IC comments - The Editor23 Oct 2022 16:07
After 44 days in office, Liz Truss, having run out of options to save her own skin and with the policies on which she was elected lying in pieces around her, accepted the inevitable and resigned the position of prime minister.
It wasn’t just the car crash of the mini-Budget and the disgraceful brushing aside of the Office for Budget Responsibility that sealed her fate. A wooden performer, a talentless politician, a weak leader who was happy to keep pointing the finger of blame at everyone else in the few days she was in office, who wrought damage on her party and the UK’s international standing, she was never a good fit for the role.
Newly appointed chancellor Jeremy Hunt has indicated that he will not stand as a candidate as the Tory party rushes to find a replacement. There is a strong possibility that Boris Johnson will stand, along with Truss’s closest rival in the recent party leadership election, Rishi Sunak. Given the law breaking episodes that led to the ousting of Johnson, Sunak should therefore be in pole position to succeed Truss. But a general election cannot be ruled out.
Political chaos in Westminster has dominated the agenda for far too long now, distracting attention away from tackling the serious issues afflicting the economy and the UK’s non-existent productivity growth. The further into the quagmire we go, the clearer it seems that this was always going to be an inevitable outcome of the Brexit result. Would Boris Johnson, Teresa May, Liz Truss have been elected as party leaders in a parallel universe where Brexit hadn’t happened? To give them their due, none of her predecessors, not even Johnson, managed to create a political and financial crisis of this scale, and at such dizzying speed as Truss has.
Less than one week before her resignation, Truss sacked the creator of the infamous mini-Budget, and then allowed his replacement to rip it up into tiny pieces. New chancellor Jeremy Hunt immediately set about laying the groundwork for an alternative plan which decisively switched fiscal policy into reverse mode. Whether or not Hunt survives the appointment of a new Tory leader (which could mean five chancellors in five months), or an election for that matter, no chancellor now will dare to do anything different.
The UK has been steered into high-tax waters and will remain there for the time being. Fiscal and monetary policy cannot be seen to be pulling the country in different directions; both are now in tightening mode. The focus will be on stabilising, or reducing, debt levels relative to GDP. Windfall taxes on big banks and oil and gas companies have moved up the list of options available to the chancellor. The latter are subject to a levy that should run out in 2025 and the former already pay an 8 per cent surcharge. If this is retained, then banks are facing a tax rate of at least 33 per cent from April.
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