Less than two months after she was elected as the British Prime Minister, Liz Truss has found herself in uncharted waters, facing a crisis. The crisis began with the announcement of a mini-budget by her finance minister, Kwasi Kwarteng, followed by Truss taking back the package to survive.
However, scrapping the mini-budget has not helped Truss as Rishi Sunak, who was beaten by her in a bid to become the Prime Minister, has come up as the choice of Tory leaders to replace her in 10 Downing Street. Let’s take a look at a timeline of the ongoing crisis British PM Lizz Truss finds herself into.
Liz Truss, who was Britain’s Foreign Secretary before, became the leader of the Conservative Party on September 5 and also became the next Prime Minister of the United Kingdom, replacing Boris Johnson in the role. Her appointment came at a time when the country was already facing an economic crisis with an increased cost of living and a recession.
The newly elected British Prime Minister appointed her cabinet following a format request by Queen Elizabeth II. The new cabinet saw a huge restructuring with 15 new members being appointed in different roles. Kwasi Kwarteng was one of the most senior members of the new cabinet and became the Chancellor of the Exchequer by replacing Nadhim Zahawi.
Kwasi Kwarteng, the new Chancellor of the Exchequer in PM Truss’ cabinet, unveils a mini-budget in the parliament. The new mini budget sends the markets into a frenzy despite showing intentions to decrease household taxes and energy bills.
The mini-budget showcases the biggest tax cut in the last 50 years. However, it also ensures cuts in national insurance along with stamp duty and top tax rate.
The mini-budget results in the opposite direction than what was intended as traders panic. The bond yields of the British government skyrocketed following the announcement of the mini-budget, however, it dips to a record low on September 26 at $1.0350.
A day after the International Monetary Fund (IMF) reveals the body is monitoring developments in the UK and urged the government to change its tactics, the Bank of England steps in to slow the economic bleeding.
The Bank of England announces its decision to buy 65 billion pounds worth of government bonds for restoring market conditions.
The British Prime Minister justifies the mini-budget by saying she is open to making difficult decisions for the growth of the country’s economy. It was the PM’s first public comment since the mini-budget was announced as she claimed that the nation was finding itself in difficult economic times. However, she went on to claim that the problem was because of Russia’s invasion of Ukraine and not domestic.
However, only a few days later, the government announced its decision to cut the UK’s highest income tax rate.
PM Truss fires Kwarteng and replaces him with Jeremy Hunt as the new Chancellor of the Exchequer. She also goes on to make more U-turns by cutting corporation tax, one of the major points in the mini-budget that sent the market into freefall.
The PM later announced that the corporation tax will increase to 25% from April 2023. Meanwhile, news emerges that the Conservative Party MPs are planning to replace Truss in the hot seat with Rishi Sunak.