UK finance minister sacked, U-turn on key ‘mini budget’: What next for embattled PM Liz Truss?

In a major U-turn, British Prime Minister Liz Truss scrapped parts of her unpopular ‘mini budget’ on Friday (14 October) that had triggered turmoil in financial markets.

Truss also sacked her Finance minister Kwasi Kwarteng and replaced him with Tory moderate Jeremy Hunt.

On Thursday, Kwarteng had said he was ‘not going anywhere’. A day later, he had to cut short a visit to the US, and by early Friday afternoon, he was fired.

Now, reports are surfacing that Truss might not be successful in saving her premiership for long as resistance against her grows within her Conservative party as well as among the voters.

What has happened since Liz Truss took over less than 40 days ago that has jeopardised her stay in power? Will Truss be able to save her post? Let’s take a closer look.

Liz Truss becomes PM

On 5 September, then Foreign Secretary Liz Truss beat her rival and former UK chancellor Rishi Sunak for the Tory leadership to become the next prime minister.

She succeeded Boris Johnson and stepped into her job amid soaring inflation, cost-of-living crisis and industrial unrest in the UK.

The 47-year-old former foreign minister vowed to tame the increasing energy bills and secure future fuel supplies, as per Al Jazeera.

On 6 September, she appointed a new cabinet and made Kwasi Kwarteng chancellor of the exchequer.

He took over the post from Nadhim Zahawi, who was selected for the job in July.

Notably, Kwarteng, the first Black Conservative Party cabinet minister, served as the business secretary since January 2021 in the Johnson administration, notes Al Jazeera.

The mini-budget

On 23 September, Kwarteng announced a ‘mini budget’ – a set of economic policies that aimed to reduce household taxes and energy bills while boosting the stagnating UK economy.

The government declared a freeze on energy bills, which it said would reduce inflation by 5 percentage points, reports Indian Express.

The economic plan also introduced a cut in National Insurance, which was pledged by Truss during her campaign for the Conservative leadership, reports BBC.

The budget included £45 billion of unfunded tax cuts, the biggest reductions in the past 50 years, as per Indian Express.

The plan also proposed to slash the lowest income tax rate from 20 to 19 per cent and cut the highest rate from 45 to 40 per cent, reports Al Jazeera.

Financial markets hit

Soon after the budget was announced, the UK government bond yields soared. There was an uptick in mortgage rates.

On 26 September, the pound severely tumbled to hit a record low at $1.0350, as the unfunded tax cuts spooked the financial market.

As per The New York Times, the Bank of England, Britain’s central bank, was forced to step into the debt market as concerns grew that pension funds could be threatened.

The central bank said it was temporarily purchasing 65bn pounds ($73bn) worth of long-dated government bonds ‘to restore orderly market conditions’, reports Al Jazeera.

Truss defends the budget

Despite criticism from Opposition and a section of economists, Liz Truss defended her economic plan, saying she is willing to make “difficult decisions” to kick-start the economy.

Standing by her tax cuts for the wealthy, she said higher taxes in difficult economic times are ‘likely to lead to a recession’.

“The reality is having lower taxes across the board helps everybody because it helps grow the economy and for too long the debate in this country has been about distribution, not how we grow our economy. It is not fair to have a recession, it is not fair to have a town where you are not getting the investment, it is not fair if we don’t get high-paying jobs in the future because we have got the highest tax burden in 70 years. That’s what is not fair,” she was quoted as saying by Outlook.

A major U-turn

On Friday, the UK prime minister reversed planned cuts to business tax, a key part of her economic policy.

She said that “it is clear that parts of our mini-budget went further and faster than markets were expecting”, reports BBC.

When asked why she did not resign along with the finance minister, Truss asserted that she will continue as the head of the UK government and has no plans to step down.

“I’m absolutely determined to see through what I promised – to deliver a higher growth, more prosperous United Kingdom to see us through the storm we face,” she said, as per BBC.

In the eight-minute news conference, she also said she was ‘deeply sorry’ to lose Kwarteng and thanked him for keeping ‘the national interest first’.

What next for Liz Truss?

Some leaders from her own Tory party are looking to oust Truss and calling for her resignation.

Tory leaders also said Truss’ alleged bid to put the blame on Kwarteng for the ‘mini-budget fiasco’ may backfire.

“The whole strategy was Truss’ plan . . . She can’t simply disassociate herself from it,” a party insider told Financial Times.

A Tory supporter said it is likely that Truss would face an attempt by members of parliament (MPs) to ouster her before Christmas.

“It’s a question of what is less embarrassing for us now: the pain of getting rid of her, or the pain of keeping her,” he told Financial Times.

“The U-turn has changed that calculation towards the former,” he further said.

A former Tory cabinet minister said “we cannot go on like this indefinitely”, adding that “electorate are not going to forgive us” if they replace another prime minister, reports BBC.

The Opposition– Liberal Democrats and the SNP– have called for a general election, however, Truss has ruled out the possibility until 2024.

With the Conservative Party’s large majority in the Parliament, it would be difficult for the Opposition to force an early election.

Many Tory leaders believe that removing Truss would lead to early elections where they would face a humiliating defeat as polls suggest Labour would win by a huge margin, as per Financial Times.

A Conservative MP told Financial Times that “removing Liz will mean an early election and we will get absolutely smashed. That’s her strongest argument for staying.”

Scotland’s First Minister Nicola Sturgeon also demanded to hold the general election, saying Truss is “unfit to hold the office of prime minister”, as per BBC.

Nadine Dorries, the former culture secretary who backed Truss’ campaign against Sunak’s, tweeted: “Those absurdly called grandee MPs (men) agitating to remove Liz Truss are all Sunak supporters . . . it’s a plot not to remove a PM but to overturn democracy.”

Can Liz Truss be ousted?

Liz Truss can be ousted as the Conservative Party leader.

As per Financial Times, a few Tory MPs have submitted letters of no confidence in Truss to Sir Graham Brady, chair of the 1922 committee of backbench Conservatives, who has the final say in the leadership matter.

Currently, Truss is protected by the committee’s rules which say her leadership cannot be challenged via a vote of no confidence until September 2023: a year after she succeeded Boris Johnson.

However, if enough party MPs tell Brady they want Truss out, she may lose her job.

Brady would then inform Truss about the demand and she would ‘either resign or be forced out through a no-confidence vote’, reports Financial Times.

With inputs from agencies

Read all the Latest News, Trending News, Cricket News, Bollywood News,
India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.