The important measures proposed by Liz Truss will likely raise inequality and plunge UK into recession. Many critics question the government’s actions.
Margaret Thatcher 2.0, otherwise called Liz Truss, was not off of a great start with her term as Prime Minister of the United Kingdom. To be fair, not much can be attributed to her: after a few days of her taking power, Queen Elizabeth II died and Vladimir Putin announced partial mobilization of 300.000 conscripts. The latter especially was very hurtful for the Pound, which fell to its lowest in 37 years.
Despite the hardship Liz Truss inherited from her predecessor Boris Johnson, things seem to be taking an even worse direction. Last Friday, the UK’s government announced a massive unfunded tax cut: a relief fund of £45 billion in total. According to Truss’ plans, this money will be spared by the highest income individuals and businesses, while the rest of the population will keep paying the same taxes as before.
In short, Liz Truss managed to increase inequality and plunge the UK into a recession faster in one single move. On Monday, when stock markets opened again, the already vandalized Pound fell to an all-time low. Apparently, markets did not like this move at all.
Truss’ announcement of the tax cut came after the Bank of England tried to stabilize the currency. As mentioned above, Putin’s speech had already sunk Sterling, therefore London started buying government bonds en masse. Over the next few weeks, the Central Bank is likely to buy £65 billion in long-term stocks.
Liz Truss defended her plan
Despite many critics came after the announcement, Liz Truss staunchly defended her move in a recent interview.
“I understand that families are struggling with their fuel bills, and we had to take urgent action to get our economy growing, get Britain moving, and also deal with inflation,” she said, “And of course, that means taking controversial and difficult decisions. But I’m prepared to do that as prime minister, because what’s important to me is that we get our economy moving.”
In her opinion, these tax cuts will encourage the higher classes to invest more into Britain’s businesses. This would raise the value of the Pound and lower inflation at the same time, as less liquidity is in circulation because it is being invested.
As Truss said herself, these measures will not come overnight, so no major shock in the UK’s economy is to be expected soon (well, except for the free-fall of the Pound). Liz Truss is gambling possibly everything with this move, as Labour leader’s Keir Starmer watches closely, possibly planning a move in the near future.
