Can anyone explain why??
Since then, she's been a dead woman walking.
Especially, I think that the cancellation of the rise in corporation tax was very welcome and in fact economists now say that the rise to 25% will make the recession deeper and longer (unsurprisingly, frankly).
The issue was that the other cuts, especially abolishing 45p income tax rate but frankly also the decrease of the basic rate, were not discussed, not funded (which is what spooked the markets since we already borrowed and spent like crazy during Covid), and frankly everyone agrees that they were useless. Of course abolishing the 45p rate now was also extremely bad symbolically (though in fairness it only exists since 2010-2012).
I think the plan has shifted from "pro-growth, nevermind inflation" to "a good recession will solve inflation". And a 'good recession' along with higher interest rates, the incoming budget spending cuts, and maybe tax increases is also going to be quite painful for the people.
Not a tax cut per se, but I'm curious what will happen with the energy bill support scheme? That seemed like a good thing to implement, one for which Truss and her cabinet got a lot of critics from a certain part of the media.
Granted, I'm not from Britain so maybe I'm reading the room wrong and that support scheme was, in fact, not liked by everyone involved, I wouldn't know.
It guarantees that the energy companies will fully profit from high energy prices, all in effect funded by the taxpayer, and Truss also rejected any windfall taxes on energy companies.
I think it makes sense to limit it in its current form to this winter instead of 2 years (which is the latest status). It'll still be possible to reassess the situation next year and perhaps come up with a more targeted scheme if needed.
Edit in response to reply:
Truss had formally said in Parliament that there would be no additional taxes on energy companies when the £2500 price cap scheme was announced.
The current windfall tax was implemented by Boris Johnson and considering it taxes energy companies at 25% instead of the normal 19% when the plan was, and again is, to tax all businesses at 25%, it's more spin than anything else.
Basically, the Tories had already placed a windfall tax on UK oil and gas before Truss even became PM that's almost identical to the one that Labour have called for, and no-one has proposed removing it. (To some extent, it looks like Labour copied the existing Tory tax.) The main reason why Truss' original proposal required so much more taxpayer funding was that her price cap lasted for two years rather than six months - Labour were relying on windfall tax revenue from well before the start of the price subsidy to make their numbers add up and still couldn't quite do it, so there's no way to extend it for longer without massive government borrowing.
Most of the media coverage didn't explain this at all, they just repeated Labour's claims that all that government borrowing was because the Tories were in the pockets of energy companies and rejected a windfall tax. Nor did they explain the practical consequences of the price cap ending in April. All of the numbers thrown around for the cost of Truss' longer price cap assumed energy prices would still be unaffordably high by then, but no-one pointed this out and what it would mean for households. Of course, the moment the government annouced their energy support would end in April there were headlines everywhere about the huge bills this could cause for households.
1) Lack of targeted support - the scheme announced by the Truss government, covers everyone in the country - both rich and old. Using taxpayer money to subsidise costs for the rich isn't popular with a lot of people. That would have been OK in the short term (until a better targeted scheme could be implemented), but the original Truss/Kwarteng plan was to have the scheme run for 2 years.
2) Borrowing - Labour favours funding energy bill support through a windfall tax on gas and oil companies who have been making big profits due to the war in Ukraine. The Truss government was opposed to such a tax, and was instead prepared to borrow tens or hundreds of billions of pounds to fund it (related to #1 - borrowing a lot to give rich people support with bills isn't popular, as everyone will be paying it back through taxes.).
The borrowing wasn't received well by conservatives, and sending more money to the rich energy companies wasn't liked by the left.
Of course, this was all on top of the other borrowing to cut taxes and so on that was announced and then de-announced.
It's quite a hike and it sends the UK among the highest taxed countries in Europe...
Btw, the US's the federal rate is 21% (which is also about the European average) but I suppose states may add their own on top.
I think the mistake is more a massive communications and timing issue. She really should have announced these cuts in a staggered way, with better communication for the markets.
It would have been fine.
But she really screwed up on getting the political communication right.
And more importantly she was announcing these policies at an exact time when the Bank of England was trying to raise interest rates and sell bonds to fight inflation. So you have the government and the central bank pursuing contradictory goals: one trying to jumpstart consumption by borrowing and spending and the other trying to cool it by raising the cost of borrowing and reducing spending. This lead to a lot of wasted time, money and efforts and really destroyed the government's credibility.
The sect Truss belongs to considers that aggregate demand is solely a matter for the central bank to sort out, and that it has to respond to the fiscal setting of the government. Not the other way around.
This is enshrined in law at s11 of the Bank of England Act 1998.
"In relation to monetary policy, the objectives of the Bank of England shall be—
(a)to maintain price stability, and
(b)subject to that, to support the economic policy of Her Majesty’s Government, including its objectives for growth and employment."
But keeping the corporation tax at 19% was the right move, IMO.
"How did you go bankrupt?"
"Two ways. Gradually, then suddenly." - Ernest Hemingway, The Sun Also Rises
UK politics became intellectually bankrupt in 2016. Promises no longer needed to have a connection to reality. Isolationism could be sold as "pro-growth" etc.
The disconnect has been growing gradually. The voters loved the pie-in-the-sky promises. So each leader's promises were more unrealistic than the last. They selected for ever more ideological belief, over pragmatism and admitting the downsides of choices. But who would be holding the can when the bill came due?
The responses that "She was terrible" are not wrong, but you have to also ask why such a charmless, incompetent-and-unaware-of-it character came to be in power.
This is the culmination of the Brexit ideology, make no mistake.
This is the "Suddenly" phase.
I think this might cause some second thoughts, at first for Tories, about whether it's actually a good idea to ask their membership who should be Prime Minister.
Many of these MPs knew Liz wasn't fit for this post from the outset, but their own party's rules said they should allow ordinary members (a few thousand people who are disproportionately old, white and male IIRC) to decide from the best two put forward by MPs. The members, in effect, picked the woman who said the things they wanted to hear, even if those things were nonsense. If those members were your general electorate, then arguably the country gets what it deserved - but they're not, they're just the party members. If you thought US party primaries were a bad idea, well, yeah, that.
In short, the opposition called a vote on fracking, which is supported by Truss' "pro growth" government, but was opposed in the conservative manifesto. The government declared that anyone who voted against the government (and for what they promised to their constituents when they were elected) would be kicked out of the party. MPs who then tried to vote against the government were reportedly manhandled and assaulted to force them to vote with the government.
There is a whole load of other chaos that happened in the last 24hrs that was just ultimately impossible to recover from.
I think the last 24hr has just proved even to her final supporters that she is completely incapable of leading a government.
The need to put a UFC octagon in Parliament.
It's clearly time for a general election and end of the Conservative tenure in government.
Her “mini budget” immediately crashed the economy, after she ignored all the advice saying it was a bad idea and would crash the economy.
Her party, the Conservatives, are in such a divided and shambolic state there is no one in the party who can command the confidence of the majority.
The Tory MPs resent this.