Liz Truss Resigns as UK Prime Minister After Budget Failure and Market Turbulence

Thursday, U.K. Prime Minister Liz Truss resigned after her failed plan to cut taxes shook the financial markets and caused a revolt within her own Conservative Party.

Truss said in a statement outside Downing Street: “We set out a vision for a low-tax, high-growth economy that would take advantage of the freedoms of Brexit.”

“I recognise though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party. I have therefore spoken to His Majesty the King to announce that I am resigning as leader of the Conservative Party.”

After talking with Graham Brady, the Conservative politician in charge of leadership votes and reshuffles, she decided to quit. Brady is in charge of the 1922 Committee which is made up of Conservative MPs who are not ministers and can send letters of no confidence to the prime minister.

A spokesperson for Downing Street told reporters right before the meeting that Truss wanted to stay in office.

In the hour that the meeting lasted, 17 MPs called for Truss to step down in public. On Thursday, it was said that more than 100 people had written to Brady to say they didn’t trust the prime minister.

Truss said outside Downing Street that she and Brady had agreed that the party would choose a new leader within the next week.

Soon after the news came out, the pound was up 0.4% against the dollar and was trading at $1.1273, which was a session high for a short time. It stays where it was on September 22, before Truss’ budget changed the market.

After Truss’ short speech, the yields on both 10-year gilts and 5-year gilts went down by about 5 basis points. Gilts are the government bonds of the United Kingdom.

On Thursday afternoon, the opposition parties Labour, the Scottish National Party and the Liberal Democrats all called for an election to be held right away. Labour leader Keir Starmer said: “The Conservative Party has shown it no longer has a mandate to govern.”

Mini-Budget Controversy

Truss was named prime minister on September 6, just two days before the death of Queen Elizabeth II, who had been on the throne for 70 years.

On September 23, Truss’s finance minister, Kwasi Kwarteng, announced a “mini-budget.” This was the start of a rough time for the U.K. bond markets, which didn’t like the tax cuts he proposed because they were paid for by more debt. Three weeks later, the second finance minister, Jeremy Hunt, changed most of the plans.

After Boris Johnson quit on July 7, Truss beat Rishi Sunak to become the leader of the Conservative Party. Sunak, along with Hunt, Penny Mordaunt, Defense Minister Ben Wallace and former Prime Minister Boris Johnson, is now one of the top candidates to replace Truss.

The Conservatives planned budget update on October 31 is now uncertain because of the resignation, but Truss said that the change in leadership would “ensure we remain on a path to deliver our fiscal plans.”

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