Before entering , 10 Downing Street, , British Prime Minister Trass was an absolute "political survivor": she served in the cabinet of three British Prime Ministers for 8 years. However, when she took over Downing Street , she only lasted for 45 days and became the shortest-time Prime Minister in British history.
First Financial reporters found during an interview on London Street that almost no one was sure of Tras's performance in governing. No one wants to keep or applaud, what has she experienced in these 45 days? What did you do?
Oxford Economic Research Instituteeconomicist Goodwin told the First Financial reporter that since Tras took office on September 7, political and economic policies have been in chaos, as can be seen from the roller coaster of Phnom Penh bond yields. On September 27, the yield on the UK's 10-year Treasury bond exceeded 4.5% for the first time since October 2008, and remained at 1.8% in early August. As of the time of publication by the First Financial reporter, the yield on the UK's 10-year Treasury bonds was still at a high of 3.910%.
"mini" budget shocked the financial market
Time goes back to July 2022. After months of scandal, former British Prime Minister Johnson announced his resignation. During his campaign as prime minister candidate, Tras proposed a completely different vision of tax cuts than Johnson's tenure. When her rival Sunak argued that it would lead to higher mortgage rates, she accused him of using "negative, rejection language."
Finally, she defeated Sunak by 81,000 votes to 60,000 votes among the members of the Conservative Party . On September 6, Tras flew to the Castle of Balmoral to meet with Queen Elizabeth II of England and left the last photo of Queen Elizabeth II of England during his lifetime.
On September 8, the Trass government introduced its first major policy, namely an energy plan with a scale of around £150 billion. On the same day, Elizabeth II died. "Queen Elizabeth II is the cornerstone of modern Britain," Tras said outside Downing Street. This was the third day after Tras took office.
After the end of the 10-day national mourning in the UK, she and then-English Chancellor Kwasi Kwarteng announced a series of unfunded tax cuts in the "mini" budget that shocked the financial markets. What followed was her sharp drop in approval rating, which had dropped to 7% in mid-October. The turning point of
is September 23. On the same day, the "mini" budget announced by the Tras government includes: an increase of 16 billion pounds of national insurance premiums (NI) will be permanently cancelled; the plan passed by the former government to increase the company's tax rate from 19% to 25% will be cancelled, reducing the revenue of the British Treasury by 19 billion pounds per year; the maximum marginal income tax rate has been reduced from 45% to 40%, permanently increasing the deficit by 2 billion pounds; reducing the stamp duty on home purchases, the British government will reduce fiscal revenue by 1.4 billion pounds per year; wages and work rules will also be permanently changed.
According to analysis by the British think tank Institute for Finance (IFS), the plan will spend £60 billion in the next six months and will bring the expected deficit to £190 billion, equivalent to 7.5% of national income. The huge deficit will generate the third highest government debt in the UK since World War II . Another British think tank Resolution Foundation warns that the cost of these terms is endless, and if the price of natural gas increases, the cost may increase significantly.
Even Conservative MPs were shocked by the scale of the tax cut and the tilt of the budget to the rich.
htmlOn September 26, the exchange rate of pound against the US dollar hit a record low of 1.035, almost falling to parity. As of the time of publication by the First Financial reporter, the exchange rate of pound was 1.1235. After the pound fell sharply, UK Treasury yields rose, Bank of England urgently intervened, and mortgage interest rates rose sharply. On September 28, International Monetary Fund (IMF) made a rare statement, suggesting that the UK reconsider the tax cut plan."In view of the rising inflationary pressures in many countries such as the UK, we do not recommend a large-scale and targetless fiscal plan at this juncture." The IMF also stated, "It is important that fiscal policy cannot go against the monetary policy ." The IMF believes that the nature of the UK measures "may exacerbate inequality."
Since the UK announced large-scale tax cuts, it has caused the depreciation of the pound and caused the cost of borrowing in the UK to soar. According to foreign media estimates, since the Trass government came to power to the 28th, the total value of the British stock and bond markets has lost at least US$500 billion.
After the IMF issued the above statement, the pound fell 0.7% against the US dollar to around US$1.06. The pound had hit a historical low of 1.022 on September 26, and the pound fell more than 5% against the US dollar at one point.
Goodwin told the First Financial reporter at that time: "We believe that the external assets and liabilities structure of the UK can prove that the current (market) concerns about the collapse of the pound are a bit too much. But the pound will remain volatile in the short term. Although it is seriously undervalued, it is unlikely that the pound will continue to recover until the (British) government regains market credibility."
She just sat quietly
After sticking to her position for some time, Tras had no choice and removed Kwaten on October 14 to try to calm the market panic. At the same time, she appointed former Foreign Minister Jeremy Hunt to take over the position of Finance Minister, and then the UK's fiscal policy changed 180 degrees.
Downing Street held a press conference that only 8 minutes on the same day, and Tras sat quietly at the subsequent House of Commons meeting, with only one week left before she stepped down.
On October 17, Hunter issued a statement saying that it would cancel almost all tax cuts announced by the government in September this year, while Tras apologized for the economic turmoil it caused, saying that it was going too fast and too far, but would not consider resigning.
htmlOn 19, she said in public that she was a "fighter rather than a abandoner". On the same day, the Trass cabinet lost another member, Sura Braverman resigned as Home Secretary. In her resignation letter, Braverman clearly stated that she was "concerned about the direction of this administration."It is worth noting that the day before Tras resigned, that is, on the 19th, the cabinet and parliament were in chaos.
htmlOn the 20th, Tras resigned quickly, which was unexpected. Around 13:19 noon local time, Downing Street said a statement would be released at 13:30, and the speech will begin in Tras, with less than 15 minutes in between.Previously, a British government source told the First Financial reporter that the Conservatives tend to keep Trass in office before the Conservatives clarify their intention to succeed or make relevant arrangements around this intention. Because it is not difficult to get Tras down, but the key lies in who will take over the next step, or whether the general election will be held.
Earlier this week, an insider of a financial institution told the First Financial reporter that they predicted that Tras would most likely announce his resignation this weekend, and it would also be on Friday (21st), as early as this can give the market and the outside world a longer digestion time.
47-year-old Trass will become the youngest former prime minister in Britain since Robert Peel in 1835. Does she still have a chance to make a comeback?
However, whatever she will do next, although she has only been in power for a short 45 days, she is entitled to over £100,000 in Public Responsibility Cost Allowance (PDCA) each year for the rest of her life, just like all her exes since 1991. The PDCA was announced in 1991 by former British Prime Minister Major that Thatcher was the first former prime minister to benefit from it. The current PDCA is set at £115,000 per year, which has not changed since 2011.
