Skip to content
Search

Latest Stories

Truss sacrifices finance minister, scraps tax plan in fight to survive

Truss appointed Jeremy Hunt, a former foreign and health secretary, to replace Kwarteng.

Truss sacrifices finance minister, scraps tax plan in fight to survive

British prime minister Liz Truss fired her finance minister Kwasi Kwarteng on Friday and scrapped parts of their economic package in a desperate bid to stay in power and survive the market and political turmoil gripping the country.

Kwarteng said he had resigned at Truss's request after being forced to rush back to London overnight from IMF meetings in Washington.


Truss, in power for only 37 days, then told a news conference she would now allow a key business levy to rise from next year, raising 18 billion pounds, as she accepted she had gone "further and faster" than markets had been expecting.

"We need to act now to reassure the markets of our fiscal discipline," she said.

Truss appointed Jeremy Hunt, a former foreign and health secretary, to replace Kwarteng.

"You have asked me to stand aside as your Chancellor. I have accepted," Kwarteng said in his resignation letter to Truss, which he published on Twitter.

She said in response: "As a long standing friend and colleague. I am deeply sorry to lose you from the government.

"We share the same vision."

The pound slid against the dollar after she spoke, trading 1.2% lower on the day at $1.1198 and two-year British government bonds, or gilts GB2YT=RR turned negative.

The plan for unfunded tax cuts crushed UK assets and drew international censure, but the pound and gilts have started to recover since the government started looking for ways to balance the books.

Kwarteng is the country's shortest serving chancellor since 1970, and his successor will be the fourth finance minister in as many months in Britain, where millions are facing a cost of living crisis. The finance minister with the shortest tenure died.

Truss's own position is in jeopardy.

She won the Conservative Party leadership last month by promising vast tax cuts and deregulation to try to shock the economy out of years of stagnant growth, and the fiscal policy Kwarteng announced on Sept. 23 aimed to deliver that vision.

But the response from markets was so ferocious that the Bank of England had to intervene to prevent pension funds from being caught up in the chaos, as borrowing and mortgage costs surged.

The duo had been under mounting pressure to reverse course after polls showed support for the Conservative Party had collapsed, prompting many colleagues to look for ways to force them out of office.

"The party loves the idea of principles and conviction politicians, but staying in power is everything," one party insider told Reuters. "Ruthless can also be popular."

MARKET ROUT

Having triggered a market rout, Truss now runs the risk of bringing the government down if she cannot find a package of public spending cuts and tax rises that can appease investors and get through any parliamentary vote in the House of Commons.

Her search for savings will be made harder by the fact the government has been cutting departmental budgets for years.

At the same time Conservative Party discipline has all but broken down, fractured by infighting as it struggled first to agree a way to leave the European Union and then how to navigate the COVID-19 pandemic and grow the economy.

"If you can't get your budget through parliament you can't govern," Chris Bryant, a senior lawmaker from the opposition Labour Party, said on Twitter. "This isn't about u-turns, it's about proper governance."

Underlining how far Britain's reputation for sound economic management and institutional stability had fallen, a source within the Group of Seven leading nations said G7 finance ministers at a meeting this week focused on the problems in Britain, and not the usual subject of Italy.

In Washington, Kwarteng was told by the head of the International Monetary Fund of the importance of "policy coherence". His flight back to London was carried live by television news channels. He was fired minutes after arriving back in Downing Street.

In Westminster, Truss has been trying to find agreement with her cabinet ministers on a way to preserve her push for growth with measures acceptable to her lawmakers that would also reassure financial markets.

Rupert Harrison, a portfolio manager at Blackrock and once an adviser to former British finance minister George Osborne, said markets have now almost fully priced in a U-turn.

"(That) means if the U-turn doesn't come markets will react badly," he said on Twitter.

More For You

Streeting: Health deal signals new era in UK-India ties

Foreign Office minister Catherine West, health secretary Wes Streeting and equalities minister Seema Malhotra during the Holi Reception in London.

Streeting: Health deal signals new era in UK-India ties

THE recent health and life sciences agreement between the UK and India will strengthen cooperation on healthcare innovation and security in both countries, health secretary Wes Streeting said.

Speaking at the Holi reception organised by the India All-Party Parliamentary Group and the 1928 Institute in London on Monday (24), he added that the contribution of British Indians has been pivotal in the growth of the NHS since its inception in 1948, and a robust partnership between the two nations will ensure we have a healthcare provider 'fit for the future'.

Keep ReadingShow less
british-steel-iStock

An aerial view of Steel Plant Industry in Scunthorpe. (Photo: iStock)

British Steel to shut blast furnaces, up to 2,700 jobs at risk

BRITISH STEEL, owned by Chinese group Jingye, confirmed on Thursday that it will shut down its blast furnaces and steelmaking operations in England, attributing the decision to market challenges, tariffs, and rising environmental costs.

The closures, first proposed in late 2023, could lead to the loss of up to 2,700 jobs at the company’s main UK site in Scunthorpe, northern England, according to sources familiar with the matter.

Keep ReadingShow less
Just Stop Oil

Just Stop Oil has garnered significant media attention with its direct action protests

Getty Images

Just Stop Oil ends direct action campaign after major policy success

The environmental activist group Just Stop Oil has announced an end to its disruptive direct action protests, declaring a significant victory in its campaign to halt new oil and gas developments. In a statement released by the organisation, the group confirmed it had successfully influenced government policy to abandon new fossil fuel exploration, marking a major turning point in the movement’s goals.

“Just Stop Oil's initial demand to end new oil and gas is now government policy, making us one of the most successful civil resistance campaigns in recent history,” the group’s statement read. It went on to claim responsibility for having kept over 4.4 billion barrels of oil in the ground, while legal victories in the courts have ruled new oil and gas licences unlawful.

Keep ReadingShow less
submarine-crash-reuters

People walk next to an ambulance in front of the hospital where the bodies of foreigners who were killed when a tourist submarine sank off Egypt's Red Sea resort city of Hurghada, and whose nationalities are still unknown, are kept. (Photo: Reuters)

Six foreign tourists die after submarine sinks off Egypt’s Red Sea coast

SIX tourists died on Thursday when a submarine carrying visitors sank near Hurghada, a resort city on Egypt’s Red Sea coast, state media reported.

According to the state-owned Akhbar Al-Youm newspaper, all the deceased were foreigners. The report also said 19 others were injured in the incident.

Keep ReadingShow less
EU Warns Citizens to Stockpile Essentials Amid War Concerns

Not all EU countries currently have the same level of preparedness

Getty Images

European Union urges citizens to stockpile food and supplies amid risk of war

The European Union (EU) has advised its 450 million citizens to stockpile essential items, including food and water, to prepare for potential emergencies. This call to action is part of a broader strategy to improve disaster preparedness across the 27-nation bloc, as it faces increasing risks from war, cyberattacks, climate change, and public health crises.

The EU’s recommendation comes in light of recent global developments that have raised concerns about security and stability. Citizens are encouraged to have enough food, water, medicine, and other essential supplies to last at least 72 hours during a crisis.

Keep ReadingShow less