The UK Elected A New Prime Minister, Liz Truss, Now What?

Liz Truss Low Tax

Liz Truss Defeats Rishi Sunak

UK Foreign Secretary Liz Truss defeated former Chancellor of the Exchequer Rishi Sunak, by 57% to 43% in the final round of a multi-stage election runoff after prime minister Boris Johnson resigned. 

Truss, a low-tax, small government Libertarian, will immediately be put to the test as the UK struggles with inflation rising the most in 20 years and an energy policy that's a disaster.

Truss was the alleged underdog but she offered a more upbeat message. 

Truss Faces Enormous Challenges  

Truss, the co-author of "Britannia Unchained", promises to shrink the state. But as the Wall Street Journal explains, it will not be easy.

While Mr. Sunak began the contest as the favorite, Ms. Truss quickly overtook him as party members went for her more optimistic vision of growth, versus her rival’s focus on sound finances.

“We do not have to resign our great country to managed decline,” she told supporters recently. “I am ready to be bold and will do whatever it takes to unleash our full potential.”

First, Ms. Truss will be under pressure to detail how the government will help households and businesses cope in the coming months. Crippling increases in energy prices, spurred by the war in Ukraine, are feeding the highest inflation in decades and threaten to tilt the economy into a long-lasting recession. Inflation is set to rise above its current rate of 10% by the end of the year and real wages are falling at their fastest pace in 20 years.

Ms. Truss said that she would announce a package to help struggling households in the coming days. Analysts are expecting large-scale state intervention, including possibly capping the price of wholesale gas prices.

Longer term, Ms. Truss is proposing to junk regulations put in place when the U.K. was part of the European Union and strengthen the Bank of England’s focus on fighting inflation.

An array of obstacles stand before her. During a period of deep economic pain, the new prime minister will have to corral a party that has developed a taste for revolt. Conservative lawmakers have ousted two of their own leaders in the past three years amid heated internal debate over the direction of the country following its departure from the EU. Meanwhile, the Conservatives trail the opposition Labour Party by 10 percentage points in the polls.

Ms. Truss, who has served in government since 2014, was backed by only a third of Conservative lawmakers in the first rounds of voting, so she comes to power without a large support base in the House of Commons.

“Let’s be honest: In recent years, the free world has taken its eye off the ball,” she said in a speech last year. “Societies turned inwards. Rather than engaging with the big ideas shaping the world, failed ideas ran rife, like the postmodern philosophy that there is no objective truth.”

Britannia Unchained?

As a Libertarian, Truss is starting off on the wrong foot with promises of large-scale state intervention and possibly price caps on natural gas that cannot possibly work. 

Still, Truss is better than Sunak who wants tax hikes and would possibly seek to get the UK back into the EU or more likely a customs agreement with the EU, the worst of all worlds. 

The Conservatives have splintered badly, some wanted to remain in the EU, former Prime Minister Theresa May wanted a customs union, and numerous members of Boris Johnson's cabinet stabbed him in the back over Brexit.

Boris Johnson's Unique Qualities

Boris Johnson had two unique qualities. He was arguably the only person who could get Brexit done. Congrats!

Then he was then uniquely unqualified to lead the way once that happened. 

Instead of junking regulations like Truss proposes, Johnson started Covid lockdowns while attending parties himself, then embarked on a nonsensical clean energy pact that was impossible to deliver and fueled inflation.

Many people blame Brexit for the UK's woes but it was the disastrous policies of Johnson in the wake of Brexit that made the big mess.

What Truss delivers remains to be seen. But the UK at least has a chance. 

Can we trade Biden for Truss?

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