British Prime Minister Liz Truss is taking a U-turn on previously proposed policies which sank the pound instead of fighting inflation, with the new finance minister
Liz Truss fires finance minister in a reversal of proposed policies. Source: Twitter
On Friday, Liz Truss announced that Kwasi Kwarteng resigned as the chancellor of the exchequer, which is a British analogue of finance minister. He will be replaced by Jeremy Hunt, who served as Britain’s foreign secretary.
The move comes as the new Prime Minister’s bold economic plan didn’t pass the reality’s crash test. The biggest promise of Truss’s campaign was big tax cuts for corporations and high-earners. However, her vision for growth was economically unrealistic.
During the election, Truss’s opponent, former chancellor Rishi Sunak, said it was reckless to cut taxes before beating down inflation. Besides, implementing such a plan would be impossible without more borrowing.
Many experts and investors seem to agree. At least, the British pound sank immediately after the government announced its new “Growth Plan” would be propelled by the “biggest package of tax cuts in generations.”
The Bank of England was forced to intervene with an emergency bond-buying program, to calm the market down. Many criticized Liz Truss for adding turbulence to the already unstable national economy.
The Prime Minister admitted that her economic plan “went further and faster than markets were expecting.” Therefore, she explained the planned policies would reverse. In particular, they will now allow corporate taxes to rise from 19% to 25% in April 2023.
At the same time, her ultimate goal of transforming Britain into “a low-tax, high-wage, high-growth economy” remains. However, Truss offered no details on how this might be achieved.
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