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제 16 호 Economic Conflicts in Great Britain

  • 작성일 2022-11-30
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The Resignation of the British Prime Minister

Kicker: WORLD (British Economy)


Economic Conflicts in the United Kingdom

The Resignation of the British Prime Minister



Yeong-Jin Choi, Editor

pch39067@gmail.com


  Do you know the issue that the newly designated* Prime Minister of UK, Liz Truss, the head of the cabinet and the leader of the ministers in the executive branch of government of UK, has resigned her job only after 45 days? Normally, the Prime Ministers are elected in a five-year term. This implies that Liz Truss’s early resignation had its critical reason to do so. Before deeply illustrating how and why Liz Truss has resigned, I believe it would be more helpful to know about the form of UK’s government first. 

  What is special about the government of UK is that it is both parliamentary* and monarchy*. The government of UK, also called as His Majesty’s Government, is the central executive authority of UK and Northern Ireland. The government is led by the Prime Minister who selects all the other ministers. The king of UK does not govern the country but stands as a symbol of the royal family in the UK. The Prime Minister, a de facto head of the government, and their most senior ministers belong to the supreme decision-making committee, known as the Cabinet*. 

  As a person who holds so much authority who guides the law-making process with the goal of enacting the legislative agenda of their political party and so on, it is barely understandable for the Prime Ministers to step down the position before completing their term. Therefore, in this article, I would like to share how former Prime Minister Liz Truss initiated a massive negative impact on the British economy, and the new government’s way of reversing Truss’s idiotic economic policies. 


*Designate: To choose someone officially to do a particular job. 

*Parliament: In some countries, the group of usually elected politicians or other people who make the laws for their country. 

*Monarchy: The system of having a king or queen. 

*Cabinet: A small group of the most important people in government, who advise the President or Prime Minister and make important decisions. 




Mistakes the Former Prime Minister Made

  Liz Truss, the former Prime Minister of UK has tried to push through an aggressive tax cutting policy in her first days. With inflation soaring and markets on edge, her policies were severely criticized that it was simply the worst timing to initiate such policies. Truss argued that an urgent action had been required to grow the economy, despite market turmoil since they were announced in mid-September. Truss added that she was prepared to do what it takes to make that happen and show that she was willing to take the criticism and risk to go through her financial policies on budget cuts. 


  The motivation of her so-called “Kamikaze*” policy was because UK was facing a very serious situation, a global crisis which has been brought about by the aftermath of COVID-19 and Russia’s invasion of Ukraine. A former Chancellor Kwasi Kwarteng highlighted the prime minister’s main message. He said that they are sticking to the growth plan and are going to help people with energy bills. However, the economy of UK did not turn out to be optimistic. 


  On September 23, Truss looked on as Kwarteng, her Chancellor of the Exchequer*, put forward a mini budget that would cut taxes on top earners, remove a cap on bankers’ bonuses, and cancel a planned corporate-tax hike. Almost everyone, except a few wealthy people, opposed her policies. They thought tax cuts for millionaires was unreasonable when Middle Britain, the normal working-class of UK, struggled with high energy bills, rampant inflation, and rising mortgage costs. This resulted in the value of their nation’s currency, pound, to plummet, and to make the Bank of England to interfere and stabilize the British economy. 


  After her misled policies, Truss admitted that she made a mistake and was forced into U-turn on tax only after a week of market turmoil*, reversing a cut to the highest rate of income tax that helped spark turmoil in financial markets and a rebellion in her party. While the pound has recovered from its depths, government bonds have mostly failed to recoup the historic losses incurred from the mini budget, along with the exception of long-dated debt which is subject to Bank of England support. Investors, economists, and critics say that the reversal of Truss’s budget cuts was a step in the right direction, but the government needs to go further than that. 


*Kamikaze: A sudden violent attack on an enemy, especially one in which the person or people attacking know that they will be killed. 

*Chancellor of the Exchequer: The person in the UK government who is responsible for deciding tax levels and how much money the government can spend. 

*Turmoil: A state of confusion, uncertainty, or disorder. 


Efforts to Undo Truss’s Financial Policies

사람, 남자, 정장, 벽이(가) 표시된 사진  자동 생성된 설명Jeremy Hunt, Chancellor of Exchequer

  To undo Truss’s work, Britain’s new finance minister Jeremy Hunt scrapped former Prime Minister Liz Truss’s economic plan. Hunt told to the parliament, “We are a country that funds our promises and pays our debts”. Under the new policy, most of Truss’s 45 billion pounds of unfunded tax cuts will go and the two-year energy subsidy scheme for households and businesses is expected to cost well over 100 billion pounds, which will be curtailed* in April. 


  “No government can control markets. But every government can give certainty about the sustainability of public finances, and that is one of factors that influences how markets behave. And for that reason, although the Prime Minister (Lis Truss) and I are both committed to cutting corporation tax.” Hunt said, during his speech. He also pointed out that the British government will first, reverse almost all the tax measures announced in the growth plans, second, to cut the basic rate of income tax to 19 percent from April 2023, and last but not least, to guarantee energy price as it is the biggest single expense in the Growth Plan. “And I remain extremely confident about the U.K.’s long-term economic prospects, as we deliver our mission to go for growth. But growth requires confidence and stability. And UK will always pay its way.” Hunt added. 


*Curtail: To stop something before it is finished, or to reduce or limit something.



  What citizens expect from their government is to initiate policies that are beneficial to the majority of the people, not promoting policies that seem irrelevant. Governments that promote policies that only privileges the few are based on injustice. To push ahead a certain policy and reverse it both takes a lot of time and money, and I most sincerely hope that this does not happen in our country. 


Sources: 

https://url.kr/itv7ap

https://url.kr/vkojf9

https://url.kr/qrynt5

https://url.kr/8iakem

https://url.kr/o49zc8

https://url.kr/m75941