Speaking on her arrival in Downing Street, Truss said she would “ride out the storm,” promising help with energy bills as well as tax cuts. But the incoming prime minister is in a bind. If her government borrows a lot of money, it risks further fanning inflation and inflaming burgeoning fears among investors that the country’s finances are becoming unsustainable.
That could send the pound into a tailspin, which would further drive up prices and make it harder to pay for essential imports.
In other words, the United Kingdom could endure the type of meltdown it suffered in the 1970s, when the combination of an energy shock, rising prices and hefty government spending forced the country to turn to the International Monetary Fund for a big bailout — an alarming prospect for a G7 economy.
Not long ago, this type of scenario would have sounded outlandish as a talking point. But as Truss teases a huge energy relief package and talks of tax cuts, and the pound remains mired near its lowest…
