British Prime Minister Liz Truss on Friday dismissed her
Finance Minister, forcing Kwasi Kwarteng to carry the can for turmoil sparked
by her right-wing economic platform as restive Conservatives plotted her own
demise.
The chancellor of the exchequer was dismissed in person by
Truss after he rushed back early from international meetings in Washington,
multiple media reports said, and she was due later to hold her first Downing
Street news conference.
There was no immediate announcement of his successor, who
would become Britain’s fourth Finance Minister this year.
Financial upheaval sparked by the new government’s September
23 plan to slash taxes — financed via billions in more borrowing — has subsided
somewhat since the Bank of England intervened in bond markets.
But the central bank was adamant it would end its
bond-buying spree on Friday, and market analysts said only a bigger climbdown
by Truss following Kwarteng’s disastrous budget announcement last month would
avert fresh panic.
No timing was given for Truss’s news conference, but the
announcement underscored the sense of peril as some Conservative MPs reportedly
mobilised to unseat the new leader just five weeks since she succeeded Boris
Johnson.
Kwarteng was due to conclude annual meetings of the
International Monetary Fund and World Bank in Washington this weekend, after
earning a rebuke from IMF chief Kristalina Georgieva on the need for “coherent
and consistent” policies.
A Treasury spokesman confirmed Kwarteng had cut short the
trip “to continue work on his medium-term fiscal plan” due on October 31, after
Truss held hurried meetings with her own financial advisors on Thursday in his
absence.
As UK broadcasters showed live footage of Kwarteng’s British
Airways plane landing at Heathrow airport, government bond yields eased in a
sign that markets did expect a volte-face.
Speculation was rife that Truss would row back on planned
changes to corporation tax, having already changed her mind about cutting
income tax for the highest earners.
The promised tax cuts were the centrepiece of Truss’s
successful pitch to Tory party members that she rather than rival Rishi Sunak
was the best candidate to replace Johnson.
That programme now lies in tatters, and Truss’s judgement is
in question more than ever, after Sunak’s warnings were entirely vindicated:
higher borrowing to pay for tax cuts served only to terrify the markets and
drive up borrowing costs for millions of Britons.
Speaking in Washington on Thursday, Kwarteng had insisted
that his job was safe. “I’m not going anywhere,” he said.
Truss has “total confidence” in her fellow free-marketeer,
international trade minister Greg Hands told Sky News on Friday morning.
– ‘Romcom-worthy
dash’ –
However, a new YouGov poll for The Times newspaper said 43
per cent of Conservative voters wanted a new Prime Minister in Downing Street.
Other polls show a mammoth lead up opening up for the
opposition Labour party, threatening electoral meltdown for the Tories.
Hands said, “I don’t recognise” multiple reports that senior
Tory MPs were plotting to unseat Truss by installing a new leadership team
under her defeated rival Sunak and Penny Mordaunt, who also ran to succeed
Johnson.
Pressed on whether Truss will still be in 10 Downing Street
in a week, Hands told ITV, “Oh definitely.”
The Chancellor of the exchequer’s September 23 budget
sparked markets chaos because of fears it would drive up state debt.
The pound tumbled to a record dollar low near parity with
the greenback and bond yields surged, before stabilising.
With the Bank of England’s costly interventions ending
Friday, markets have already priced in a fresh about-turn by the government,
leaving Downing Street with no room for manoeuvre.
“Do it now,” Mel Stride, chairman of the Treasury select
committee in the House of Commons, urged Kwarteng and Truss earlier Friday.
“If it doesn’t happen, then the markets may have an adverse
reaction to that,” he said on BBC television.
Sophie Lund-Yates, lead equity analyst at Hargreaves
Lansdown, agreed with Stride’s analysis.
“There is a sense of urgency in this move and it would seem
the market is optimistic that Kwarteng’s romcom-worthy dash through the airport
suggests a dramatic reconciliation between stubborn existing policy and the
U-turn investors have been waiting for,” she commented.
For many pundits, the self-inflicted damage risks proving
terminal for Truss and her hard-right platform.
“This is a government in meltdown and an economic policy in
tatters, and frankly I think the Conservative party should be hanging their
head in shame at what it’s putting the country through,” senior Labour MP Ed
Miliband told Sky News.
AFP
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