Liz Truss predicts a chaotic fall. The omens were below reality. Nothing went as planned during his first month in business, as Elizabeth II died suddenly two days after their meeting. And when the Prime Minister wanted to bring the economic situation under his control, it got worse.
The beginning of this calamity period was reached on September 23. In Parliament, newly appointed Finance Minister Kwasi Kwarteng unveiled a “mini budget” of which he is the architect. This package of economic measures has set two objectives: preservation of household purchasing power and revival of growth.
Liz Truss has chosen to cap energy bills at £2,500 for homes for two years. Companies will see their energy costs halved within six months. The costly results were seen as the first reversal of a man who did not mention an anti-inflation plan during his election campaign. However, they seemed inevitable when almost 45 million Britons were threatened with “energy poverty” this winter, according to the University of York.
” Mini budget » Unaccounted for, tax gifts… and public outcry
These billions in outflows from public coffers are not offset by savings or equivalent tax revenue. Total invoice not established. “Mini-Budget” offers more stimulus Tax credits for £45 billion in social contributions for companies and households. The cut in the top income tax rate from 40% to 45%, interpreted as a gift to those least affected by inflation, sparked unanimous outrage in the kingdom.
Ten days of fierce criticism, including from the Conservative camp, forced the government to roll back its tax cuts to benefit the wealthy. ” Liz Truss is already facing slingers among conservatives. The fringe fears Boris Johnson will lose voters in former Labor strongholds in northern England. »Analyzing the academic Aurelian Antoine, head of Brexit Watch, he points to a split between the popular fringe of the Conservative Party and other neoliberal and Thatcherite MPs.
The Tories’ annual conference, currently taking place in Birmingham, has provided a glimpse of these tensions. Usually very civilized, the event was the scene of demonstrations. Some members of the government, such as Secretary of State for Energy Jacob Rees-Mogg, were attacked by protesters. ” We heard and understood », Kwasi Kwarteng on the congressional stage justified the withdrawal of tax breaks for the rich. The minister regretted the move “Eclipsed” Other parts of its program.
Debt and currency storm
In fact, the most serious lies elsewhere. Lack of accurate measurement of the “mini budget” has caused panic in the financial markets. The pound fell to an all-time low, hitting an all-time low against the dollar on September 26. 10-year sovereign rates on British debt rose from 3.5% to 4.5% after the release of the anti-crisis plan.
Faced with the shipwreck, the Bank of England had to buy back debt on September 28 to rescue its rates and avoid bankruptcies by pension funds holding British bonds. This unprecedented intervention resulted in a relative lull in interest rates. The 10-year rate fell to 4% while the pound rose slightly.
But the financial storm has left scars. As lending rates are indexed to sovereign rates in the real economy, mortgages are already on the rise in a country where a quarter of households borrow at variable rates. What burden their budget a little more. ” A strong reaction from markets led to measures to support growth A disaster. The government succeeded in exacerbating an already severe economic crisis. Purchasing power is declining, further reduced by the fall of the pound, which increases the cost of their imports. This is disastrous for products like fruits and vegetables from abroad »Educator Aurélien Antoine worries.
The origin of amateurism
Failure is more severe in association with amateurism. “ Liz Truss sacked the director of the British Treasury in early September after he failed to deliver on his budget plan. Similarly, it did not submit its “mini-budget” for verificationOffice of Budget Responsibility (General Financial Control System, Editor’s Note) It is unable to establish budget projections »observes Sophie Luzourne, Professor of British Civilization at the Jules-Verne Faculty in Amiens.
“Only two ministers, including Kwasi Kwarteng, were involved in the formulation of this mini-budget without bothering to consult with other ministers. It testifies to the complete lack of preparation and gives the appearance of incompetence, which weakens the power of Lis Truss after a month of forming his government”, continued UK expert regrets no total bill for mini-budget “Not sure yet”. Liz Truss’s government ended the meetingOffice of Budget Responsibility Last Friday. The independent body’s budget projections have been sent to Downing Street and will not be published until the end of November.
Liz Truss’s reversals were already undermining her political reach, as she wanted to be part of the succession of Margaret Thatcher, who could make more unpopular decisions. As he described the tax cuts promised by Liz Truss this summer, his former rival for prime minister Rishi Sunak’s fears came true. “weird” And “Irresponsible”. Little did he know that the facts would prove him right so soon.