Liz Truss' Tax Fiasco Shows How UK Guardrails Have Fallen Away

Stephanomics

The UK's politics and policies have always been a bit quirky. But international investors have long trusted that the country would, in the words of prominent British economist Malcolm Barr, see itself from point A to point B. Lately, those investors could be forgiven for calling that premise into question. A series of unforced errors by new Prime Minister Liz Truss and her financial team have shaken confidence in Britain's leadership at a time when its public is reeling from soaring energy and mortgage costs.

In the first episode of this season's Stephanomics podcast, we deliver a triple dose of UK turmoil. First, Bloomberg UK political editor Kitty Donaldson details Truss's arguably terrible debut. Donaldson spent the week at the Conservative Party conference in Birmingham, where some of the prime minister's fellow Tories are "hopping mad" after tax cuts proposed by Truss and Chancellor of the Exchequer Kwasi Kwarteng spooked financial markets and sent the pound to its lowest level since 1985. In an embarrassing U-turn, Truss had to scrap her plans to cut the 45% tax rate on top earners.

Next, Stephanie Flanders talks with Barr about what the market chaos means for the UK (both now and later) as well as its trading partners and investors. Head of European economics for JPMorgan Chase & Co., Barr argues that some of the guardrails that have steered British politicians toward sound, orthodox economic decisions in the past have fallen away. An independent central bank, a proficient civil service and functioning parliamentary oversight have all been undermined to the point that it's "hard to imagine a similar set of errors having been made by any incoming administration over the last 15 to 20 years."

Finally, Bloomberg Senior Editor Brendan Murray takes us to Liverpool, where dockworkers say they're missing out as the port city bustles with tourists and expensive new soccer stadiums. They're staging a strike to demand higher pay amid soaring inflation and interest rates, and for now, have the sympathy of the public.

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