On Friday, Truss announced the resignation of his development architect Kwasi Kwarteng as Chancellor of the Exchequer, or Britain’s Chancellor of the Exchequer.
Truss also said his government would abandon one of his key campaign promises – and allow corporate taxes to rise from 19 per cent to 25 per cent in April 2023.
The British pound edged higher against the dollar on Thursday, after easing slightly on Friday to around $1.12. Britain’s top stock index, the FTSE 100, was essentially flat.
Quartet will be replaced by Jeremy Hunt, who served as Britain’s foreign secretary when he dominated the Brexit debate. Hunt lost the Conservative leadership race to Boris Johnson in 2019. In that race, he wanted to cut corporate taxes.
He now becomes Britain’s fourth chancellor in four months, taking the economic policy portfolio at a time when the Bank of England is forecasting a recession this winter. Costs of living, especially energy prices, are rising. Unions are on strike, mortgage rates are climbing.
In a remarkably short news conference on Friday, reporters asked no questions about the country’s finances, but instead pressed Truss repeatedly about his future as prime minister.
They pointedly asked why he would fire his president for tax cuts that rocked the markets, when the plan was actually his. A reporter asked, “How will you stay?” if Kwarteng had to go. Another asked, “What credibility do you have to continue the regime?” he asked.
Truss admitted that it was “clear” that his economic plan had “moved more quickly than markets expected”. He explained: “So we now have to change the way we deliver our work” and “we have to act now to reassure the markets of our financial discipline.”
He insisted that his aim was to make Britain a “low-tax, high-wage, high-growth economy”, but gave no answers as to how this would be achieved.
“My priority is to ensure the economic stability of our country,” he said, while many economists say the tax has created the current instability.
When Truss admitted, “I want to be honest, it’s difficult, but we will weather this storm,” it was unclear whether he was referring to the British people or his government.
As he left the 10-minute, four-question news conference, a reporter asked, “Aren’t you going to apologize?” He shouted. The dress kept going.
The rapid unraveling of the Truss plan to improve Britain’s future has been remarkable and has left the country stunned.
He has been in office for less than six weeks. After Conservative lawmakers ousted Boris Johnson as unfit for office, the party membership – just 0.3 percent of the population – elected Truss to succeed him on his promises to cut taxes.
His opponent, former president Rishi Sunak, said it was irresponsible to cut taxes before reducing inflation. He called his plan for growth through tax cuts “imaginary island” economics.
Investors seem to agree. Kwarteng’s Sept. 23 announcement of the government’s new “growth plan,” which will be driven by “the biggest tax cuts in generations.” Caused the currency to tank And this The central bank should take action to calm the markets.
The Bank of England decided to end its emergency bond-buying programme, an extraordinary intervention, on Friday. So it was left to the government to reassure investors about what was coming next.
In a letter posted on Twitter on Friday, Kwarteng wrote that Truss asked him to quit. “As your chancellor you asked me to stand aside. I accepted,” he wrote. “It is now critical that we move forward to emphasize your government’s commitment to fiscal discipline.”
Kwarteng, a free-marketer and ardent Brexiteer, flew from Washington to London earlier on Friday as British newspapers tracked his flight.
He attended a meeting of the International Monetary Fund, his first appearance as president at a major economic summit. He told reporters in Washington “Going Nowhere” Despite the market turmoil, he acknowledged that it was partly due to the government’s fiscal plan. Asked if he and his boss, the prime minister, would get their jobs within a month’s time, the chancellor replied, “Absolutely, 100 percent.”
But a planned dinner with reporters at the British ambassador’s residence in Washington was cut short, with Kwarteng rushing out about 15 minutes later – no dinner served.
“I greatly respect the decision you have made today,” he wrote in a letter to Quarteng. The language struck many as a bit odd as he was asked to resign.
Kwarteng was on duty for only 38 days. Ian McLeod, the only shorter-serving president in office, died of a heart attack in 1970 after 30 days.
The Truce government has already done one U-turn In the most controversial part of its tax plan, it will reduce the top income tax rates paid by high-income Britons. Not only has the associated borrowing spooked investors, but tax breaks for the wealthy have not gone down well with Britons struggling to pay for petrol and groceries.
On Friday, Truss scrapped his plan to cut corporate taxes.
He was attacked at the weekly Prime Minister’s Questions session on Wednesday, and some participants that day said it was a disastrous performance in private meetings with backroom lawmakers.
One lawmaker told the Financial Times, “The mood is frankly funereal, terrible. I was shocked at how horrible it was.
Mujtaba Rahman, an analyst at Eurasia Group, said in a briefing note on Friday that the truss was more likely to be lifted before the next election, which should finally happen by January 2025.
He said a group of Conservative lawmakers planned to oust him by Christmas, and some were floating the idea of a “moderate dream ticket” from Sunak and Benny Mordant, who are interested in the latest party leadership race.
“While some MPs say the plan to scrap the tress would make the Conservatives more ridiculous than they are now, a growing number believe it is the only way to prevent a Labor landslide in 2024,” he wrote.
Under the current rules of the Conservative Party, there cannot be a leadership contest for another year. But those rules can be changed.
Labor leader Keir Starmer, who has seen his party’s poll ratings rise in the past few weeks, said changing chancellors “wouldn’t undo the damage”.
“Lis Truss’ reckless approach has wrecked the economy, sent mortgages soaring and undermined Britain’s position on the world stage” he wrote on Twitter. “We need a change in government. Through my leadership, Labor will protect Britain’s economy and get us out of this mess.
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