Editorial | Truss’ humiliation a lesson for all leaders

Britain’s dramatic U-turns on flawed moves to cut taxes and cap household energy bills are a desperate attempt to end market turmoil and restore confidence in the government. Prime Minister Liz Truss was elected by members of her Conservative Party last month on a platform that promised the slashing of taxes and a two-year cap on energy costs. Six weeks later, those plans are in tatters. Their announcement on September 23 caused a plunge in the value of the pound and a worrying rise in the cost of government borrowing. The markets were spooked. The failure to explain how the measures would be paid for amid spiralling government debt undermined Britain’s reputation for fiscal responsibility.

Drastic times called for drastic measures. Truss sacked her finance minister, Kwasi Kwarteng, last week. His successor, Jeremy Hunt, on Monday announced that most of the tax cuts would be scrapped, saving £32 billion (HK$36.2 billion). The energy price cap will now only last until April. There were six U-turns in a day. Hunt sought to restore credibility by emphasising the need for stability. He warned of more tax rises and spending cuts in a bid to balance the books. The move has, so far, calmed the markets. But it might not be enough to save Truss. Her key campaign proposals have been discredited and discarded. Senior party members are plotting to replace her.

Hong Kong people living in Britain have felt the impact. There are winners and losers. Those sending their earnings back to families in Hong Kong suffered along with the falling value of the pound. Now, they face steep energy cost increases next year. Inflation and mortgage rates are both high. Hong Kong businesses exposed to the UK economy were also hit.

The turbulence is a reminder to governments everywhere, including here in Hong Kong, of the need for clear, consistent and pragmatic economic policies that are carefully thought through. This is all the more important in these challenging times, as the threat of a global recession looms. Truss is said to idolise former British prime minister Margaret Thatcher, who described herself as a “lady who is not for turning”. The U-turns are humiliating but necessary. It is to be hoped they signal a return to more prudent economic policies.