LONDON — British Prime Minister Liz Truss sacked her finance minister on Friday, forcing Kwasi Kwarteng to take the blame for the turmoil caused by her right-wing economic platform as unruly Tories plotted her downfall.
The Chancellor of the Exchequer was personally fired by Truss after her early return from international meetings in Washington, according to multiple media outlets, and she was later due to hold her first press conference in Downing Street.
His successor, who will become Britain’s fourth finance secretary this year, has not been announced immediately.
The financial disruption caused by the new government’s September 23 tax cut plan – funded by billions more in loans – has eased somewhat since the Bank of England intervened in bond markets .
But the central bank insisted it would end its bond-buying spree on Friday, and market analysts said only a bigger pullback from Truss after Kwarteng’s disastrous budget announcement last month last one would avoid a new panic.
No date was given for Truss’ press conference, but the announcement underscored the sense of danger as some Tory MPs were reportedly mobilized to oust the new leader just five weeks after she was replaced by Boris Johnson.
Kwarteng was due to wrap up the annual meetings of the International Monetary Fund and World Bank in Washington this weekend after receiving a rebuke from IMF chief Kristalina Georgieva on the need for “consistent and consistent” policies.
A Treasury Department spokesperson confirmed that Kwarteng had cut short the trip scheduled for October 31 “to continue working on his medium-term financial plan” after Truss held urgent meetings with his own financial advisers in his absence on Thursday.
As UK broadcasters showed live footage of Kwarteng’s British Airways plane landing at Heathrow Airport, government bond yields fell in a sign markets were expecting a turnaround.
There was speculation that Truss would backtrack on the proposed corporate tax changes, having already changed his mind about cutting income tax for top earners.
The promised tax cuts were at the heart of Truss’ successful speech to Conservative members that she, rather than her rival Rishi Sunak, was the best candidate to succeed Johnson.
That program is now in shambles, and Truss’s judgment is more than ever in question after Sunak’s warnings are fully vindicated: more borrowing to pay for the tax cuts has only served to scare the markets and reduce the cost of borrowing to blow up millions of Britons.
Kwarteng insisted Thursday in Washington that his job was secure. “I’m not going anywhere,” he said.
Truss has “complete confidence” in its free market counterparts, International Trade Secretary Greg Hands told Sky News on Friday morning.
However, a new YouGov poll for The Times newspaper has found that 43% of Tory voters want a new Prime Minister in Downing Street.
Other polls show a huge open lead for the opposition Labor Party and the Tories face electoral defeat.
Hands said “I don’t see” several reports that senior Tory MPs were planning to unseat Truss by installing a new leadership team under defeated rivals Sunak and Penny Mordaunt, who were also running to succeed Johnson.
When asked if Truss would still be at 10 Downing Street a week from now, Hands told ITV: “Oh definitely.”
The Chancellor of the Exchequer’s September 23 budget has sparked chaos in markets over fears it will increase the national debt.
The pound fell to a record low dollar near parity with the greenback and bond yields rose before stabilizing.
As the Bank of England’s costly interventions come to an end on Friday, markets have already priced in another U-turn from the government, leaving Downing Street with no room to manoeuvre.
“Do it now,” urged Mel Stride, chairman of the House of Commons Treasury Select Committee, Kwarteng and Truss earlier on Friday.
“If that doesn’t happen, markets could react negatively,” he told BBC television.
Sophie Lund-Yates, senior equity analyst at Hargreaves Lansdown, agrees with Stride’s analysis.
“There is a sense of urgency to this move and it appears the market is optimistic that Kwarteng’s rom-com-worthy shot through the airport portends a dramatic reconciliation between stubborn existing policies and the volte- deal that investors were expecting,” you commented.
For many experts, the danger is that self-inflicted damage to Truss and his far-right platform could prove fatal.
“It’s a government in crisis and economic policy in shambles and frankly I think the Conservative Party should hang their heads in shame at what they are doing to the country,” Labor MP Ed Miliband told Sky News.
- Editor/ additional report by AFP