The United Kingdom has been through quite the tumultuous time over the last 6 months. There have been through 3 prime ministers, 4 Chancellors of the Exchequer, and 2 Monarchs. This lack of continuity has left the UK not only culturally uneasy but also politically and economically.
It would be incorrect to lay the culpability of the mistakes made in the last few months solely to the recent leadership, but it is certainly the case that we are in a worse place than we were before following decisions made. The effects of the war in Ukraine, and the aftermath of the pandemic has left most of Europe with supply chain problems and a falling value of domestic currency against the dollar. The UK however seem to be doing particularly badly compared to many of their European compatriots; the only member in the G7 to have GDP still smaller than the pre pandemic sizes.
The appointment of the Truss Mandate (Sept 2022) and the appointment of her cabinet started a further downturn both in confidence and stability in the UK. Most important of all for Truss’ parliament is to mention the appointment of Kwasi Kwarteng as the Chancellor of the Exchequer. The biggest intervention of the chancellor’s time in office was his disastrous mini budget. A plan that set out to cut taxes and give financial support to cap energy prices.
The budget was made without the consultation of the OBR ( Office of Budget Responsibility) and thus put doubt into the minds of international and domestic investors. The OBR statement after the mini budget revealed that they would have been able to produce a forecast in time for the mini budget, but it was not seen to be required by Mr Kwarteng.
There was an increase in the yield of the gilts for 10-year government bonds following this event, putting all the pressure onto the Bank of England to bail out the chancellor’s poor fiscal plan. They poured 65 billion worth of the taxpayers’ money into government bonds; a decision that was essential to stabilise their value on which many pension funds are dependent on. Obviously, this created an even larger dent into the UK’s public debt at no avail. We saw all the economic policies reversed within weeks of their original proposal.
The push to drive growth in the UK in a time of recession and uncertainty coupled with an already poor relationship between the incumbent government and the public proved to be a hurdle to which ultimately Mr Kwarteng and Mrs Truss fell at.
The last thing that Truss may have done that was partially fiscally responsible was to appoint MP Jeremy Hunt as the chancellor succeeding Mr Kwarteng. Previously described as a “boring technocrat” Mr Hunt may be just what the UK need in a time of economic downturn. Much like in the early 2010s with the Monti government in Italy, the government are in strong need of people who can make long term decisions for the good of the economic welfare of the country.
Under heavy social pressure to resign, Liz Truss stepped down after only 45 days in office.
In late October, Mr Sunak formed his new cabinet having been voted into office following a short party election. Jeremy Hunt importantly retained his position as the Chancellor of the Exchequer and Dominic Raab who had previously been resigned to the back benches came into the Sunak cabinet as the deputy prime minister.
In contrast to Truss’ free market rather right-wing approach with less taxes and less regulation, Sunak is trying to reduce the amount of volatility of the pound and to contain the high inflation rate. This has included tax rises and a refusal to pay the demands that many unions are presenting for pay rises in the public sector (19% for nurses). Although many may consider this fiscally responsible (in comparison to his predecessor most decisions would be), Sunak faces strong opposition in the strikes announced on the train networks, nurses and border control officers.
The Conservatives seem to have bleak days ahead: They were 33 points behind the labour party in a YOUGOV poll just after the minibudget was released, Labour leader Keir Stamer is unsurprisingly calling for a general election, and interest rates are at their highest since 2008. Although the conservative party have now had a bump in public opinion from the appointment of Rishi Sunak, it is the case that neither the current prime minister nor his predecessor was elected by the people during a general election. It would seem the labour reclamation of the red wall and the end of conservatism in the UK is only a matter of time.
To conclude the right honourable leader of the labour party Sir Keir Stamer recently questioned Mr Sunak’s thoughts on ‘COUNTRY OVER PARTY’; what will be interesting to see is whether the Prime Minister works in the interest of the UK or the Tory party’s slim chances of retaining office.
by George Marshall