Former British Prime Minister Liz Truss’ “small” Budget announcement nearly three weeks into office marked the end of her political honeymoon.
The collapse of Truss’ economic project, dubbed “Trussonomics”, would seal her fate and deal a blow to the Conservatives’ reputation for financial responsibility. Her ideological “mini” budget contains £45 billion in unfinished tax cuts – the biggest tax cut in 50 years.
The response from the markets was very quick. The value of the pound fell while government borrowing costs skyrocketed, which threatened the solvency of parts of the pensions industry. The Bank of England has launched an emergency government bond purchase program to stabilize the market.
In the weeks that followed, Truss would fire her chancellor and reverse most of her proposed tax cuts. These unusual events culminated in her leaving office after just 44 days – the shortest prime ministerial term in British history.
Importantly, Kwarteng decided to distribute independent projections from the Office of Budget Responsibility in accordance with the customary practice before fiscal reports.
Three days later, new prime minister Jeremy Hunt has cut out nearly all remaining tax cuts during the protocol pause, which was announced in a statement before the London market opened.
Data and graphics of Steve Bernard