LONDON — U.K. Prime Minister Liz Truss resigned Thursday following a failed tax-cutting budget that rocked financial markets and which led to a revolt within her own Conservative Party.
Truss said in a statement outside Downing Street: “We set out a vision for a low-tax, high-growth economy that would take advantage of the freedoms of Brexit.”
“I recognize though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party. I have therefore spoken to His Majesty the King to announce that I am resigning as leader of the Conservative Party.”
The party is now due to complete a leadership election within the next week, faster than the usual two-month period.
Truss has been in office for just 44 days, on 10 of which government business was paused following the death of Queen Elizabeth II.
LONDON — U.K. Prime Minister Liz Truss resigned Thursday following a failed tax-cutting budget that rocked financial markets and which led to a revolt within her own Conservative Party.
Truss said in a statement outside Downing Street: “We set out a vision for a low-tax, high-growth economy that would take advantage of the freedoms of Brexit.”
“I recognize though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party. I have therefore spoken to His Majesty the King to announce that I am resigning as leader of the Conservative Party.”
The party is now due to complete a leadership election within the next week, faster than the usual two-month period.
Truss has been in office for just 44 days, on 10 of which government business was paused following the death of Queen Elizabeth II.
Her resignation follows a meeting with Graham Brady, the Conservative politician that is in charge of leadership votes and reshuffles. Brady chairs the 1922 Committee — the group of Conservative MPs without ministerial positions who can submit letters of no confidence in the prime minister.
Just before the meeting, a Downing Street spokesperson told reporters Truss wanted to stay in office.
During the hour the meeting lasted, the number of MPs publicly calling for Truss to step down reached 17. The number who have written letters to Brady expressing no confidence in the prime minister was reported to be over 100 by Thursday.
The pound was up 0.4% on the day against the dollar shortly after the announcement, trading at $1.1273, briefly touching a session high. It remains at the level it was on Sept. 22, before Truss’ market-moving budget. The yields on 10-year and five-year gilts (U.K. sovereign bonds) we both down by around 5 basis points after Truss’ brief speech.
Opposition parties Labour, the Scottish National Party and the Liberal Democrats called for an immediate general election on Thursday afternoon. Labour leader Keir Starmer said: “The Conservative Party has shown it no longer has a mandate to govern.”
On Sept. 23, Truss’ finance minister, Kwasi Kwarteng, announced a so-called “mini-budget” which began a turbulent period for U.K. bond markets which balked at the debt-funded tax cuts he put forward. Most of the policies were reversed three weeks later by the second finance minister, Jeremy Hunt.
Truss beat Rishi Sunak to become leader of the Conservative Party following the resignation of Boris Johnson on July 7. Sunak is now one of the favorites to replace Truss, along with Hunt, another leadership contender Penny Mordaunt, Defense Minister Ben Wallace and former Prime Minister Boris Johnson.
The resignation leaves the status of the Conservatives’ expected budget update on Oct. 31 uncertain, but Truss said the leadership handover would “ensure we remain on a path to deliver our fiscal plans.”
More to be done
Paul Dales, chief U.K. economist at Capital Economics, said the new PM would need to do more to regain the trust of financial markets.
“In just a few weeks fiscal policy has swung from being ultra loose, to less loose to outright tight,” he said in a note.
“This has increased the downside risks to our forecast that the economy will enter a recession involving a peak-to-trough fall in GDP of around 2%, although that itself means there is also a downside risk to our forecast that interest rates will rise to 5.00%.”
https://www.cnbc.com/2022/10/20/uk-prime-minister-liz-truss-resigns-after-failed-budget-and-market-turmoil.html
It will be interesting to see the procedure now for the Tories, another few months to search for a leader or replace her with the runner up from the previous contest. Either way, not good for the stability of the UK.