Prime minister Liz Truss has sacked chancellor Kwasi Kwarteng and made a second U-turn in the mini-Budget, removing the planned cancellation of the corporation tax hike.
Kwarteng had been summoned back from a trip to the US a day earlier than planned for talks with the PM. His removal sees him become the second-shortest serving chancellor, having been in the role for just 38 days.
Former health secretary Jeremy Hunt has been confirmed as Kwarteng’s replacement.
With the Truss government having already U-turned on the mini-Budget policy of abolishing the top band of income tax, the PM confirmed in a news conference on Friday that ministers would now be going ahead with the corporation tax increase, which will see business taxes go from 19 per cent to 25 per cent.
Truss said the decision to dispense with Kwarteng and make a second U-turn had been "difficult", but she acknowledged the need to "act now to reassure the markets."
As Kwarteng departed, he continued to endorse his prime minister’s economic growth plan, writing a letter which said that “following the status quo was simply not a option.”
The letter read: “For too long, this country has been dogged by low growth rates and high taxation – that must change if this country is to succeed.”
This remarkable move comes after intense pressure from within the Conservative party to bring stability to the markets and restore credibility to the Tories around fiscal responsibility.
The market turbulence - which saw borrowing costs rise, the value of the pound fall, and the Bank of England stepping in to buy government bonds to help save pension funds – came as the mini-Budget announced £45 billion in tax cuts and an energy support package that would cost £60 billion, without any economic projection or details as to how it would be paid for.
The government had said that the measures would be partially supported by borrowing.
The chancellor was due to deliver a statement on October 31 outlining the government’s fiscal plan alongside a projection from the Office for Budget Responsibility, but it is unclear for now as to whether this will still go ahead on schedule.
Labour shadow chancellor Rachel Reeves said that with its mini-Budget and the lack of supporting detail, the Truss government had “plunged the economy into chaos and crisis with Truss' discredited trickle-down approach”.
Reeves and other opposition MPs have also called for a general election, but Truss has ruled out one before 2024, vowing to "see through what I've promised."
Any further rowing back on the mini-Budget policies will come as another setback for Truss' turbulent premiership thus far, with her plans to cut taxes forming the cornerstone of her policy agenda, which saw her emerge victorious in the Conservative leadership contest.
Indeed, the BBC quotes one anonymous Conservative MP as suggesting that Truss should resign.
Elsewhere, the markets enjoyed an uptick earlier in the day as speculation emerged of the U-turn on the mini-Budget, although the pound did drop as government borrowing costs rose following Truss' announcement.
The Bank of England is also due to wind down its bond-buying scheme today.
Photo by UK Government on Wikimedia Commons
