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Liz Truss Faces Epic Economic Challenges

High energy costs, a labor shortage, and declining production are significant challenges she faces.

New Conservative Party leader and incoming prime minister Liz Truss smiles and waves as she arrives at Conservative Party Headquarters in central London having been announced the winner of the Conservative Party leadership contest at an event in central London on September 5, 2022. - Truss is the UK's third female prime minister following Theresa May and Margaret Thatcher. The 47-year-old has consistently enjoyed overwhelming support over 42-year-old Sunak in polling of the estimated 200,000 Tory members who were eligible to vote. (Photo by DANIEL LEAL/AFP via Getty Images)

Liz Truss succeeds Boris Johnson as the fifteenth prime minister of Britain under Queen Elizabeth. She did not win a general election but won the leadership of the Conservative Party, implying that she has a tough road ahead, keeping both her party and the people happy.

Though she positioned herself as a fresh face during her campaign, Truss is a seasoned politician who has mostly kept a low profile. Despite not being in the spotlight, she has been part of the British government for about a decade. The new prime minister was the environment secretary under David Cameron and wholeheartedly supported the PM in his campaign to keep the country in the EU. Under PM Theresa May, she held the post of justice secretary. She was the foreign secretary in her predecessor, Boris Johnson's administration.

Political pundits are trying to decipher what kind of Prime Minister Truss will be. Though she is a relatively unknown persona, one thing is clear. Truss has a quality or ability that is necessary for survival, especially for a politician – adaptability.

Oxford-educated and raised by left-leaning parents, Truss herself started in politics as a Liberal Democrat. While in university, she was elected the President of Oxford University Liberal Democrats. More recently, Truss advocated strongly for Britain to remain in the European Union. When the public referendum voted for Brexit, she chose to see the country's exit as an opportunity. While pro and anti-Brexit positions spelled doom for many political careers, Truss successfully changed track and kept going on.

Paul Goodman, who knew Truss, from his days as an MP, says, "She is the champion now of the Tory right, having once been a Liberal Democrat. And she's presented herself in this election as the new kid on the block when she's actually been in cabinet for the best part of 10 years. So she has extraordinary powers of reinvention and recovery."

Britain is in sore need of her prowess of 'reinvention and recovery.' The country is slipping into a recession, and nothing less than a miracle can prevent it. The energy crisis looms large, and the approaching winter is only likely to worsen matters. Brexit has led to a shortage of cheap labor and disrupted trade with the EU, its largest trading partner. Near record inflation and rising fuel and living costs have diminished the pound's value. The severity of the situation is evident from the IMF's prediction that only Russia, shackled by tough sanctions, is likely to fare worse among the world's top economies.

Hinting at a break from her predecessor's policies, the new PM has already stated that tax cuts are a priority. Doing away with the former prime minister's proposed rises in corporate tax (up to 26% from 19%) and scrapping the 2.5-percentage-point payroll-tax increase should grant domestic budgets and businesses some relief.

Truss is optimistic that Britain can stave off a recession. During her campaign, Truss proposed to cut back on government spending. She does not favor income distribution and supports economic growth. The public sector is reeling in the wake of the Covid-19 pandemic. With gas prices tripling over the year, Truss may have to consider a price cap on gas and assisting households and small businesses. The question is, with energy costs sky-high, labor shortage acute, and production numbers falling, how does she plan to revitalize the economy?

The new prime minister is expected to lay out detailed policies and plans in the coming days. While Britons look for tax relief and more reliable public services, the EU is watching to see what Truss brings to the table. With the Ukraine war dragging on and winter fast approaching, will Truss's campaign promise to address the energy crisis manage to break the stalemate with President Putin? Beyond European shores, what will her efforts to tackle supply chain issues mean for UK's relations with China?

Truss's conservative ideology will likely correct Britain's course, which has been moving closer to the left over the last decade. Precisely what impact her policies will have and if she can steer the country through one of its worst economic phases will be revealed in the coming months.

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