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UK’s Truss Fires Finance Minister as Budget Plan in Ruins

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By Jitendra Joshi

British Prime Minister Liz Truss on Friday fired her finance minister after prolonged market turmoil, but restive Conservatives plotted the new leader’s own demise as her right-wing economic agenda imploded. online news

Kwasi Kwarteng became the second shortest-lived chancellor of the exchequer in UK political history, paying the price after Truss’s crash programme of unfunded tax cuts terrified the financial markets.

Truss did little to reassure investors and the UK electorate at a brief news conference — her first since succeeding Boris Johnson on September 6.

She insisted she had acted “decisively” to bring about “economic stability” — but the pound resumed its slide on currency markets, falling under $1.12.

“We will get through this storm,” she said, taking only four questions, looking nervously around the room and delivering terse replies.

“I want to deliver a low-tax, high-wage, high-growth economy,” Truss added. “That mission remains.”

Kwarteng, who had rushed back early from international meetings in Washington, was replaced by the centrist former foreign secretary and Tory leadership candidate Jeremy Hunt as Britain’s fourth chancellor this year.

Financial upheaval sparked by the new government’s September 23 plan to slash taxes — financed via billions in more borrowing — had subsided somewhat since the Bank of England (BoE) intervened in bond markets.

But the central bank was adamant it would end its bond-buying spree on Friday, and market analysts said only a bigger climbdown by Truss following Kwarteng’s disastrous budget announcement last month would avert fresh panic.

She duly delivered the U-turn by announcing she would retain the Johnson government’s plan to raise profits tax on companies — having already changed her mind about cutting income tax for the highest earners.

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Courtesy of Shutterstock Author: Sandor Szmutko
  • Collapsing polls –

The promised tax reforms were the centrepiece of Truss’s successful pitch to Tory party members that she, rather than moderate rival Rishi Sunak, was the best candidate to replace Johnson.

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A new YouGov poll for The Times newspaper said 43 percent of Conservative voters want a new prime minister in Downing Street.

Other polls show a mammoth lead up opening up for the main opposition Labour party, threatening electoral meltdown for the Tories.

Labour leader Keir Starmer said that ditching Kwarteng would not “undo the damage made in Downing Street”.

“Liz Truss’ reckless approach has crashed the economy, causing mortgages to skyrocket and has undermined Britain’s standing on the world stage,” he said.

Tony Travers, from the London School of Economics, told AFP that Kwarteng had been made “the fall guy for the government’s mistakes” — but that the sacking had not taken the pressure off Truss or calmed the Tories.

“It’s very hard to see them coming back from this” by the next election, he added.

  • ‘Rash talk’ –

Kwarteng had been due to stay in Washington this weekend to conclude annual meetings of the International Monetary Fund and World Bank, after having earned a rebuke from IMF chief Kristalina Georgieva on the need for “coherent and consistent” policies.

Commenting on the tax U-turn, senior IMF official Alfred Kammer paid credit to the UK’s “strong institutions”, such as the BoE and the Office for Budget Responsibility — both of which were undermined by Truss and Kwarteng.

Also speaking in Washington, European Union economy commissioner Paolo Gentiloni said the upheaval in Britain showed “how prudent we should be also with our fiscal and monetary mix”.

In the US capital on Thursday, Kwarteng had insisted that his job was safe. “I’m not going anywhere,” he said.

But UK broadcasters showed live footage of Kwarteng’s British Airways plane landing at London’s Heathrow airport a day early, after Truss held hurried meetings with her own financial advisors in his absence.

Multiple reports said that senior Tory MPs were plotting to unseat Truss by installing a new leadership team under Sunak and Penny Mordaunt, who also ran to succeed Johnson.

Party grandees could move next week, senior BBC journalist Nick Watt tweeted.

“They said not tenable for PM to remain after sacking @KwasiKwarteng who was implementing the programme that won her the Tory leadership,” he wrote.

But Bernard Jenkin, a senior voice on the Tory right, called for “calm” after Hunt’s appointment.

“Rash talk of ditching the PM, or calls for a general election, will not calm the financial markets,” he tweeted.


© Agence France-Presse. All rights are reserved.

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Notes from APS Radio News

Since the early part of March 2020 until about April 2022, the US Federal Reserve has added nearly $5 trillion to its holdings.

The Federal Reserve did this by purchasing billions of dollars of corporation and government bonds each month between the early part of March of 2020 to about April 15, 2022.

For its part, the European Central Bank followed the same policy during the same period.

Since February 2020 to about June of 2022, ECB has added over 5 trillion euros to to its holdings.

During that period, the Bank of Japan increased its holdings by hundreds of trillions of yen.

Many banks had maintained near zero interest rates.

During the past few years, major central banks have engaged in massive programs of monetary expansion, and they did so at rapid rates.

Economists say that when fiat money is infused into the economy at high rates of velocity, increases in inflation are more likely.

The combination of lockdowns, which had caused the closures of many small and medium-sized businessees, and aggressive programs of “quantitative easing” has led to shortages and noticeably higher rates of inflation.

Even before Russia invaded Ukraine, inflationary pressures were being noticed last year.

The war in Ukraine and price-gouging have exacerbated those trends.

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