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Embattled British Prime Minister Liz Truss made (another) U-turn yesterday, firing her top finance official, Kwasi Kwarteng, and reversing her plans to slash the corporate tax rate.
Catch up: All eyes are on Truss as she scrambles to hang on as Prime Minister after a disastrous first few weeks in office, during which her government’s economic proposals (which she heavily campaigned on) brought the UK to the edge of a financial crisis.
- Last month, Truss and Kwarteng pitched a “mini-budget” including not-so-mini unfunded tax cuts, to which investors reacted by dumping UK government bonds (gilts) and the British pound—and forced the Bank of England to intervene.
Truss and her allies have abandoned much of their initial plan for the economy, but it may not be enough to inject a sense of stability back into the markets:
- The yield on 10-year gilts is up (which indicates investors still lack confidence in Britain’s fiscal stability), and the pound continued to fall against the US dollar.
What’s next: Speculation is growing over whether Truss will be turfed from office by her own party (one tabloid has even launched a live feed to see if she will outlast a head of lettuce).
- “Asked a former cabinet minister about PM's prospects. They text back: ‘As we both know, this is only going to end one way,’” reported Sky News’ Beth Rigby.
Why it matters: As troubles for the global economy mount, these days, economic chaos that looks to be confined to one country (say, Britain) can quickly spiral into a global problem.