Highlights
- New leadership election by Friday the 28th of October
- Pound, London stocks climb
London: British Prime Minister Liz Truss quit on Thursday — bowing to the inevitable after a tumultuous term in which her policies triggered turmoil in financial markets and a rebellion in her party that obliterated her authority.
Making a hastily scheduled statement outside her 10 Downing Street office, Truss acknowledged that “I cannot deliver the mandate on which I was elected by the Conservative Party.’’
Truss announced elections for successor will be held by October 28.
I was elected by the Conservative Party with a mandate to change this. We delivered on energy bills and on cutting National Insurance. And 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 notify him that I am resigning as leader of the Conservative Party.
This morning I met the chairman of the 1922 Committee, Sir Graham Brady. We've agreed that there will be a leadership election, to be completed within the next week. This will ensure that we remain on a path to deliver our fiscal plans and maintain our country's economic stability and national security.
I will remain as prime minister until a successor has been chosen. Thank you."
Truss is the third Conservative prime minister to resign since 2019 and leaves a divided party seeking a leader who can unify its warring factions. Truss, who said she will remain in office until a replacement is chosen, has been prime minister for just 45 days.
Bitterly divided Conservative Party lawmakers have just a few days to agree on a successor, or face yet another leadership contest. Potential contenders include former Treasury chief Rishi Sunak, who lost to Truss in the last leadership contest.
Truss bowed out just a day after vowing to stay in power, saying she was “a fighter and not a quitter.’’ But she couldn’t hold on any longer after a senior minister quit her government with a barrage of criticism and a vote in the House of Commons descended into chaos and acrimony just days after she was forced to abandon many of her economic policies.
Markets breathed a sigh of relief, and the pound rose about 1% to above $1.13 after Truss’ resignation.
A growing number of lawmakers had called for Truss to resign after weeks of turmoil sparked by her September 23 economic plan, which included a raft of tax cuts that spooked financial markets that investors worried Britain couldn’t afford.
That tumult resulted in the replacement of Truss’ Treasury chief, multiple policy U-turns and a breakdown of discipline in the governing Conservative Party.
Where the party goes from here is not clear.
“Nobody has a route plan. It’s all sort of hand-to-hand fighting on a day-to-day basis,’’ Conservative lawmaker Simon Hoare told the BBC on Thursday before Truss resigned.
She quit after a meeting with Graham Brady, a senior Conservative lawmaker who oversees leadership challenges. Brady was tasked with assessing whether the prime minister still has the support of Tory members of Parliament.
But by that point, the chorus of voices calling for her ouster was growing.
Rapid downfall
“It’s time for the prime minister to go,’’ Conservative lawmaker Miriam Cates said. Another, Steve Double, said of Truss: “She isn’t up to the job, sadly.’’ Legislator Ruth Edwards said “it is not responsible for the party to allow her to remain in power.’’
Truss’ downfall was so rapid that Brady was unable to spell out exactly how the selection of a new leader would unfold, and whether the party’s 172,000 members, or only its 357 lawmakers, would get a say.
Brady said he was “deeply conscious of the imperative in the national interest of resolving this clearly and quickly.”
Whoever succeeds Truss will be the country’s third prime minister this year alone. A national election doesn’t have to be held until 2024, but opposition parties demanded one be held now, saying the government lacks democratic legitimacy.
“The Conservative Party has shown it no longer has a mandate to govern,” said Labour Party leader Keir Starmer. “We must have a chance at a fresh start. We need a general election - now.’’
'This lettuce outlasted Liz Truss!
Conservative lawmakers’ anger grew after a Wednesday evening vote over fracking for shale gas produced chaotic scenes in Parliament, with party whips accused of using heavy-handed tactics to gain votes.
Chris Bryant, a lawmaker from the opposition Labour Party, said he “saw members being physically manhandled ... and being bullied.’’ Conservative officials denied there was manhandling.
Truss’ downfall was also hastened by the resignation on Wednesday of Home Secretary Suella Braverman. She lambasted Truss in her resignation letter, saying she had “concerns about the direction of this government.’’
Newspapers that usually support the Conservatives were vitriolic. An editorial in the Daily Mail was headlined: “The wheels have come off the Tory clown car.’’
Below are the country’s other leaders who did not make it through their first year.
George Canning
118 days The Tory statesman’s time in office was cut short by death, aged 57, possibly from pneumonia or tuberculosis, on Aug. 8, 1827. The champion of Catholic emancipation was also famous for fighting a duel when foreign minister.
Viscount Goderich
143 days Goderich, whose real name was Frederick Robinson, succeeded Canning but struggled to contain a turbulent coalition and, with the king’s confidence in him fading, resigned in January 1828 in his fifth month in office.
Andrew Bonar Law
209 days Law was forced to resign in May 1923 as his throat cancer advanced and made it difficult for him to speak in parliament.
The Conservative died less than six months later.
The Duke of Devonshire
225 days William Cavendish, the 4th Duke of Devonshire and a Whig, was seen as de facto prime minister during a caretaker government and stepped down in June 1757.
The Earl of Shelburne
265 days Dublin-born William Petty, the 2nd Earl of Shelburne, was in office when the treaty of Paris, which ended the American War of Independence, was signed. He resigned in March 1783, pressed by the opposition after falling out with colleagues over reforms.
The Earl of Bute
317 days John Stuart, third Earl of Bute, was the first prime minister from Scotland after the Acts of Union in 1707. He had been tutor to Prince George, later George III, and rose on his royal connections, but fell foul of infighting particularly in the wake of an uppopular Cider Tax, and resigned in April 1763.
Truss’s immediate predecessors, her fellow Conservatives Boris Johnson and Theresa May, both ended their tenures with forced resignations. But they each notched up more than three years first.
The dramatic series of events began after Truss and her Treasury chief, Kwasi Kwarteng, unveiled an economic plan with 45 billion pounds ($50 billion) in unfunded tax cuts that resulted in a hammering of the value of the pound and increased the cost of UK government borrowing. The Bank of England was forced to intervene to prevent the crisis from spreading to the wider economy and putting pension funds at risk.
Truss fired Kwarteng, and his replacement, Hunt, scrapped almost all of Truss’ tax cuts, along with her flagship energy policy and her promise of no public spending cuts. He said the government will need to save billions of pounds and there are “many difficult decisions’’ to be made before he sets out a medium-term fiscal plan on October 31.
Speaking to lawmakers for the first time since the U-turn, Truss apologized Wednesday and admitted she had made mistakes during her six weeks in office, but insisted that by changing course she had “taken responsibility and made the right decisions in the interest of the country’s economic stability.’’
Still, Truss said she would not region — a resolve that was short-lived. Her departure on Thursday sparked jubilation for the tabloid Daily Star, which has set up a livestream featuring a photo of the prime minister beside a head of lettuce to see which would last longer.
“This lettuce outlasted Liz Truss!’’ it proclaimed on Thursday.
"It will be possible to conduct a ballot and conclude a leadership election by Friday the 28th of October. So we should have a new leader in place before the fiscal statement which will take place on (October) the 31st," Graham Brady, chairman of the influential 1922 Committee of backbench MPs, told reporters.
MARKETS: Sterling rallied after Truss resigned. Then turned negative. Britain’s mid caps jumped as much as 1%.
Investors reined in bets of a full percentage-point interest rate increase by the Bank of England next month, after a top official said it remained to be seen whether rates rise as sharply as the market has been expecting.
The biggest jump in food prices since 1980 pushed British inflation to 10.1 per cent last month, matching a 40-year high hit in July in a new blow for households grappling with a cost-of-living crisis.
WHAT’S BEHIND THE CRISIS?: The Bank of England was forced into emergency bond-buying to stem a sharp sell-off in Britain’s 2.1 trillion pound ($2.3 trillion) government bond market that threatened to wreak havoc in the pension industry and increase recession risks.
The sell-off began after then-new finance minister Kwasi Kwarteng’s tax-cut announcement on Sept. 23.
After firing Kwarteng, a close friend and ally, on Friday, Truss announced that corporation tax would rise to 25% as intended by her predecessor Boris Johnson, reversing her earlier plan to freeze it at 19%. Kwarteng’s cut to the highest rate of income tax had already been reversed.
His replacement Hunt on Monday then scrapped “nearly all” of Truss and Kwarteng’s economic plan and scaled back her vast energy support scheme, announced in September, in a historic U-turn to try restore investor confidence.
The BoE interventions have highlighted a growing segment of Britain’s pensions sector - liability-driven investment.
LDI helps pension funds use derivatives to “match” assets and liabilities to avert risks of shortfalls in payouts, but the soaring interest rates have triggered emergency collateral calls for those funds to cover the derivatives.
