On October 20th, Liz Truss resigned from being the Prime Minister of the UK after a disastrous few weeks in office. Truss' main policies and goals when entering the position were to introduce large tax cuts and provide energy subsidies to counter the growing energy crisis in Europe. Britain was already facing economic problems when Truss entered the economy, but her policies made it worse.
Truss' announcement with her plans for major tax cuts spooked the markets and raised questions about how it would be paid for and the already soaring public debt. The response to this saw an increase in interest rates, the pound depreciating in value, and increased yields on government bonds. Mortgage costs have also significantly increased in this time as well making it extremely difficult for individuals to make their payments. A week before Truss resigned, the Minister of Finance announced the tax cuts would not be taking place and resigned a few days later. Despite all the issues with the tax cuts, the plan to provide energy subsidies did pass and is expected to be in effect for two years.
Financial markets are expected to continue to remain volatile until the government releases its new economic plan. Soaring public debt is a major concern and it is expected that combating that issue will be a large part of the new plan. The Bank of England's emergency intervention to protect markets is coming to an end, but unease among the financial markets and the public is expected to continue for quite some time.
I wonder how much her short time as prime minister will effect their economy, making it worse than it already was. With only a few weeks in office I believe she tried to use reganomics which in turn does not work, only worsening their economy.
ReplyDeleteHow did Truss the people that helped her come up with the idea to cut taxes not predict the economy to react the way it did? Already being close to an economic crisis and deciding to cut taxes would be concerning to anybody. The way we learned in class to escape an economic crisis would be to increase government spending and Truss wanted to accomplish the opposite.
ReplyDeleteYou did a great job explaining the background of Truss' resignation. When I first heard the news, I was shocked, so it is good having some context. It makes sense that her policies caused the markets to become volatile, and at a time of transition, Britain needs dependable people in power. I am confused about how the situation got so bad. I know Queen Elizabeth met with her before her death, so it is interesting the situation escalated so quickly.
ReplyDeleteIt is surprising to me that the financial board backing Truss didn't dismiss the tax cuts earlier as people were worried about it from the beginning. I'm curious if you think it is good that Truss is now out of the office or if you think she should've stayed and cleaned up the economic mess she took part in? Is there a plan in motion to help to the economy get back to a steadier state?
ReplyDeleteIt is interesting to hear that she left so abruptly without contributing to cleaning up the mess she made. Is it better for her to resign if she knows she cannot help clean it up or do you think she should've stayed and assisted?
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