Double-digit inflation, threat of recession and fear of a debt slippage with soaring interest rates: the signals of the British economy are red as Liz Truss enters 10 Downing Street. In her first speech since taking office on Tuesday September 6, and in a country facing a major cost of living crisis, Liz Truss promised to get the UK out of the ” storm “.
His “top three priorities” will be the economy, the energy crisis and improving the national public health system, said Boris Johnson’s successor, officially became prime minister on Tuesday.
“We are now facing severe global headwinds caused by Russia’s appalling war in Ukraine and the aftermath of Covid”said Liz Truss on Tuesday. “We should not be intimidated by the challenges we face”she pointed out in front of dozens of deputies, who had to shelter from the pouring rain a few minutes before her arrival.
“As strong as the storm is, I know the British people are stronger. (…) I am convinced that together we can weather the storm and rebuild our economy. »
Very liberal, the new Prime Minister, 47, has given priority to tax cuts for “reward those who work hard” and relaunch an economy promised to recession by the end of the year. But faced with price increases of 10.1%, the highest in forty years, which should reach new heights in the coming months, driven by energy tariffs, Mme Truss is also preparing to line up billions of pounds in aid to British households.
“I will tackle the energy crisis head-on. I will take action this week to deal with the energy bills”which must increase by 80% on 1er October for an average household, she promised on Tuesday. According to British media, it is due to announce on Thursday a plan worth tens of billions of pounds to freeze electricity and gas prices.
“Thirdly, I will make sure everyone can get doctor’s appointments and benefit from the public health service (NHS). »said Liz Truss.
Liz Truss has appointed her close ally Kwasi Kwarteng, who has until now served as business minister, as finance minister and will find herself on the front line of the severe economic and social crisis hitting the UK. The son of immigrants from Ghana who arrived in the UK in the 1960s, the new Chancellor of the Exchequer, 47, is the first black man to hold the post and is seen as a die-hard economic liberal, an apostle low taxes and a market economy.
The UK could see the cost of its debt soar
The envisaged cocktail of tax cuts and increased spending “seriously calls into question the UK’s fiscal credibility”, comments Geoffrey Yu, analyst at iFlow. A perception of increased risk on the British debt which increases the remuneration and therefore the interest rates associated with this debt. The ten-year borrowing rate in the United Kingdom rose above 3% on Tuesday and was at its highest since July 2011. The 3% mark had not been crossed since 2014.
If market confidence continues to erode, “it could turn into a balance of payments crisis if the [investisseurs] foreigners would refuse to finance” British debt, warns Shreyas Gopal, an analyst at Deutsche Bank. The economist points to the risk of a debt crisis similar to that of the 1970s, when the United Kingdom had to appeal to the International Monetary Fund (IMF) to bail out its coffers.
Joe Biden intends to call Liz Truss to congratulate her, White House spokeswoman Karine Jean-Pierre said Tuesday. “I look forward to deepening the special relationship between our countries and working closely together on global challenges”, also wrote the American president on Twitter. The one who was until now head of diplomacy, with a willingly belligerent tone towards Russia or China, said on Tuesday that she wanted “to defend freedom and democracy everywhere in the world, with [les] allies » from the United Kingdom.
Liz Truss appointed James Cleverly as Foreign Secretary on Tuesday, a strong campaign supporter, Downing Street announced on Twitter. The 53-year-old Brexit supporter, whose mother is from Sierra Leone, is little known abroad, but served for two years as Secretary of State in the Foreign Office before being appointed in July Minister of Education.