Timeline: British Prime Minister Liz Truss in crisis | Business and Economy News

British Prime Minister Liz Truss has sacked its finance minister Kwasi Kwarteng and abandoned parts of his unpopular economic package in a desperate bid for political survival, less than 40 days after taking office.

With financial markets in turmoil, a chastened Truss said on Friday she accepts her government’s plans for unfunded tax cuts have gone ‘further and faster’ than investors expected. were waiting.

Here’s everything that’s happened since Truss became Prime Minister of the United Kingdom:

Truss wins leadership contest

On September 5, then Minister of Foreign Affairs Liz Truss has been named leader of the ruling Conservative Partytaking office as Britain’s next Prime Minister at a time when the country is facing a cost of living crisis, industrial unrest and recession.

Longtime favorite in the replacement race Boris JohnsonTruss became the Conservatives’ fourth prime minister since the 2015 election.

Truss, 47, vowed to act quickly to tackle the UK’s cost of living crisis, saying that within a week she would come up with a plan to deal with rising energy bills and securing future fuel supplies.

Truss signaled during her leadership campaign that she would challenge economic conventions by scrapping tax increases and cutting other levies that some economists believe would increase inflation.

This, together with the commitment to review the remit of the Bank of England while protecting its independence, would later prompt some investors to dump the pound and government bonds.

Truss names the cabinet

On September 7, hours after entering the upper office, Truss appointed a new cabinet at the formal request of Queen Elizabeth II.

The wide-ranging reshuffle saw 15 new faces occupy senior positions in government, while 16 members of the previous cabinet remained in the newly formed cabinet.

Among the longest serving members was Kwasi Kwarteng as Chancellor of the Exchequer. He replaced Nadhim Zahawi, who got the job in July.

Kwarteng previously served as business secretary since January 2021, when he became the first cabinet minister of the black Conservative Party.

Queen Elizabeth II has died

On September 8, the 96-year-old monarch died. A 10-day period of national mourning followed, with the Queen’s funeral taking place on September 19.

A quarter of a week announces a mini-budget

On September 23, the British government unveiled a new mini-budget in parliamentaimed at reducing taxes and household energy bills while stimulating economic growth.

In what is the biggest tax cut budget since 1972, Kwarteng’s sweeping new budget would see cuts to national insurance, stamp duty and the top tax.

Kwarteng said the budget would address three key elements: guaranteed energy prices, equal business support and a program to finance energy markets.

A plan was presented to reduce the lowest tax rate from 20 to 19% and the highest rate from 45 to 40%.

Financial markets in turmoil

Kwarteng’s tax cuts and energy price freeze, aimed at boosting Britain’s recession-threatened economy, appeared to be having the opposite effect as traders warned of rising debt for pay the incentives.

Following the budget, UK government bond yields soared and on September 26 the pound hit a record high of $1.0350 as sweeping unfunded tax cuts rattled the market .

The Bank of England steps in

In a highly unusual intervention, the International Monetary Fund (IMF) said on September 27 that it was “closely monitoring” developments and urged the government in London to change course.

The next day the The Bank of England (BoE) intervened to boost market confidence in UK after IMF criticized the UK budgetarguing that it will “likely increase inequality” and worsen inflation.

The BoE announced that it was temporarily buying up 65 billion pounds ($73 billion) of long-term British government bonds “to restore orderly market conditions”.

Truss defends his economic plan

On September 29, Truss defended his economic plan and shrugged the negative reaction financial markets, saying she is ready to make “tough decisions” to grow the economy.

In his first public comments since the mini-budget chaos, Truss said the UK was facing “very, very difficult economic times”.

But she said the problems were global and spurred by Russia’s large-scale invasion of Ukraine.

U-turn on the highest tax rate

In a humiliating reversal, the government reversed plans to cut the nation’s highest income tax rate.

Announcing the government’s U-turn, Kwarteng said the proposal to cut the top rate – which was about two billion pounds ($2.2 billion) out of the overall tax cut plan of 45 billion pounds ($50.4 billion) – had “become a distraction from our overarching mission to address the challenges facing our country.”

“We understand and we have listened,” he said in a statement released hours before he was due to deliver a keynote address at the Conservative Party’s annual conference.

Kwarteng Mesh Bags

Truss remained under pressure to drop the ill-fated mini-budget further and on October 14, she appointed Jeremy Hunt to replace Kwarteng as chancellor and canceled the plan to cut corporation tax, removing a key part of the economic plan that had sparked the market turmoil.

Speaking at a press conference, she said corporation tax will rise to 25% from April next year.

Truss said she decided to stick with the hike, a move that would boost public finances by 18 billion pounds ($20 billion).

The intervention of the Bank of England was coming to an end.

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