Britain, Brexit & Liz Truss 6 September 2022 –

Written by  //  October 2, 2022  //  Geopolitics, Government & Governance, U.K./Britain  //  No comments

Britain Adrift
The UK’s Search for a Post-Brexit Role

May/June 2020

Britain’s financial meltdown carries a global warning
By Sebastian Mallaby, the Paul A. Volcker senior fellow for international economics at the Council on Foreign Relations
(WaPo) … Acerbic zingers aside, Truss’s performance is no joke. For 10 days, the British pound has swung dizzyingly from weak to extremely weak to merely weak again. Long-term government bonds, maturing in 50 years, shed one-third of their value at one stage, recovering from that unprecedented plunge only when the Bank of England stepped in. Foreign watchdogs from the International Monetary Fund to the rating agency Standard & Poor’s have condemned Truss’s unfunded tax cuts, which triggered the rout.
Clearly this is bad for Britain. Truss’s net approval rating has collapsed from negative 9 percent to negative 37 percent in the space of a week. But Truss’s predicament also reflects a larger issue. Across the supposedly advanced economies, the return of inflation has magnified the riskiness of extravagant political gestures. For the most part, however, politicians have not gotten the message.

28 September
Liz Truss’ honeymoon canceled as pound plummets and UK borrowing costs soar
Bank of England forced to issue emergency statement after UK leader’s mini-budget triggers market turmoil.
Humiliation for UK’s ‘Kami-Kwasi’ chancellor as central bank steps in to halt market rout
Just weeks into the job, Tory MPs are calling on new UK chancellor Kwasi Kwarteng to quit.
(Politico Eu) Increasing numbers of Tory MPs are now calling for Kwarteng and new Prime Minister Liz Truss to go – just three weeks into their new roles.
Friday’s announcement of debt-funded tax cuts — unveiled without the usual scrutiny from independent fiscal watchdog the Office for Budget Responsibility — was followed by a plunge in the pound and sparked rare criticism from the International Monetary Fund.
Bank of England steps in to calm markets
By Daniel Thomas & Noor Nanji, Business reporters
(BBC News) The Bank of England has said it will step in to calm markets after the government’s tax-cutting plans sparked a fall in the pound and caused borrowing costs to surge.
It warned that if the market volatility continued there would be a “material risk to UK financial stability”.
The Bank will start buying government bonds at an “urgent pace” to help restore “orderly market conditions”.
It comes after the currency hit a record low on Monday following the chancellor’s mini-budget, which pledged $45bn worth of tax cuts, funded by borrowing, as part of a plan to boost economic growth.
Kwarteng sent stinging and unusual rebuke by IMF
Not only did the world’s most important international financial institution suggest the plan was economically risky, it said it was likely to increase inequality and recommended taking an “early opportunity” for a re-evaluation of the policies in the coming weeks, on a specific date.
The stinging rebuke from the International Monetary Fund reflected similar concerns from the world’s major finance ministries that a crisis brewing in the UK could spill over into a global slowdown.
The criticism from the Washington-based body was without a clear precedent in regard to a major G7 country and shareholder.

27 September
Paul Krugman: Why Is the Pound Getting Pounded?
It was already clear that the Truss government was going to have to increase spending in the short run, to aid families hit with higher energy bills stemming from Vladimir Putin’s de facto natural gas embargo. Rather than raising taxes to help cover this expense, however, Truss’s chancellor of the Exchequer — basically her Treasury secretary — announced tax cuts, notably a big reduction in taxes on the highest earners.
The parallel with Reaganomics was obvious. Interest rates duly rose. But in this case, rather than rising, the pound plunged: This wasn’t the market reaction you’d expect for an advanced economy. It was instead similar to what you often see in emerging markets, where investors worry that governments will cover increased deficits by printing more money, causing inflation to accelerate. …
So why the sudden run on the pound? One answer I liked came from the City of London economist Dario Perkins, who declared that the problem with the budget wasn’t that it was inflationary but that it was “moronic,” and that an economy run by morons has to pay a risk premium.

‘The jewel has lost its shine’: how the world reacted to the UK’s pound crisis
The turmoil stirred condemnation in the US, bitter memories in Greece and interest among holidaymakers in Singapore
(The Guardian) International reaction to the turmoil in the financial markets which saw the pound fall to its lowest level ever against the dollar is devastating in its condemnation of the new government’s policies, and the astonishment and shock focused in particular on the chancellor’s willingness to experiment with one of the world’s most stable economies.
Pound comes under new pressure after Bank of England fails to raise rates
Central bank stops short of emergency rate hike and instead says it will make full assessment in November
Tory MPs furious with Liz Truss and Kwasi Kwarteng as pound crashes
Backbenchers express concern new leadership team has already lost them the next election
Pound’s plummet underlines Kwarteng schoolboy error
Q&A: what does the pound’s slump mean for the UK?
Conservative MPs were furious with Liz Truss and Kwasi Kwarteng as the pound continued to crash on Monday, with some talking of a new leadership contest and others terrified that replacing her would lead to an early election.

16 September
Bill McKibben: Charles III and Climate Change in the U.K.
Not only is the new king supposed to stop pushing for green political policies; he faces a new Prime Minister who plans to reverse them.
it is worth noting that the newest occupant of the British throne, Charles III, understands in fairly deep ways the climate crisis now imperilling our career as a species.
It is, as he said at the Glasgow climate talks last year, an “existential threat” that requires the world to go on a “warlike footing.” His language showed him to be a man who had studied the problem deeply: “As we tackle this crisis, our efforts cannot be a series of independent initiatives running in parallel. The scale and scope of the threat we face call for a global, systems-level solution, based on radically transforming our current fossil-fuel-based economy to one that is genuinely renewable and sustainable.” Speaking to the assembled leaders, he said, “Many of your countries, I know, are already feeling the devastating impact of climate change, through ever-increasing droughts, mudslides, floods, hurricanes, cyclones, and wildfires.” He concluded, “I can only urge you, as the world’s decision-makers, to find practical ways of overcoming differences so we can all get down to work, together”
… Truss doesn’t even talk much about climate change—she gave a speech last week on energy policy in which, though she referred to clean and renewable technologies, she managed to not even mention the phrase, and also promised to increase oil and gas extraction. (It’s a sign of how far right the Tories have swung; Margaret Thatcher, who had trained as a scientist, was an early advocate of climate action.) Truss has called for ending the ban on fracking in the U.K., and she has appointed as her Business, Energy, and Industrial Strategy Secretary Jacob Rees-Mogg, a Member of Parliament who has wandered the fever swamps of climate denialism.

Britain’s new prime minister, Liz Truss, with her husband, Hugh O’Leary, after giving her first speech, at Downing Street on Tuesday. Carl Court/Getty Images

Liz Truss clearly had a plan for her first week, but fate tore it up
However, in the few short days before all government business was effectively suspended, Truss was not idle. She managed to complete a relatively hitch-free cabinet reshuffle, announce a £100bn-£150bn package of relief on energy bills and replace almost the entirety of Boris Johnson’s Downing Street operation.
Truss had evidently prepared to a high degree as it became obvious she would triumph over her rival, Rishi Sunak. Over the last three weeks of the campaign, she spent much of her time planning for government with a clutch of close aides at her grace-and-favour retreat in Chevening.
… Truss had much of the logistics stitched up before she even entered No 10. She was also a diplomat; awkward conversations took place by phone over the course of the last week so that those who were departing would be prepared. Negotiations over positions for ambitious leadership rivals took place over days, sometimes weeks beforehand, ensuring there would be no standoffs in No 10 to set tongues wagging.
Truss will now have to contend with a break in her plans for government, using the time to take stock and work out the details of her energy bailout – which was published without an explanation for how it would be funded.
When business returns after 10 days of national mourning culminating in the Queen’s funeral, Truss will have a huge amount to get done in a compressed period of time, from a visit to the UN general assembly and an emergency budget, to a slew of policy announcements that will be expected at her first party conference.

7 September
UK leader Truss vows energy relief, rules out windfall tax
(AP) — Newly installed U.K. Prime Minister Liz Truss told Parliament on Wednesday that she would tackle Britain’s “very serious” energy crisis while still slashing taxes, ruling out imposing a windfall levy on oil companies to pay for her plans to offset the soaring cost of heating and electricity.
Truss rebuffed opposition calls for a new windfall tax, even as she refrained from explaining how she would fund a plan meant to help the public pay energy bills skyrocketing because of Russia’s invasion of Ukraine and the economic aftershocks of COVID-19 and Brexit.
EU braces for bruising battle with UK over Northern Ireland protocol
What could happen if Liz Truss triggers article 16 – and will it increase Brexit hostilities?
The EU is bracing itself for another tumultuous and bruising battle with the UK over Brexit, despite hopes and pleas for Liz Truss to be pragmatic and try to seal a deal on the protracted Northern Ireland issues.
Welcome to Liz Truss’ Britain. Everyone’s going on strike
Soaring inflation is triggering workers to walk out en masse, just as Britain’s new prime minister takes the reins.
(Politico Eu) Across the country, rail workers, barristers, dockhands, bus drivers, garbage collectors, Amazon employees, and even journalists at the infamously anti-union Daily Express newspaper are walking out over stagnant wages in the face of soaring inflation — not to mention the size of their bosses’ pay packets, and the crumbling state of public services.
U.K.’s Liz Truss inherits an economic nightmare
Britain’s economy, rendered fragile and brittle by Brexit, has proved incapable of withstanding the twin scourges of the pandemic and energy price inflation. The result is a historic economic implosion.
(Axios) Driving the news: The government of incoming prime minister Liz Truss is expected to spend as much as £200 billion ($230 billion) to goose the economy and subsidize energy costs.
The catch: Energy costs are high because demand exceeds supply. Government subsidies will only serve to increase the demand for energy, making it even harder for Britain to find the energy savings it needs.
The big picture: Truss was most recently elected to parliament in December 2019, just weeks before Britain formally left the European Union and months before the pandemic precipitated a seemingly endless litany of scandals surrounding the behavior of lawmakers from the ruling Conservative Party.
The vote that made her prime minister involved just 141,725 voters, all of whom were party members.
The bottom line: Only 5% of Britons expect Truss to be a great prime minister, while 35% think she will be terrible.
Liz Truss’s cabinet is the U.K.’s first without a White man in top office
Shortly after becoming prime minister on Tuesday, Truss got down to business and appointed her senior leadership team for the roles known as the “The Great Offices of State.”
She named Kwasi Kwarteng as chancellor of the exchequer, or finance chief, a role that will be pivotal as the country grapples with a cost-of-living crisis

Liz Truss becomes U.K. prime minister after meeting with the Queen

Liz Truss was officially appointed the U.K.’s new prime minister on Tuesday after a formal meeting with Queen Elizabeth II.
Truss’ appointment follows former Prime Minister Boris Johnson’s departure from 10 Downing Street for the final time. He officially resigned in a meeting with the Queen at Balmoral Castle in Scotland earlier in the day.
Truss vows energy crisis action after becoming Britain’s new PM
By William James, Kate Holton and Elizabeth Piper
Truss vows to take on global headwinds
New PM faces daunting in-tray

(Reuters) – Liz Truss took over as British prime minister on Tuesday, vowing immediate action to tackle one of the most daunting set of challenges for an incoming leader in post-War history led by soaring energy bills, a looming recession and industrial strife.
Truss, who will later announce her government appointments, said she had three priorities: growing the economy through tax cuts, dealing with rising energy costs from this week, and ensuring people got the care they needed from the state-run National Health Service.
However, she inherits an economy in crisis, with inflation at double digits, the cost of energy soaring and the Bank of England warning of a lengthy recession by the end of this year. Already, workers across the economy have gone on strike.
Truss Takes Office, Promising Britons They Can ‘Ride Out the Storm’
Liz Truss takes over as prime minister at a time of deepening economic crisis. Her first cabinet appointments reward loyalists who supported her bid for office.
(NYT) Liz Truss, newly anointed by Queen Elizabeth II as Britain’s prime minister, arrived at a rain-swept Downing Street on Tuesday, promising action this week on energy bills to help Britons “ride out the storm,” and filling out a cabinet that rewarded her loyalists in the contest to replace Boris Johnson.
Speaking under dark clouds minutes after a thundershower drenched onlookers, Ms. Truss leaned on the weather as a metaphor for the economic challenges facing Britain. But she offered no fresh details on how the government planned to help people cope with soaring inflation and runaway costs.
The pound, bonds and energy: the winners and losers under British PM Truss
Truss risks fresh row with EU over workers’ rights, say legal experts
Changes as part of ‘bonfire’ of EU laws could lead to tariffs on British exports if level playing field rules breached
(The Guardian) The new prime minister is reportedly considering a review of workers’ rights as part of a wider “bonfire” of 1,500 EU laws she wants to take off the UK’s statute books before the end of 2023.
Liz Truss to appoint cabinet of loyalists as she becomes UK’s next PM
Britain’s fourth Tory prime minister in six years begins race against time to deal with cost of living emergency on Tuesday
The prime minister-elect is expected to announce plans for an energy price freeze on Thursday as she battles to navigate an overwhelming in-tray during the worst economic crisis in a generation.
She also faces an uphill struggle to win over Tory MPs as she inherits a deeply divided party lagging behind in the polls – some mutinous backbenchers are already said to be plotting her demise. Truss won 81,326 votes (57.4%) of Tory members to the former chancellor’s 60,399 (42.6%), a narrower victory than many had expected.
Truss will reveal support for households and businesses later this week, with allies understood to be discussing a £100bn package that could include freezing energy bills. Treasury sources said that under the proposal, funds could be provided by commercial banks and backed by government guarantees, and added to consumers’ bills over the long term.
One move under discussion is to freeze all households’ bills potentially until the next planned general election in 2024, according to reports. Truss was also said to be planning an expansion of North Sea gas extraction.
Team Truss: 10 key people in PM’s inner circle

EU calls on Liz Truss to abide by Brexit deal
European leaders express hope for more constructive relationship with Britain’s new prime minister
The EU has urged Liz Truss to respect the Brexit agreement, as it called on the incoming British prime minister to take a broader view of Britain’s relationship with Europe.
The European Commission president, Ursula von der Leyen, who is expected to speak to Truss by phone in the coming days, tweeted her congratulations, referring to common challenges, from climate change to the Russian invasion of Ukraine.
Behind the scenes, EU officials have low expectations of an improvement in relations with Truss, the architect of a bill to override key aspects of the Northern Ireland protocol, which could lead to a trade war. (See Truss-Sunak contest leaves Brussels pessimistic about relations with UKEU officials see little hope of escape from post-Brexit low under either Tory candidate and Brexit is the monster under the bed Liz Truss is desperately trying to ignore)

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