Truss appointed as British Prime Minister, Johnson resigned

LONDON (Reuters) – Liz Truss took office as Britain’s prime minister on Tuesday, facing one of the toughest challenges for a new leader in post-war history, led by soaring energy bills, a looming recession and industrial conflict.

Truss, the fourth Conservative prime minister in six years, flew into the Scottish home of the royal family to ask Queen Elizabeth to form a government. She replaces Boris Johnson, who was forced to step down after three turbulent years in power.

“Ms. Truss accepted Her Majesty’s offer and kissed her hands on her appointment as Prime Minister and First Lord of the Treasury,” Buckingham Palace said.

The 47-year-old former secretary of state will speak later in the country from Downing Street before her cabinet is appointed. Johnson urged the country and his warring party to unite behind the new leader.

Truss inherits an economy in crisis, with double-digit inflation and rising energy costs, and the Bank of England has warned of a prolonged recession by the end of this year. Already, workers are striking across the economy.

Its plan to revive growth through tax cuts with the potential to provide around 100 billion pounds ($116 billion) of energy has sparked financial markets, prompting investors to dump the pound and government bonds in recent weeks.

It is also entering into the latest crisis to strike Britain with a weaker political hand than many of its predecessors.

Having held a position in the Cabinet of Senior Ministers for eight years, she defeated her rival Rishi Sunak in a vote of Conservative Party members by a narrower margin than expected, and more party MPs initially supported her rival.

Johnson, who tried to cling to power in July despite ministers resigning en masse over a series of scandals, told reporters and politicians assembled in Downing Street early Tuesday that the country must unite.

In his farewell speech, he said: “These are the people.” “What I’m saying to fellow conservatives is, it’s time for politics to end, guys. It’s time for all of us to support Liz Truss, her team, and her program.”

After speaking out the famous Black Door, he left London to travel to North East Scotland and tender his resignation to the 96-year-old Queen before Truss followed him to Balmoral Castle. Read more

Johnson used his departure speech to brag about his successes, including an early vaccine program during COVID-19 and his strong support for Ukraine in its fight against Russia.

He also listed “Brexit” as one of his main achievements, even though polls now show that a majority of people think leaving the EU was a mistake.

From crisis to crisis

Britain, under Conservative rule since 2010, has stumbled from crisis to crisis in recent years, and there is now the prospect of a prolonged energy emergency that could drain household savings and threaten the future of businesses still burdened with COVID-era loans.

Household energy bills are set to jump 80% in October, but a source familiar with the situation told Reuters that Truss could freeze bills in a scheme that could cost around 100 billion pounds ($115.33 billion), bypassing the Covid-19 holiday plan. .

It is not clear how Britain will pay for the subsidies but it is likely to increase government borrowing.

The size of the package, as well as the fact that the energy crisis could last for a few years, frightened investors.

The Sterling has fared worse against the US Dollar than most of the other major currencies recently.

In August alone, sterling fell 4% against the dollar, and it was the worst month for 20-year British government bonds since around 1978, according to Refinitiv and Bank of England records.

Britain’s public finances are still affected by the huge government spending spree on the Corona virus. Public debt as a share of economic output is not far from 100%, up from about 80% before the pandemic.

(dollar = 0.8671 pounds)

Written by Kate Holton; Additional reporting by Michael Holden, Alistair Smoot, Andy Bruce, Paul Sandel and Movija M; Editing by Angus McSwan

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