On Oct. 20, after only 44 days in office, Liz Truss resigned as Prime Minister of the United Kingdom. Based on the headlines, it was clear that her economic policy played a major role in her unpopularity. But just what was her economic policy? How did it go so wrong?
Before Truss began as Prime Minister, the country was already in a cost-of-living crisis. This was in addition to high inflation, caused by interest rate increases, COVID-19 stimulus, and increased energy prices due to the war in Ukraine. Truss had been in office for two days when the Queen died. The government’s focus turned to national mourning. After the funeral, Truss had the floor. In late September, to jump-start the weak economy, Truss endorsed a mini-budget that would come to be known as “Trussonomics.”
It cut taxes for Britain’s highest earners, stopped a plan for a corporate tax increase, and got rid of a cap on bankers’ bonuses. This would essentially give millionaires and large corporations more pocket money. During an inflation crisis, putting more money into the economy is a controversial, if not an outright, bad idea. When consumers get more money, they buy more goods. Increased demand can push prices up, perpetuating the inflation crisis. Rather than increasing taxes to combat inflation, Truss elected tax cuts.
After only five days, the Bank of England was forced to intervene and stabilize the economy. Government bonds had plummeted, the cost of mortgages rose, and foreign investors removed their money from the British economy.
The budget was so detrimental that the value of the pound fell to a record low compared to the U.S. dollar. In short, it was a disaster. A week before her resignation, Truss told the BBC that she would take responsibility for her mistakes. This U-turn was the first crack in Truss’s authority as prime minister. She then fired her Chancellor, Kwasi Kwarteng, and replaced him with Jeremy Hunt. Her authority continued to crumble when in Parliament, Truss sat behind Hunt as he took control and junked Trussonomics. Already unpopular, the prime minister was further mocked for not speaking for herself.
On Oct.19, Truss vowed to continue in the position, stating that she was a “fighter and not a quitter.” The next day, she resigned…and the value of the pound rose one percent.
~ Madison Keezer `26
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