[UPDATED] UK’s Truss fires finance minister Kwarteng: BBC

LONDON – British Prime Minister Liz Truss dismissed her finance minister today, 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, and she was due later to hold her first Downing Street news conference.

There was no immediate announcement of his successor, who will become Britain’s fourth finance minister this year, and the pound slumped anew on currency markets.

“You have asked me to stand aside as your chancellor. I have accepted,” Kwarteng wrote in a letter to Truss, while insisting that their economic programme was needed because “the status quo was simply not an option”.

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 today, 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 Parliament members (MPs) reportedly mobilised to unseat the new leader just five weeks since she succeeded Boris Johnson.

Tony Travers, from the London School of Economics, told AFP Kwarteng had been made “the fall guy for the government’s mistakes” but the sacking had not taken the pressure off Truss or calmed the Tories.

“It’s very hard to see them coming back from this” by the next election, he added.

‘Not going anywhere’ 

Kwarteng was due to have stayed in Washington this weekend to conclude annual meetings of the International Monetary Fund and World Bank, after earning a rebuke from IMF chief Kristalina Georgieva on the need for “coherent and consistent” policies.

Speaking in Washington yesterday Kwarteng had insisted that his job was safe. “I’m not going anywhere,” he said.

But UK broadcasters showed live footage of Kwarteng’s British Airways plane landing at Heathrow airport a day early after Truss held hurried meetings with her own financial advisors yesterday in his absence.

Speculation was rife that Truss would row back on planned changes to corporation tax, has 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.

A new YouGov poll for The Times newspaper said 43% of Conservative voters want 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.

Junior minister Greg Hands said “I don’t recognise” multiple reports that senior Tory MPs were plotting to unseat Truss by installing a new leadership team under 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.”

‘Romcom-worthy dash’

The chancellor’s September 23 budget sparked market 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 thanks to interventions by the Bank of England.

But with that costly crutch ending today, markets have already priced in a fresh about-turn by the government, leaving Downing Street with no room for manoeuvre.

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, October 14, 2022