The resistance within the party was too great: Prime Minister Truss had to give in on one of her most important projects at the beginning of her term.
Birmingham (AP). Facing fierce criticism within her party, the new British Prime Minister, Liz Truss, made a resounding turn just at the start of her term. After several Conservative MPs threatened to vote against a planned cut in the top tax rate for top earners, Finance Minister Kwasi Kwarteng withdrew the plan. “We understood, we listened,” he said Monday from the Tory party conference in Birmingham.
The markets reacted positively, the pound, which had been under heavy pressure lately, soared. But the impact on Truss, who had defended her plans the night before, could be devastating. “His critics, of which there are many, are getting the message that other unpopular measures, such as public spending cuts, can also be undone,” commented Sky News. The reputation of the 47-year-old, who had announced that she would firmly enforce even controversial decisions, has suffered greatly.
Political scientist speaks of humiliation
Political scientist Mark Garnett called the reversal “the most humiliating decision” by a British government in decades. “Britain is now facing a prolonged period of economic stagnation with a government whose reputation has already been irreparably damaged,” Garnett told the German Press Agency. A convention attendee with good Tory connections said MPs were deeply unsettled. “They dare not publicly defend the government’s line because they fear that the line will change overnight,” the man said.
Finance Minister Kwarteng announced a week ago, among other things, that he would lower the top tax rate for annual income of at least £150,000 (€172,000) from 45 percent to 40 percent. The government wants to use it to fuel economic growth. Following the announcement of the debt-financed plans, the pound’s exchange rate plummeted.
The British central bank felt compelled to step in and buy government bonds with long maturities, without a ceiling. Several leading members of the Tory party, including former ministers Michael Gove and Grant Shapps, criticized tax breaks for the wealthy at a time of rising costs of living and indicated they would vote against it in parliament. However, Kwarteng wants to stick to other equally controversial parts of the economic plan.
The Finance Minister is now under enormous fire. Truss not only admitted Sunday that she and Kwarteng made the decision on her own. The prime minister also stressed that the tax cut for the richest was Kwarteng’s idea. The fact that the former hedge fund employee attended a reception with hedge fund managers the night after the announcement of his plans also caused outrage.
Is it already the end for the new government?
Interest in Kwarteng’s speech on Monday afternoon was even higher. He only briefly commented on the change in attitude: “What a day,” the minister began. “It was tough, but we have to focus on our tasks.” His announcements of how he wants Britain to move again, true to the party’s congress motto “Get Britain moving”, were repeatedly greeted with loud applause. By now, Kwarteng should have gotten his head out of the rope.
But the resentment in the party remains great. Many critics of Truss avoid the party conference. If the government wants to save billions on public services as a next step, as some media are reporting, a new uproar could follow. The pundit Garnett still doesn’t see a pending rebellion, if only for one reason: “The Conservative MPs are unwilling to change their party leader again.” Because then a new election is hardly avoidable; however, according to polls, many Conservatives would lose their mandates in this case.
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