GP Short Notes # 679, 23 October 2022
On 17 October, Jeremy Hunt was appointed as the UK’s new chancellor replacing Kwasi Kwarteng as the announced economic mini-budget to “unfunded tax cuts” backfired. The plan resulted in sudden fluctuation in inflation, currency, and borrowing rates leading to domestic and international criticisms. According to an IMF spokesperson: “There is also a sense of problems in the country's economic management and their ability to handle issues, which could lead to problems of inflation [and] financial market difficulties.” Right after the appointment, Hunt reverses GBP 32 billion out of the GBP 45 billion announced under the economic plan of Liz Truss.
On 19 October, UK’s Home Secretary, Suella Braverman handed in the resignation citing technical infringement and raised concerns over the ruling government in terms of “honoring manifesto commitments” and immigration. Along with the resignation and the reversal of the economic plan not having a drastic change in the economy, the conservative party leader asked Liz Truss to step down.
On 20 October, despite continued meetings with the conservative party members, Liz Truss succumbed to the pressure and resigned as Prime Minister. The term longed only 45 days, and the labour party leader Sir Keir Starmer called for a general election.
On 22 October, BBC reported the probable candidates for contenting in the Tory leadership next. Rishi Sunak who was a former competitor against Liz Truss topped the list with support from 93 MPs, followed by Boris Johnson with the support of 44 MPs, and lastly Penny Mordaunt with 21 MP’s support. To go forward the support of 100 MPs will be required by the contenders.
What is the background?
First, the reversal of Truss’s mini-budget. Since the 2016 Brexit, UK’s economic management has been under pressure and the mini-budget plan which was supposed to boost the economy went in the opposite direction. The energy support package, aimed at keeping the unit price under the cap and slashing taxes was done to provide space to rework the economy but it prompting inflation, increased the risk of a recession, and the pound value crashed. With negative reactions within the conservative party, domestic and international asking for a reversal laid the basis for Truss to step down. If the budget had been introduced before Brexit, the immediate fallout could have been less burden on UK’s economy, but without its access to the EU market, its businesses still recovering from COVID-19 and reduced trade traffic, only the conservatives are at the receiving end for their bad economic plans.
Second, crack within the conservatives. Truss who was seen as the best replacement for Boris Johnson was expected to cut taxes and lead the party like a conservative, but the crack within the party is not only about the economic policy, leadership, or the selection process. Since Brexit, the differences between the nationalists and unionists over culture, climate change, and measures for the working class weakened the unity, immigration, and contending interest for the economy making it challenging to lead the party in one direction. Apart from this, the recurring contest for leadership within the party has prompted the members to grow a thirst for power and implement their vision for the UK. Brexit, combined with the widening differences after Truss’s administration has devasted the equation within the party members threatening its continuity in the UK’s political fora.
Third, the possibility of a general election. The previous contest to lead the Tories which longed to three months is not cut down where contenders for the next leadership will qualify upon getting backing from 100 MPs, Rishi Sunak or Boris Johnson emerging as the top two contenders will now be voted amongst the conservatives to select the next Prime Minister. If either one withdraws the candidacy, the other candidate will be chosen as the leader. If the Tories continue to be split the Prime Minister can call for a general election as per the Dissolution and Calling of Parliament Act 2022, which will prompt a confidence vote in the House of Commons, and if the government loses the vote, new elections will be held in next 25 days, this means a complete teardown of the Tories.
What does it mean?
First, the conservative party’s failure to stand put, Truss’s overarching dart to economic growth, and the effects of Brexit, the pandemic, and the Ukraine war, have tumulted the political and economic landscape of the UK into clutter. The next UK Prime Minister will have more pressure and a more complexed scenario than Truss to bring a pause to the ongoing chaos, but the continuity of the Torys till the 2025 general elections remains in the hands of the members than its leader.
Second, on the front, Brexit might be seen as a cause of the broadening ideological divide, economic challenges, and political chaos, for the EU always wants to grow its relations with the UK. For the UK whether it is the Tories or the Labour party accomplishing Brexit remains a priority. With the economic escalations, the UK might draw closer to improving its equation with specific EU member states but in cooperation with the Brexit agreement, the Ukraine war and tackling the energy crisis can be expected to be seriously affected due to the political instability ahead.