LONDON – Assembled British Prime Minister Liz Truss fired its finance minister and key policymaker on Friday, in a bid to save his job after weeks of market panic fueled by it economic project.
Truss announced at a press conference that she would drop a planned tax cut, the latest reversal in the face of growing political and economic pressure.
She added that she was “absolutely determined” to continue, saying she had changed course “to reassure markets of our fiscal discipline”.
She was also looking to reassure her decision Conservative partywhose poll numbers have fallen alongside the value of the pound, fueling speculation that she could be ousted just weeks after taking office.
Truss said she was maintaining her radical low-tax strategy and remaining “ambitious for growth.”
“But it is clear that parts of our mini-budget have gone further and faster than the markets expected,” she added. “So the way we execute our mission right now has to change.”
She has dropped plans to keep her predecessor Boris Johnson’s promise to raise corporation tax from 19% to 25%, an embarrassing descent from a promise that helped her win the race to succeed the scandal tarnished Johnson as a leader.
Hinting at spending cuts to fund the rest of his plans, Truss said future “spending will rise less rapidly than expected”, a move that will be pilloried by opposition parties as imposing additional pain on a British public already facing a cost-of-living crisis.
Earlier, Truss sacked Finance Minister Kwasi Kwarteng just 38 days after the couple came to power. He had been the face of the tax cut”mini budget” who sent the crashing book and fueled the country’s latest political crisis.
Kwarteng announced his departure on Twitter, saying, “You asked me to step down as Chancellor. I agreed.” He had rushed back to London earlier on Friday after a meeting in New York, with media following his flight as he arrived home.
He attached a defiant letter in which he declared that his strategy was the right one, without even mentioning the unrest of the past two weeks. “Following the status quo was simply not an option,” he wrote.
Kwarteng becomes the second-shortest Chancellor of the Exchequer, as Britain’s finance minister is known. He is second only to Iain Macleod, who died after 30 days in office in 1970.
In a written response, Truss said, “We share the same vision for our country and the same belief in moving towards growth.”
“I deeply respect the decision you made today,” she added, though it seemed clear the decision was hers.
Truss’ personal office has confirmed that the next finance minister will be Jeremy Hunt, a former minister under successive Tory governments who twice ran unsuccessfully for the top job.
Hunt will present the government’s medium-term budget plan on October 31, the Treasury said in a statement, sticking to the date announced by his predecessor.
It remains unclear whether Friday’s dramatic developments will be enough to save Truss, who as leader will be seen as ultimately responsible for the economic plan. Her short period in office was dominated by crisis, with growing reports that senior Tory officials were plotting to replace her.
On Friday, a tabloid threw Truss into a lettuce race, asking readers if they thought she would lose her job before the unrefrigerated vegetable rotted.
Earlier this month, after repeatedly rejecting any suggestion of a course change, Truss dropped a proposal to cut taxes for people earning more than 150,000 pounds a year ($167,000).
That failed to calm the markets or the legislators.
The plan involved a cut of 45 billion pounds in taxes ($50.4 billion) – more than the UK’s annual defense budget – but did not identify either how this would be funded or what services would have to be cut in result.
The proposal saw interest rates and mortgage payments rise, the value of the pound crash and the government’s cost of borrowing skyrocket. More details about this were to be revealed in a speech on October 31, but the political and economic damage had already been done.
The Central Bank of England was forced to step in and buy billions of pounds of government bonds, known as gilts, to calm the market. In doing so, the bank warned of a “significant risk” to the entire UK financial system.
On Tuesday, the bank said it had stepped in to stop a “fire sale”. Basically, the bank’s bond-buying program was due to end on Friday, meaning the government needed to convince markets that its economic plan was sound to avoid further chaos.
The International Monetary Fund has sharply criticized the unfunded tax cuts, while economists and commentators around the world have questioned the wisdom of such a sweeping plan.
Truss and Kwarteng have long advocated low-tax, high-growth economic policies. They were among the co-authors of “Britannia Unchained”, an ultra-conservative treatise on economic reform published in 2012.
“The British are among the worst idlers in the world,” write the authors. “We work some of the lowest hours, we retire early and our productivity is low.”
Truss still sticks to this analysis. At the Conservative Party’s annual conference, she told lawmakers and campaigners, “I have three priorities for our economy: growth, growth and growth.”
With each new development, it seems, the crisis it fueled does just that.