Truss to Rescue Crisis in UK... First Policy is 200 Trillion Won Energy Bill

"Large-scale fiscal spending for economic growth... Energy issues also resolved" plan proposed
German Deutsche Bank points out 'Pound crisis'... Warns of macroeconomic difficulties related to fiscal policy

On the 5th (local time), Liz Truss, the next Prime Minister-designate, expressed her victory speech at the Queen Elizabeth II Centre in London, UK. She said, "I will present a bold plan to lower taxes and grow the economy." London (UK) = Reuters Yonhap News Photo by Reuters

[Asia Economy Reporter Park Byung-hee] Liz Truss, who was elected as the new Prime Minister of the United Kingdom, has introduced an energy bill worth 200 trillion won as her first policy. Facing a recession threat due to double-digit inflation and an energy crisis, Germany's largest bank, Deutsche Bank, has warned of a 'pound crisis' for the UK economy.

On the 5th (local time), immediately after being elected as the next leader of the UK Conservative Party, Truss declared that she would revive the UK economy through large-scale fiscal spending. In her victory speech, Truss said, "I will present a bold plan to lower taxes and grow the economy." She also added, "We will address household energy bill issues while also tackling long-term energy supply problems."

Bloomberg reported that the Truss government has drafted a support plan to spend 130 billion pounds (approximately 206 trillion won) in fiscal spending over 18 months after taking office to reduce the annual electricity and gas bills burden on UK households.

Locally, it is expected that the UK's electricity bills will surge by 80% in October, increasing the current annual electricity and gas bill cost of 1,971 pounds to 3,548 pounds. Bloomberg reported that the Truss government plans large-scale fiscal spending to keep household energy costs below 2,000 pounds, similar to current levels.

The problem is that such massive fiscal spending could further stimulate already soaring prices and exacerbate the pound crisis.

In a report released on the same day, Deutsche Bank's foreign exchange investment strategist Shreyas Gopal pointed out that the UK's current account deficit is at an all-time high and warned that the possibility of a pound crisis should never be ignored. As uncertainty about the UK economy grows, the pound has fallen more than 13% against the dollar this year, plunging to its lowest level since 1985.

Gopal said, "For the pound to strengthen, capital inflows must be based on confidence in the UK economy and falling inflation, but the opposite is currently happening," adding, "UK inflation is the highest among the Group of Ten (G10) countries, and economic growth prospects are weakening." He advised, "The policies announced in the weeks following the election of the new prime minister are crucial to avoid a macroeconomic crisis related to fiscal matters."

There are already doubts about whether Truss can play the role of a savior amid the UK's worst crisis, with a long-term recession expected from the fourth quarter of this year through the end of next year.

Public trust in Truss in the UK is low. In a recent survey by UK polling firm YouGov, only 14% responded that Truss would be a better prime minister than former Prime Minister Boris Johnson. Rather, 27% said she would be a worse prime minister than Johnson.

Truss's approval rating was also lower than expected in the Conservative Party leadership election results announced that day. According to the official Conservative Party announcement, Truss received only 81,326 votes (57.4%) out of 172,437 Conservative Party members who participated in the vote with an 82.6% turnout. This is a much lower vote share than the 60% support rate shown in initial polls, where she had about twice the support gap compared to her rival, former Minister Rishi Sunak.

Bloomberg pointed out that the Conservative Party members who voted in the leadership election that elected Truss as prime minister accounted for only 0.26% of the total UK electorate. It criticized that Truss became prime minister with the support of a hardline conservative base, mostly older white men who nostalgically remember the era of Prime Minister Margaret Thatcher.

In the Truss cabinet, current Industry Minister Kwasi Kwarteng is expected to be appointed as the UK's first black Chancellor of the Exchequer. In an article published on the 4th, Minister Kwarteng argued that the UK's fiscal deficit ratio to GDP is the lowest among the Group of Seven (G7) countries except Germany, and there is no reason for fiscal tightening.

With Truss becoming prime minister, Tom Tugendhat, chairman of the House Foreign Affairs Committee, is expected to be appointed as Foreign Secretary. He is expected to implement the tough stance on China emphasized by Truss. Tugendhat plans to visit Taiwan with foreign affairs committee members at the end of this year.

This content was produced with the assistance of AI translation services.