British Prime Minister Liz Truss, in her first substantive act as Britain's leader, unveiled dramatic tax cuts in a mini-budget released Sept. 23. The markets hated her combination of steep tax cuts and higher spending in a period of high inflation, the British pound fell to a record low against the dollar, government borrowing costs shot up, and Truss' approval rating plummeted into single digits. The Bank of England had to step in to prop up financial markets.
On Friday, Truss sacked her treasury secretary and longtime ally, Kwasi Kwarteng, the coauthor of her supply-side budget. She replaced him with Jeremy Hunt, a former health secretary and foreign secretary who has supported her rival, Rishi Sunak, in the Conservative Party leadership race to replace ousted Prime Minister Boris Johnson.
Truss had already dropped some of her proposed tax cuts, and Hunt suggested over the weekend he will toss the rest of her keystone budget plans. With markets still jittery, Hunt will release an interim statement Monday laying out new budget priorities, ahead of a longer mid-term budget update Oct. 31.
"There has to be, in a pretty short time, an apology and a fundamental reset of the government by the prime minister," Conservative lawmaker Robert Halfon said Sunday. "The government has looked like libertarian jihadists and treated the whole country as kind of laboratory mice to carry out ultra, ultra free market experiment."
"Truss is still prime minister in name, but power in government has shifted to Hunt," The Associated Press reports. Hunt said on Sunday that Truss is "in charge," adding, "She's listened. She's changed. She's been willing to do that most difficult thing in politics, which is to change tack." But the Conservatives have to decide if Truss is permanently damaged goods in the eyes of the voters. Her party currently has a substantial majority in Parliament, but "polls suggest an election would be a wipeout for the Tories, with the Labour Party winning a big majority," AP notes.
"This is a hand-to-mouth government, living hour by hour," BBC political editor Chris Mason wrote Monday. "If you pick up the hint of panic in the air, you're right, too." Monday's statement by Hunt "is about two things. Restoring the government's financial credibility. And propping Liz Truss up in office," Mason adds. "Both remain imperiled and no one can be quite certain what will happen next."