Biden’s Criticism and Britons Anger: Truss’s Plan to Abandon Tax Cuts Is Likely to Oust Her

The Global Times newspaper issued a report entitled UK mired in chaos, as Truss fights for survival after just 40 days as PM, stressing that: "Truss is fighting for her political survival as more than 100 members of parliament (MPs) belonging to her Conservative Party are threatening to force her to step down as early as this week."

The Times, The Telegraph, and other newspapers have reported that Conservative lawmakers are still planning to oust Truss, something that could happen within days, as the party's position in opinion polls has deteriorated since Truss took over from Boris Johnson in Sept.

The Guardian quoted a former cabinet minister saying they thought it was "50/50 whether she will make it till Christmas." The newspaper added that a Tory MP, who has backed Truss since the leadership contest, told the Guardian that Truss' authority is shattered, and people want it done this week."

 

Humiliating U-turn

Since entering the race to succeed former Prime Minister Boris Johnson, Truss pledged to adopt radical reforms to revive the economy and attract foreign investment after the apathy caused by the pandemic and the repercussions of the Russian-Ukrainian war.

Her reforms shocked the financial markets, plunged the value of the pound sterling to unprecedented levels against the dollar, triggered a crisis in the real estate and bond market, and raised government borrowing interests.

With increasing pressures from within her party and the central bank, Truss was forced to withdraw during her party's conference last week from a central part of this budget, which was intended to reduce the tax burden on high-income earners.

While the currency reacted positively to this decision, which was considered by many as embarrassing for the new government, it was not enough to restore the market's confidence in Truss's financial policies.

While the finance ministers of the Group of Twenty were meeting in Washington on the sidelines of the annual meetings of the World Bank and the International Monetary Fund, Kwarteng decided to shorten his visit and return to London under the pretext of holding "urgent talks" on the budget.

Yet, these "talks" ended before they began, and 10 Downing Street announced Kwasi's dismissal. Kwarteng would thus have held the second shortest term as Secretary of the Treasury, after Iain MacLeod, who died of a heart attack 30 days after taking office in 1970.

Replacing the treasury minister may not be enough to restore Truss' reputation within her party. Rather, this decision may anger some of her supporters, who are tired of her hasty decisions and criticized her "sacrifice" of one of her closest allies in the government.

In an interview with Al-Estiklal, the expert on economics and researcher at Sabahattin Zaim University Soumia Rahali said: "With the Conservatives' popularity waning in opinion polls in favor of the Labour party, and the economic challenges expected to accompany rising energy prices in the winter, it is natural for Britons to demand the departure of Truss after the huge mistake in her proposed budget."

She continued: "Current Conservative Party rules do not allow her to be removed from office until 12 months after her appointment, but some MPs have hinted at the possibility of changing the rules if the 1922 Committee receives more than a hundred letters requesting Truss's impeachment."

The expert added: "There is no doubt that by appointing Hunt as the new Treasury Secretary and adjusting the direction of her fiscal policies, Truss is trying to persuade her colleagues in the party to continue supporting her until the next election cycle."

 

Severe Repercussions

The study, conducted by the Association of Employment and Labor in Britain, showed that companies began to impose restrictions on hiring due to pessimism about the economic prospects, while employees decided to stand in their current conditions.

As a result, the number of job vacancies and the number of applicants rose at the slowest pace in more than a year and a half, according to Bloomberg. The study stated that there is still a shortage of job applicants, forcing companies to raise wages. Initial salary inflation moderated slightly in September, as employees are demanding compensation for the rising cost of living.

While any economic slowdown this winter will affect the market, the extent of shortages mean that hiring will remain a focus for employers," Bloomberg quoted Neil Carberry, executive director of the Association for Employment and Labor, as saying.

The decline in the labor market is a major concern for the Bank of England, the Bank of England, which has raised interest rates seven times since last December, to prevent a jump in salaries and prices, and is expected to raise interest rates again next year.

The Bank of England expected that prices in the country would rise by 6.6 percent in the three months to the end of last September, compared to 6.5 percent in the previous August, the highest increase since the Bank began publishing a survey of the decision-makers committee composed of executives at the beginning of 2017.

 

Biden's Criticism

US President Joe Biden on Saturday called a tax cut plan abandoned by British Prime Minister Liz Truss a "mistake" and said he was concerned about other countries' fiscal policies that could hurt the United States amid "global inflation."

Biden said it was "expected" that the new British prime minister would have to back off plans to cut taxes sharply, without specifying cost savings, after her proposal caused turmoil in global financial markets.

This was an unusual criticism by an American president of the domestic policy decisions of one of the United States' closest allies.

"I wasn't the only one who thought it was wrong," Biden said. "I don't agree with the policy, but it's up to Great Britain."

After the storm of sackings, Truss announced, in a press conference, that it was reversing the abolition of the corporate tax, after it succumbed to intense pressure from Conservative MPs and the markets, by removing the corporate tax cut from the government's mini-budget.

Truss said it was clear that portions of her government's mini-budget went further and faster than the markets had expected. "So the way we are delivering our mission right now has to change. We need to act now to reassure the markets of our fiscal discipline," she added.

Biden's comments came weeks after White House officials refused to criticize the Truss plans, though they emphasized that they were closely monitoring the economic fallout.