Economic Fears Grow as UK Government Shifts

Liz Truss, UK Prime Minister. By Simon Dawson / No 10 Downing Street

The British economy is in a serious economic downturn. This trouble comes as the government experiences changes in the top two offices: the monarch and the Prime Minister. Following the death of Queen Elizabeth II on Sept. 8, 2022, her son, King Charles III, has been working to settle into his new role as the country’s figurehead. However, the person many people blame for this downturn is Prime Minister Liz Truss, who took office on Sept. 6, 2022. 

Truss, a member of the Conservative Party, came in with ambitious economic plans that imitated those of former Prime Minister Margaret Thatcher. However, in a country that was already in a tumultuous political period, her policies of trickle-down economics and austerity for the poor are proving to cause more harm than good.

Almost immediately after assuming her role, Truss began to follow through on her plan to cut taxes by £45 billion. However, most of the tax cuts would go to the country’s wealthiest taxpayers. This is a principle known as trickle-down economics, in which a country levies only light taxes on the rich, in hopes that the wealthy will put that money back into the economy through spending, and money will flow through the economy and into the pockets of the country’s poorest population. This policy was a favorite of Margaret Thatcher and U.S. President Ronald Reagan, and in both cases, trickle-down plans failed to benefit anyone besides the elite. 

A Pound, the British currency. REUTERS/Dado Ruvic/Illustration

The lack of faith in Truss’ plans was felt immediately, as the value of the British pound dipped to $1.07, the closest to the US Dollar as it has ever been. Exchange rates have not narrowed to this level since 1985 under Thatcher’s leadership, further demonstrating their parallel. 

Even after this trouble, Truss has doubled down on her conservative economic plans, announcing cuts to the existing social welfare programs. Truss’ financial advisors have been praising privatized health care policies, contrary to the universal health care system that the National Health System (NHS) provides. Truss is advocating for the move, stating that the government is “trimming the fat,” so that the economy can return to normal soon. However, many have raised concerns that the policies will only benefit the upper class while ignoring the needs of the United Kingdom’s lower-income population.

All of these changes come as economists warn that, with rising inflation, the United States will enter a recession soon. This threatens to bring about a global economic downturn which would directly impact Britain. In addition, if the social welfare system is stripped away, a large portion of the British population will be unwilling or unable to put their money back into the economy, only worsening this recession.

As Truss tries to advance her economic agenda, many are calling for her resignation after being in office for only a month. It remains to be seen whether Truss will start listening to the needs of her people and find a way to unite the parties -- or whether she will be voted out by Parliament soon.