LONDON – September 6, On Tuesday, Liz Truss was elected as the new prime minister of the United Kingdom. She has promised to take quick action to address one of the most challenging problems facing a new leader in post-War history, including rising energy costs, an impending recession, and industrial unrest.
In six years, Truss, the fourth conservative prime minister, travelled to Scotland to meet with Queen Elizabeth and receive the request to form a government. After three turbulent years in office, Boris Johnson was forced to step down, and she took his position.
Truss promised to address the energy crisis after being appointed Britain’s new prime minister.
Her governmental nominations stated that she had three main goals:
- Expanding the economy through tax cuts;
- Addressing the anticipated increase in energy prices; and
- Ensuring that people had access to the National Health Service, which the government manages.
However, she inherits an economy in crisis with double-digit inflation, skyrocketing energy prices, and a Bank of England warning of a prolonged recession by the end of this year. Workers from all sectors of the economy have already begun striking.
In recent weeks, investors have dropped the pound and government bonds due to her pledge to boost GDP through tax cuts while potentially providing around 100 billion pounds ($116 billion) for energy.
In addition, Truss has pledged to abandon plans to raise the corporation tax rate for large corporations and to scale back an increase in the payroll tax for both employees and employers. These measures were intended to raise more money for health and social care, with the additional spending coming from general taxation.
British 30-year government bond prices dropped by the most in a single day since March 2020, when the COVID-19 pandemic shook the financial markets. Hence, investors focused on the additional borrowing Truss’s plans are anticipated to require.
Although two-year rates decreased and ten-year borrowing costs increased to their highest level since 2011, economists noted that an energy price cap would prevent inflation from growing in the foreseeable future.
Presented by CTC News