senior government offices were based on virtue signalling and political correctness, she appointed people on the basis of skin colour and ethnic origin rather than ability and experience. Worse, she handed out senior posts to her most loyal supporters. Thus, instead of allowing the competent and level headed Nahdim Zawahi continue as Chancellor, because he had been appointed he had to be replaced by the economically illiterate and politically tone deaf Kwasi Kwarteng who, far too quickly introduces a tax cutting mini budget. With an energy crisis in progress and soaring inflation driving people into poverty it was completely the wrong time for tax cuts which always favour the well off.
The Financial markets went into meltdown and the value of the pound sterling crashed as soon as Kwarteng revealed his plan. And repeated the stunt when Truss tried to defend her government's policy.
The chaos her chancellor's mini budget caused continues to endanger investments andpension funds two weeks after the event. To recap:
As soon as the deceased queen was buried Truss went to work. Chancellor Kwarteng announced a 'mini-budget' that will lower taxes for people with high incomes while increasing the deficit to cover the promised energy cost subsidies:
As soon as the 'mini budget' was announced the British pound sterling tanked. This not only against the overvalued U.S. dollar but also compared to the rather weak Euro.
Interest rates on British government bonds (Gilts) increased sharply.
After two days the British central bank, the Bank of England, had to intervene to prevent a Lehman like crisis that would have killed many British pension funds. The bank, which had just increased its interest rate to tighten money supply, reverted to quantitative easing by buying gilts in the open market. This will further increase the already runaway inflation.
On October 3 Truss had to trash her plans to lower taxes for rich individuals:
In a major U-turn, Prime Minister Liz Truss said Monday that the proposal to scrap the 45 percent rate for people earning more than 150,000 pounds ($168,000) had become a “distraction.”
Reacting to the news of the reversal, the pound rebounded Monday morning against the U.S. dollar, returning to where it was before the government’s tax-and-borrowing plan sent it plunging.
But Britain will still have a major budget deficit and gilts soon started to fall again. Three days ago the Bank of England again stepped in to save the nearly bankrupt pension funds.
Some saner members of the conservative party were finally preparing to oust her:
Britain’s government faced intensifying calls on Thursday to retreat from tax-cutting plans that have alarmed financial markets, as questions continued to swirl about the future of the country’s new prime minister, Liz Truss, and her beleaguered chancellor of the Exchequer, Kwasi Kwarteng.
On a day of political turmoil, the foreign secretary, James Cleverly, warned colleagues against trying to oust Ms. Truss. And Mr. Kwarteng rejected suggestions that the backlash against his so-called mini-budget, which includes unfunded tax cuts and a costly package to help consumers with energy bills, could cost him his job, insisting: “I’m not going anywhere.”
On Thursday, Downing Street said that its policy had not changed, but that did nothing to quell speculation that the government would have to change course and increase corporate taxes, something it had previously decided against.
Speaking from Washington, where he is attending a meeting of the International Monetary Fund, Mr. Kwarteng acknowledged there had been “some turbulence” following his announcement last month but told the BBC that he was still focused on delivering the tax-cutting plans.
Asked if he and Ms. Truss would be in their jobs next month, Mr. Kwarteng replied, “Absolutely, 100 percent.”
But there is skepticism that she has the support for such measures among her own lawmakers. A majority of them preferred Rishi Sunak, a former chancellor of the Exchequer, to succeed the last prime minister, Boris Johnson, who was forced out after a series of scandals. But the final decision fell to rank-and-file party members, who chose Ms. Truss.
Under the Conservative Party’s rules, Ms. Truss cannot face a leadership challenge until September 2023, but so sour is the mood within the party that there is already talk of changing the rules.
On Thursday Mr. Cleverly, the foreign secretary, acknowledged the threat to Ms. Truss’s position even as he defended her strategy. “Changing the leadership would be a disastrously bad idea,” he told the BBC.
Kwarteng is not good in making predictions. Today Truss sacrificed her pawn to save her own arse and keep her Premiership alive a little longer:
Kwasi Kwarteng has been sacked as chancellor amid intense speculation Prime Minister Liz Truss is about to junk key parts of their economic plan.
Mr Kwarteng met Ms Truss for crunch talks in Downing Street after cutting short a US trip.
In a letter to the PM, Mr Kwarteng said Ms Truss's vision for economic growth was "right" and he still supported it.
Ms Truss is expected to announce a U-turn on business tax cuts at a news conference in Downing Street at 14:30.
The prime minister has appointed former Health Secretary Jeremy Hunt - who backed Rishi Sunak in the Tory leadership contest - as the new chancellor.
Ms Truss's pledge to cut taxes was at the heart of the economic agenda that won her the Tory leadership at the start of September.
Truss was co - wrote the mini budget with Kwarteng (in secret according to some sources,) afterr today's press conference she still has not learned that channeling the spirit of Margaret Thatcher with its tax cuts for the rich and for large corporations is not enough to convince people she can do the job. Those were her ideas. She had fought for them. In her news conference today she further withdrew such plans:
Prime Minister Liz Truss's U-turn on corporation tax means it will rise from 19% to 25% next April - a move that should add an estimated £18bn a year in tax revenue to the government's coffers.
Corporation tax is paid on profits by UK companies and foreign companies with UK offices.
Before the Conservatives came to power in 2010, it was charged at 28%, but was then cut several times before being reduced to 19% in 2017.
In his March Budget, the former Chancellor Rishi Sunak announced the tax would climb from 19% to 25% in April 2023. He said it was fair to ask companies to contribute more after the government spent billions of pounds supporting them during the Covid pandemic.
However, Liz Truss had pledged to reverse the decision before her U-turn was confirmed today.
It is certainly fair to criticize her change of mind:
Reacting to Liz Truss's U-turn on corporation tax, the Shadow Work and Pensions Secretary Jon Ashworth says "this is a government in utter meltdown".
"Let's be clear what's just happened. Liz Truss has sacked her chancellor for carrying out the policies of Liz Truss - a set of policies that led to turmoil on the markets, a run on pension funds and soaring mortgage rates for homeowners across the country," he tells the BBC.
After only 38 days in office Kwasi Kwarteng is no longer Chancellor of The Exchequer. Unfortunately Liz Truss still has the same ideas and in her libertarian zeal will
continue to make dreadful policies. She talks of 'growth' but the only thing her government will grow as the nation tries to repair the economic damage of COVID lockdowns is the national debt.
How many such cock ups will Conservative Members of Parliament who, according to rumour are already planning to oust her, be willing to tolerate before they take a leaf out of Vladimir Putin's playbook and defenestrate her?