Even by British traditions of political failure, this prime minister’s brief tenure has been a spectacular disaster.
For the first time in my adult life, there is a genuine sense of decay in Britain—a realization that something has been lost that will be difficult to recover, something more profound than pounds and pence, political personalities, or even prime ministers. Over the past three weeks, the U.K. has been gripped by a crisis of crushing stupidity, one that has gone beyond all the turmoil of Brexit, Boris, even the great bank bailouts of 2007, and touched that most precious of things: core national credibility.
Today, we had the absurd spectacle of a prime minister, barely a month into the job, abandoning the central tax-cutting purpose of her premiership and sacking her closest political ally, who had implemented this vision. This all in aid of a vain and surely doomed attempt to cling to power, after the markets concluded that her policies were insane. Never before has Britain found itself in such a humiliatingly risible position. It is the stuff of nightmares: the national equivalent of getting caught short onstage in front of your entire school because you chose not to go to the bathroom when you had the chance.
As hard as it is to get across the sheer scale of idiotic farce now unfolding, let’s try. Just last month, on September 6, Liz Truss replaced Boris Johnson as prime minister. Johnson had been forced to resign because Conservative members of parliament decided he was unfit for office, after, among other things, he had been fined by the police for attending his own birthday party during lockdown. Truss won the race to replace Johnson by presenting herself as both the continuity candidate—the loyal follower who did not kill Caesar—and the new guard who would do away with all the boring bits of Johnsonism, such as raising taxes to pay for things.
What Britain needed, Truss argued, was a tax-cutting bonanza to set it free. Her rival for the leadership was Johnson’s chancellor, Rishi Sunak, who argued for fiscal responsibility and warned that such a reckless policy would lead to a run on the pound and a calamitous series of mortgage-rate rises. Given this choice, the electorate for the Tory leadership—the roughly 170,000 members of the Conservative Party—preferred the magical money tree.
So, on September 23—two and a half weeks after taking over as prime minister—Truss and her new chancellor, Kwasi Kwarteng, announced an extraordinary array of tax cuts without any indication of how they would be paid for. They called this their “plan for growth.”
And then there was a run on the pound and a calamitous series of mortgage-rate rises.
The reaction to Truss’s plan was immediate and savage. The markets responded with horror at the sudden gaping hole in Britain’s budget. The pound collapsed against the dollar, almost reaching an unprecedented parity, and the cost of government borrowing rocketed. Huge interest-rate increases by the Bank of England began to be priced in as the only way to protect the currency, which, of course, meant stepping on the brakes after Truss had put her foot on the accelerator.
This, in turn, led ordinary banks to start hiking their mortgage rates in expectation of what was coming, just as Sunak had warned, which then sent the property-owning middle classes into a tailspin as they rushed to lock in new rates before the numbers spiked even further.
