What challenges does Liz Truss face as the new prime minister?
Will Liz Truss end the Conservative Party’s decade-long leadership?
How will Liz Truss’s tax policy address the UK’s financial challenges?
Liz Truss is the third female Prime Minister in the UK’s history. She came to the office at a time when Britain was experiencing the highest rate of inflation in forty years. She has introduced her tax-cut plan, but Liz Truss’s tax policy endangers programs for the public finances.
Truss Comes to No ten at a Critical Time.
Liz Truss, the new leader of the UK Conservative Party, faces a terrifying situation at Downing Street. Liz Truss becomes the UK Prime Minister at a critical time as she inherits Boris Johnson’s legacy. The former prime minister left many problems and had to leave office following a series of cabinet resignations. The former foreign secretary is the prime minister after most party members selected her over Rishi Sunak.
More than 170,000 Conservative Party members were eligible to participate in the leadership vote. Truss won the vote at a time when Britain was experiencing the highest rate of inflation in four decades. The soaring energy costs and food prices are squeezing millions of households across the UK. The inflation rate has passed 10 percent and may increase over 20 percent next year. Liz Truss’s tax policy was one of her pledges which helped her to the NO 10.
Johnson’s Brexit Increased Inflation
Liz Truss has a lot to do, from getting the country through the cost-of-living crisis to solving the energy crisis. She faces many challenges during Boris Johnson’s tenure, including rampant inflation and substantial energy costs. Johnson was leading the campaign to leave the EU, he secured Brexit, but the country felt the harm. He carries the dishonour of the country’s first sitting prime minister to be fined for breaking the law.
Liz Truss maintained loyalty to Johnson till the last minute and did not resign as her foreign secretary. Now she is inheriting what Johnson has left behind in politics and the economy. Boris Johnson’s Brexit has led to a surge in support for Scottish independence. Brexit poses the risk of potential trade between London and Brussels because of the Northern Ireland Protocol. Liz Truss takes the reins of affairs during a period when Brexit risks the future unity of the United Kingdom.
The New PM Pledges Low-Tax Strategy
Liz Truss has fallen heir to a political and an economic, political catastrophe. The UK economy is moving toward a breaking point, and inflation is increasing pressure on the taxpayers. Financial stress has forced some Brits to choose between putting food on the table and heating their homes. During the leadership contest, Liz Truss emphasized that her government would be based on a low-tax strategy. She believes a lower tax economy boosts economic growth by raising investment.
Truss hopes a low-tax economy will help to improve the government’s fortunes. But British households have been struggling with the cost-of-living crisis, and this strategy may not work out. This strategy needs a longer time to see the effects on the UK economy, but she hopes most people would benefit. Liz Truss’s tax policy may take years to increase economic activity while people are under mounting financial pressure.
Truss’s Solution Is Not Immediate Help
Liz Truss’s tax policy aims to reboot a stalled economy and help British households. She vowed that the UK would come out of the storm and the British people overcome the hardship. However, Liz Truss’s tax policy is not an immediate solution for struggling families, pensioners, and businesses. She must borrow money from banks, financial institutes, and insurance companies. Eventually, taxpayers have to pay the money back with interest.
Liz Truss’s tax policy could hurt fragile public finances and affect inflation. Government taxes are the primary sources of revenue for the public finances in the UK. The National Institute of Economic and Social Research has said Truss’s energy plan is inefficient. The think tank has warned that Truss’s plan will pressure public finances. Accordingly, some economists requested assurance that the program would not jeopardize the public finances.
Truss’s Tax Policy Will Affect Public Sector
Domestic and foreign businesses consider the cost of tax, but it will take time for new investments. Liz Truss’s tax policy will not reduce inflation to save the UK economy. The Conservative government’s economic ideas will directly affect their future votes. The Institute for Fiscal Studies (IFS) has warned that without cuts to public spending, Liz Truss’s tax policy would leave a £ 23bn deficit in government accounts. The public sector, such as the police, army, and education, could feel the impact shortly.
The UK is now the second out of the G7 countries for income equality. Liz Truss’s tax policy is divisive, and lowering taxes will be unequal. This policy will make low benefits for wealthier individuals. Cutting taxes will not be the same for the low-income Brits and wealthy individuals. With a high level of inequality, rich people have little incentive to spend the benefits of the tax cuts. The government should introduce other tax cuts with specific purposes to encourage expenditure.
Brits Struggle with Energy Crisis
Liz Truss is a right-wing Conservative and appointed several like-minded ministers once she entered the office. She has promised a bold plan to tackle the economic crisis, address rampant inflation, and increase energy costs. Soon after forming the cabinet, Liz Truss vowed to help with the energy costs. She has guaranteed that a typical British household would save £ 1,000 a year with her plan. She has said the average energy bill would not be more than £ 2,500 a year until 2024.
Around 43 percent of British households will be in fuel poverty and cannot heat their homes. Truss should address poverty generally as the wealthy Brits have become richer and the low-income Brits have moved toward poverty. She should take decisive action to shield British households and businesses from the cost-of-living crisis. In the longer term, people will know whether Liz Truss’s tax policy successfully creates faster economic growth.
The Sterling has fallen 8 percent against the dollar over the past three months. It will worry many investors in Britain’s market. Another time sterling fell against the dollar was in 2016 after the Brexit referendum. Liz Truss, the new UK Prime Minister, faces several challenges at No 10. But, are her policies good for stoking inflation?