The chaotic start of the term of Liz Truss provokes her discredit on the eve of the Conservative conference
The British Labor Party would obtain 51% of the votes in an election called now and the Conservative 21%, according to a survey published by the YouGov firm of 1,700 citizens. At the time of Boris Johnson’s resignation, the Labor lead was 9 points. Prime Minister Liz Truss stated after her election as her leader that she will call elections in 2024.
Capital markets have declared a truce to the British Treasury after the intervention of the Bank of England, on Wednesday, which stopped a spiral that some have described as close to the one that culminated in 2008 with the bankruptcy of Lehman Brothers. In this case, the central bank prevented the possible bankruptcy of private pension funds.
The most widespread opinion is that the cause of the whirlwind – in addition to the multiplication of risk, as in 2008, by derivative financial instruments, popular in fund management during the last decade – was the presentation by the Minister of Finance, Kwasi Kwarteng , of a mini-budget that contained grants and tax cuts without presenting an income or savings chart.
The British government after ‘Brexit’ has brought about the agonizing management of Theresa May to negotiate the departure of the EU with a Parliament in which there was a majority in favor of permanence and then the disorder caused by a leader, Boris Johnson, extremely narcissistic . The first steps of Kwarteng and Truss, coreligionists of libertarian conservatism, as well as friends and neighbors, are shocking.
On Friday morning, three members of the Office of Fiscal Responsibility, created twelve years ago to audit the general accounting of the State, were received in Downing Street, offering projections that are not biased by partisan interest. Kwarteng and Truss ruled out that their mini-budget required an OBR report, they also said there was no time to produce one.
black start
The parliamentary committee that analyzes Treasury policy warned on Thursday that the OBR did have a report ready to be published a few weeks ago. That announcement was followed by the meeting. There had never been an official meeting of prime ministers with this independent entity. It was later announced that the OBR will deliver the report to the Government on October 8, but it will be published on the 23rd. The pound fell after the meeting.
The haste to announce tax cuts, especially for the richest, has cost pension funds still unknown amounts of money and has forced the Bank of England to change course, which wanted to begin this week the withdrawal of bonds accumulated on its balance sheet since 2008 and grown during the pandemic. His new purchase of bonds could now cause more inflation.
The beginning of Truss’s mandate evokes the ‘black Wednesday’ of September 16, 1992. The Government of John Major had to withdraw the pound from the exchange system of the European Economic Community after increasing the interest rate to 15% in an effort failed to stop the currency’s decline. There were almost five years left for the elections, but the Conservatives had lost credibility in economic management and, highly divided after the overthrow of Margaret Thatcher, they were overwhelmed by Tony Blair’s Labor Party.
Truss needs to act urgently because her promise to turn around a stagnant economy, and deliver growth she has set at 2.5% a year, must be achieved within two years. Her first step has caused unfortunate effects for her plans. The annual conference of the Conservative Party begins on Sunday. The leader will render accounts in what is usually a rhetorical feast, with triumphant speeches and ridicule from rivals.
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