Liz Truss says she is enjoying being Prime Minister. Given the past week, that’s something of a surprise. A tone-deaf budget from Chancellor Kwasi Kwarteng has propelled Labour to a 20-point poll lead in less than four weeks of her premiership. Speculation that the Bank of England would intervene to hike rates led mortgaged middle-England to fret publicly about affordability, with lenders pulling deals as the yield on long-dated gilts spiked. The opposition reveled while rumours of an early defenestration swirled. Now, a humiliating U-turn has followed a weekend on the defensive. Enjoyment in these conditions takes on a masochistic air; it is hard to think of a worse start.

The new leadership appears to have fallen into the trap of hubris. Having persuaded a selectorate of the Conservative party membership that they held the key to the future, Mr. Kwarteng ploughed ahead with bold reforms without either advice or communication: a sure-fire approach to learn the hard way. As intransigence changed to acquiescence this week, the markets have begun to shake off their funk. The pound has recovered, and a central Bank guarantee to keep the gilt market moving appears to have prevented a systemic freeze with interventions much smaller than the GBP 5 billion a day that were authorised.

Underlying it all, the UK is not in such terrible shape. Debt levels are nowhere near comparable to Italy, for instance. That the markets were pricing in a 50 to 75 basis point rise within a fortnight of the budget showed how wrong they can be. Yet interest rate rises are coming – consensus still puts peak rates above 5% within a year and a 100-basis point hike is expected in November. Deposing Ms. Truss would surely guarantee electoral defeat, increasing the chance she will survive at least for now. Only a month into her premiership though, the new Prime Minister must bring her rebellious party to heel or face being in office but not in power. Those hoping the UK might exhibit increased stability under new leadership may have some time to wait.   

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