The announcement of former British Prime Minister Liz Truss’ ‘mini’ budget after almost three weeks in office marked the end of her political honeymoon.
The collapse of Truss’ economic project, dubbed “Trussonomics,” would seal his fate and deal a lasting blow to the Conservative Party’s reputation for fiscal responsibility. His ideological ‘mini’ budget contained £45billion in unfunded tax cuts – the biggest tax cuts for 50 years.
The market reaction was quick. The value of the pound plunged as government borrowing costs soared, threatening the solvency of parts of the pensions sector. The Bank of England has launched an emergency government bond buying program in an effort to stabilize markets.
In the weeks that followed, Truss fired his chancellor and reversed most of his proposed tax cuts. These extraordinary events culminated in his leaving office after just 44 days – the shortest prime ministership in British history.
Basically, Kwarteng has decided to dispense with the independent Office of Budget Responsibility forecasts that are customary before financial statements.
Three days later, new Chancellor Jeremy Hunt tore up nearly all of the remaining tax cuts in a breach of protocol, which was communicated in a statement before London markets opened.
Data and charts by Steve Bernard