By Yange Ikyaa
The newly elected Prime Minister of the United Kingdom (UK), Liz Truss, has taken over, facing a set of challenges, including rising energy bills, a looming recession and industrial strife.
Truss, who is the fourth prime minister in six years, flew to the royal family’s Scottish home to be asked by Queen Elizabeth to form a government before the Queen died a few days later on Thursday.
She has replaced Boris Johnson, who was forced out after three tumultuous years in power.
“Ms Truss accepted Her Majesty’s offer and kissed hands upon her appointment as Prime Minister and First Lord of the Treasury,” Buckingham Palace said.
However, Truss has inherited an economy in crisis, with inflation at double digits, the cost of energy soaring and the Bank of England warning of a lengthy recession by the end of this year. Already, workers across the economy have gone on strike.
Her plan to revive growth through tax cuts while also potentially providing around 100 billion pounds ($116 billion) for energy has rattled financial markets, prompting investors to dump the pound and government bonds in recent weeks.
She also enters the latest crisis to buffet Britain with a weaker political hand than many of her predecessors.
Having held a place in the cabinet of senior ministers for eight years, she defeated rival Rishi Sunak in a vote of Conservative Party members by a tighter margin than expected, and more of the party’s lawmakers initially backed her rival.
Britain, under Conservative rule since 2010, has stumbled from crisis to crisis in recent years and there is now the prospect of a long energy emergency that could drain the savings of households and threaten the futures of businesses still weighed down by COVID-era loans.
Household energy bills are due to jump by 80% in October, but a source familiar with the situation has told Reuters that Truss may freeze bills in a plan that could cost towards 100 billion pounds ($115.33 billion), surpassing the COVID-19 furlough scheme.
It is not clear how Britain will pay for the support but it is likely to increase government borrowing.
The scale of the package, plus the fact the energy crisis could run for a couple of years, has spooked investors.
The pound has fared worse against the U.S. dollar than most other major currencies recently.
In August alone, sterling shed 4% against the greenback and it marked the worst month for 20-year British government bonds since around 1978, according to records from Refinitiv and the Bank of England.
Britain’s public finances also remain weighed down by the government’s huge coronavirus spending spree. Public debt as a share of economic output is not far off 100%, up from about 80% before the pandemic.