Fuel to the fire: Liz Truss on government audacity

The United Kingdom is fast becoming a cautionary tale of how bad politics can lead to even worse economics. Prime Minister Liz Truss was once seen as a new hope of breathing life into the sinking fortunes of the UK Conservative Party, with its previous leader, Boris Johnson, ruining the goodwill of success with the COVID-19 vaccine programme. Died and put Downing Street to shame. partygate scandal, Now, Ms Truss is in the crosshairs of her party members after imposing a disastrous set of economic policy proposals on the country, which was already trembling under the weight of energy prices, inflation and global growth stifling economic activity . Flipflops, U-turns and the lack of a coherent long-term strategy for economic stability and growth have led to a lack of merit in advocating for policies to transform the UK into a “high growth, low cost” economy. The questionable, principled idea at the center of the truce government’s missteps, at its worst moments prompting the Bank of England (BoE) to step in with a £65bn emergency bond purchase program to stabilize gilts and the cost of government borrowing. was required. His campaign promises massive tax cuts. While most Tories would theoretically be happy with that proposal, what has confused macroeconomists is that instead of adhering to its energy price guarantee plan – a timely intervention in the face of rising gas prices linked to the Ukraine invasion – In consultation with BoE. With inflation stabilizing, Ms Truss jumped headlong into tax cut mode.

The cost of this poorly timed fiscal effort was dire. Ms. Truss’s proposal and Former Chancellor of the Exchequer, Quasi Quarteng, To eliminate 45% top rate Of income tax on income of £150,000 or more, raised eyebrows. With their unfunded plan to end the increase in corporate tax from 19% to 25% from next April, it was clear that these measures would result in a £45bn loss in government finances. The market turmoil has indicated the true extent of rejection of Ms Truss’s formula – yields on 10-year government bonds rose from 3.5% to 4.3%, then held steady at around 4.05% after the BoE intervention. Meanwhile the pound plummeted, the mortgage market was thrown into chaos, and the country now looks on a rough road before inflation can be contained. Ms Truss is likely to add the label of “incompetence” to the image of the Tory regime, far from being the leader to lift the Conservative Party out of its shameful, scandal-ridden image. Because of his poor performance, his time on Downing Street could end sooner than he expected.