Truss’s budget proposals were ill-timed and poorly conceived.It took 61 days for Liz Truss to win the support of the Conservative party and become UK’s Prime Minister after Boris Johnson resigned in July. She lost that support in just 44 days. Her resignation on Thursday makes her the PM with the shortest tenure in British history — going all the way back to Sir Robert Walpole in 1721. Looking back, Truss’s fate was sealed the day her long-time collaborator and Chancellor of the Exchequer, Kwasi Kwarteng, presented the new government’s “mini-budget”. Truss had won the leadership contest within the party, edging out Rishi Sunak, on the promise of rebooting economic growth in the UK. While her “mission” of creating “a low tax, high wage, high growth economy” was an inspiring one, her mini-budget, as she admitted later, “went further and faster than markets were expecting”.
Truss’s budget proposals were ill-timed and poorly conceived. In her bid to be the modern-day Margaret Thatcher, she unveiled a bold budget that was exactly the opposite of the Conservative party credo; it lacked fiscal rectitude, which was the hallmark of Thatcher’s approach. To be sure, Truss announced that she would both cut taxes — even for the richest — as well as provide an energy price cap for the whole population for two years. But, without any new sources of revenue or taxes, this spending meant a spike in the government’s borrowings. This was the most unappetising recipe for a country that has been witnessing economic stagnation since the 2008 global financial crisis and historic inflation in the wake of the war in Ukraine even as its fiscal health is already battered due to the strain of Covid relief. Investors lost confidence in the UK’s ability to repay its debt. As investors sold off UK assets, the pound fell to historic lows, gilt yields skyrocketed and the panic led to a full-blown financial crisis that required the Bank of England to intervene.
But restoring economic stability is not the only challenge facing the new UK PM. Completing a full term in office has been near impossible for UK PMs for the better part of the past decade. David Cameron resigned in the wake of the Brexit referendum in 2016, just a year after forming the first majority Conservative government for almost two decades. Theresa May tried to steady the ship even as the UK came to terms with the aftershocks of Brexit. But she was forced to resign after a rebellion in the ranks in just three years. Boris Johnson, who led the Tories to a landslide victory in 2019, too, was forced out after a spate of Cabinet-level resignations. Part of the challenge for the new prime minister will be to hold on to the job long enough to do it.