Even after a turnaround, Prime Minister Truss can 'have the shelf life of a head of lettuce'

Liz Truss has been prime minister for less than six weeks, the political and economic chaos in the United Kingdom is almost unimaginable and the question hangs over her head how long she can maintain the support of her Conservative Party. On Friday it was announced that Prime Minister Truss is victimizing her finance minister and is reversing one of the key points of her policy. The corporate tax will go up next year, despite her earlier plans to scrap that increase, Truss announced Friday. In this way she wants to reassure the financial markets, where there is great concern about whether the announced tax cuts are covered. Also read British Finance Minister Kwarteng is a tory pur sang Finance Minister Kwasi Kwarteng flew hurriedly back from Washington on Friday, where he attended the annual meeting of the International Monetary Fund, only to learn that he has lost his job. He and Liz Truss share the same ideological views and are close friends – they live in the same neighborhood in Greenwich – and her decision to fire him is an ultimate attempt to bolster her own position and restore the credibility of her government. The point is that Truss has not solved a set of structural problems for her and the Conservative Party. Three factors that make her premiership very difficult. She has little authority anymore Even if Liz Truss stays on for now, she will anyway make the history books as prime minister “who kept the shortest grip on power,” as The Economist wrote this week. Not counting the ten days of mourning surrounding Queen Elizabeth’s death, Truss has had her premiership under control for about seven days, ” about the shelf life of a head of lettuce .” Friday’s turnaround marked the second time Truss has had to overhaul her plans. At the beginning of this month, she and Kwarteng already decided not to abolish the tax rate for the highest incomes, as they wanted. Too much of the Conservative faction in the House of Commons was against giving the wealthiest upper class such an advantage in what are financially difficult times for so many Britons. For the time being, the other tax cuts (including for the purchase of a house) will remain in place. Truss abandons her principled beliefs here, which further undermines her authority. She believes in a small government with the lowest possible taxes and she won the leadership campaign with that last summer. But failing to provide clarity in recent weeks about how the government intended to fund those planned cuts has raised doubts about the soundness of Britain’s public finances and turned the tax cuts into a noose around its neck. A deeply divided faction Despite the supremacy of the Conservative Party in the House of Commons (they have a large majority of dozens of seats), Truss cannot rely on her party members. The faction has split into all kinds of groups, all of which have their own views on where to go for both the country and the party. Part of the Conservatives still support Truss and want to try to restore political stability. They are optimistic that it should be possible to grow the economy within the next two years, if new elections are foreseen. Another group would be out to get Truss to step down as soon as possible and to have Rishi Sunak, her rival from the leadership struggle, take office as prime minister and repair the damage. According to British media , many Tories accept that they will have a period in the opposition anyway, and that it is therefore better to call elections as soon as possible. In opinion polls, the Tories haven’t been this bad in years. The problem is that when Truss took office, he only appointed ministers who supported her during the leadership struggle. For example, she made no effort to win over the suspicious part of the group and that quickly turned out to be a crucial mistake. Now she has appointed Jeremy Hunt – who supported Rishi Sunak after he himself dropped out of the campaign – as the new finance minister in what is seen as an attempt to reconcile with the other wings of the party. In practical terms, it is difficult to force Truss to resign. According to party rules, the Conservative faction can only hold a confidence vote on a party leader one year after taking office. Those rules can of course be adjusted, but this requires a consensus within the party, which is precisely what is lacking. Consequences in the real world The turmoil in financial markets is already having repercussions in the real world. Mortgage interest rates, for example, have risen sharply in recent weeks , to 6.46 percent for a period of two years, the highest percentage since 2008. In the United Kingdom, many residents have fixed their mortgage interest for a relatively short time, for two or five years. or they have agreed on a flexible interest rate. So there are homeowners who immediately lose hundreds of pounds extra per month – due to faltering government policy. Also read this profile of Truss: ‘Radical’, they call the new Prime Minister of the United Kingdom. But who is she really? In the meantime, structural problems such as inflation persist and the United Kingdom will continue to suffer from this for longer than comparable economies, according to the IMF. Also, the ever-changing policy is likely to have negative effects on the economy, as companies like predictability and certainty in the markets in which they invest. Truss’ press conference Friday was brief, and she said her “mission to bring economic growth” has not changed despite these “tough times.” According to her, the new Treasury Secretary will present the full budget in two weeks, which, according to Truss, will clearly show that her government has enough budgetary discipline. Only: two weeks is an eternity in British politics and who knows what measures Truss will have had to withdraw by then. If she’s still there. A version of this article also appeared in the newspaper of October 15, 2022