By ENAYA NIHAL
On Friday 14th of October, as we tuned into Liz Truss’s emergency press conference, the UK braced itself for a continuation, or even a worsening, of the ongoing economic crisis. What we had not anticipated was a new political crisis, courtesy of our current Prime Minister. After weeks of national outrage and speculation, Truss has officially declared a U-Turn on most of the economic policies she developed less than a month ago with the now former Chancellor, Kwasi Kwarteng. Having appointed the former Health and Foreign Secretary, Jeremy Hunt, as her new Chancellor, the Prime Minister is effectively trying to scrap an unreasonable set of policies by deflecting the blame and firing the person she worked with to develop them.
Unsurprisingly, proposing unfunded tax cuts worth £45 billion to help the highest earners in society, piling government debt while choking the civil service, and cancelling the rise in corporation tax while giving energy companies a free pass on windfall tax, did not result in booming economic growth. The catastrophic release of the ‘mini-budget’ a few weeks ago wreaked havoc on the British economy and the Pound Sterling, which reached a record low against the United States Dollar following the announcement. The markets, the Bank of England, and Members of Parliament’s confidence levels in Truss’s economic plans then plunged to unfathomable depths.
The short-sightedness of these neoliberal policies could be seen quite clearly in market confidence levels, as well as the people’s confidence in Truss’s governance. The BoE’s forced intervention in securing pensions, combined with high inflation and the cost-of-living crisis, has weakened support in the Conservative Party. Once the public outrage at her policies was joined by Conservative MPs in Parliament, Liz Truss reversed on a variety of policies. This past week, Truss backed off from her target of cutting 91,000 jobs in the civil service, as well as the proposed income and corporation tax cuts, ending with the fourth Chancellor of the exchequer in four months. The effects of her decision to fire Kwarteng in an attempt to legitimise her governance caused fluctuations in the Sterling, which fell by 1.4% on Friday following her evasive press conference. It rose by 0.9% to $1.128 in trading this morning, as expectations of more U-turns, now confirmed, increased
In the face of inflationary pressure, the Governor of the Bank of England announced that they would not rule out a stronger response by raising interest rates. The speculation around rising interest rates has already resulted in higher mortgage rates; The Resolution Foundation has predicted that 5 million families will pay an extra £5,100 by the end of 2024 (23% of which rose immediately after the mini budget’s announcement).
Around half of Tory voters thought that Truss should resign. Her growth-based policies would neglect those on benefits while going easy on millionaires, widening income inequality across the country. A senior backbencher said ‘She will have to resign… She is worse than Corbyn’ while a former cabinet minister said that the ‘electorate is not going to forgive us if we oust Liz Truss’, referring to a finishing blow to the credibility of the government and party. From every political perspective, including within the Conservative Party, these policies are seen to be sheading for the destruction of the British economy. Even silent resentment leads to disharmony among MPs, as can be seen in Truss’s low-laying supporters. The people are also acutely aware of the divisions and infighting within the Tory party, with open talks in Parliament cafes about plotting to get Truss’ government removed.
Hunt, who backed Sunak during the race for Prime Minister, is seen as a more level-headed Chancellor than his predecessor by other Conservative MPs, who cited his support for long-term funding for the NHS during his time as Health Secretary. He has already made claims admitting that ‘mistakes were made with the government’s mini budget; including cutting the top rate of taxation for the highest earners in the economy and the lack of reassurance that the government would be able to afford it. His solutions to the crisis on hand involve higher taxes and ‘efficiency savings in the public sector’ to curb government borrowing. Truss and Hunt were in talks on Sunday and subsequently brought forward their fiscal plan for the economy, which on Monday announced further U-turns on tax, and spending cuts.
His solutions will plaster a band-aid of sorts on the British economy’s gaping wound. It won’t heal the damage done in the long run. To provide sustainable growth in Britain, the government needs to increase public spending and bolster the nation’s infrastructure. By facing the cost-of-living crisis and providing viable solutions to the people, including those protesting a fall in real wages and worsening standards of living, the government would be able to establish a legitimate sense of commitment to its people.
Many believe that only a new government could provide the stability desperately needed in today’s political and economic climate. The Labour Party, the Liberal Democrats, and the Scottish National Party are now calling for a general election which, by the looks of its substantial lead in the polls, Labour would easily win. Although Truss has ruled out a general election until 2024, perhaps it is time for the Tories to hang the hat and end their economic and political assault on the nation. Whenever the next general election is held, the choice is up to free-thinking agents. The facts are out there, and the choice is yours.
Image: Flickr / Number 10