UK Prime Minister Liz Truss resigns after budget failure and market turmoil

Prime Minister Liz Truss announced her resignation on 20th October 2022 at 10 Downing Street, London, England.

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LONDON — British Prime Minister Liz Truss resigned Thursday after a failed tax cut budget that rocked financial markets and led to an uprising within her own Conservative Party.

In a statement outside Downing Street, Truss said he had “launched a vision of a low-tax, high-growth economy that harnesses the freedom of Brexit.”

“However, given the circumstances, I am aware that I am unable to fulfill the mandate elected by the Conservative Party. Therefore, I have spoken with His Majesty the King and have announced my resignation as leader of the Conservative Party.”

The party now expects to complete the leadership election within the next week, earlier than the usual two-month period. Conservative MP Graham Brady, who is in charge of leadership voting and personnel transfers, told reporters the party was looking at how the ballot could include Conservative MPs and the wider party.

Truss was in office for just 44 days, 10 of which saw government operations suspended after the death of Queen Elizabeth II.

Her resignation came after a meeting with Brady, chairman of the 1922 Commission, a group of Conservative MPs without ministerial status who could submit a letter of no confidence to the Prime Minister.

Shortly before the meeting, a Downing Street spokesperson told reporters that Truss wanted to stay in the office.

In the hours the meeting lasted, the number of MPs who had publicly called for Truss’ resignation had reached 17. The number of those who had written letters of distrust to Prime Minister Brady had reached 100 by Thursday. was reported to exceed

of lb increased by 0.5% on the day. dollar An hour after the announcement, it briefly touched the session highs, trading at $1.1273. It remains at the level of Sept. 22 ahead of the truss market-moving budget. Yields on 30-, 10- and 5-year gilts fell about 5 basis points after Truss’ brief speech.

The opposition Labor, Scottish National Party and Liberal Democrats called for an immediate general election on Thursday afternoon. “The Conservatives have shown they no longer have the power to govern,” said Labor leader Keir Starmer.

The controversial ‘mini-budget’

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On September 23, Truss Finance Minister Kwasi Kwarten announced a so-called ‘mini-budget’. This started a period of turmoil in the UK bond market, which was hesitant about the debt-financed tax cuts he advocated. Most of the policy was overturned by the second Finance Minister, Jeremy Hunt, three weeks after him.

After Boris Johnson resigned on 7 July, Truss defeated Rishi Sunak to become leader of the Conservative Party. Sunak is now one of the candidates to replace Truss, alongside Hunt, another party leader candidate Penny Mordaunt, Defense Minister Ben Wallace and former prime minister. Boris Johnson.

While his resignation leaves the status of the Conservative Party budget update scheduled for 31 October uncertain, Truss said the leadership transition “will ensure that we remain on track to deliver on our fiscal plans.” I will.”

More to do

Paul Dales, UK chief economist at Capital Economics, said the new prime minister needed to do more to restore confidence in financial markets.

“In just a few weeks, fiscal policy has gone from being very loose to being loose to being completely tight,” he said in a note.

“This raises downside risks to our forecast that the economy will plunge into recession and that GDP will decline by about 2% from peak to trough, but as such, it will be in line with our forecast that interest rates will rise. also means there is downside risk, up to 5.00%.”

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