Truss addressed a press conference from 10 Downing Street to formally announce the changes
Embattled British Prime Minister Liz Truss on Friday appointed former Cabinet minister and Conservative Party leadership contender Jeremy Hunt as the new Chancellor, after she sacked close friend Kwasi Kwarteng in an effort to stem the rebellion within her party ranks over the economic turmoil unleashed by his mini-budget.
Truss addressed a press conference from 10 Downing Street to formally announce the changes, blaming them on her fiscal plan going “faster and further” than the financial markets could handle.
She also confirmed another widely expected U-turn that the government would raise corporation tax for businesses from 19 per cent to 25 per cent in April 2023, as tabled by former Chancellor Rishi Sunak and withdrawn by Kwarteng in last month’s mini-budget.
"It is clear that parts of our mini-Budget went further and faster than markets were expecting. So the way we are delivering our mission right now has to change," Truss said during the televised conference.
"We need to act now to reassure the markets of our fiscal discipline. I have therefore decided to keep the increase in corporation tax that was planned by the previous government," the 47-year-old Truss said.
On the choice of her new Chancellor, she added: “Today I have asked Jeremy Hunt to become the new Chancellor. He is one of the most experienced and widely respected government ministers and parliamentarians and he shares my convictions and ambitions for our country.
"He will deliver the medium term fiscal plan at the end of this month. He will see through the support we are providing to help families and businesses," she said on the 55-year-old new Chancellor.
Hunt was himself in the race for the top job after Boris Johnson resigned in July, but threw his weight behind former Chancellor Sunak after he did not get enough Conservative Party members backing him in the leadership election. His appointment is seen as Truss’ attempt at closing the widening divide within the Tories, with many of Sunak loyalists in open rebellion against her policies.
In her letter to Kwarteng released on Twitter, Truss said she was sorry to lose him and indicates that she still believes in the broader economic vision laid out in the controversial mini-budget.
“We share the same vision for our country and the same firm conviction to go for growth. You have been Chancellor in extraordinarily challenging times in the face of severe global headwinds,” she writes.
It came in the course of a day of high political drama at the heart of Downing Street with the exit of Kwarteng – in office at the UK Treasury for only 38 days. He took to Twitter soon after to confirm that he had been asked to “step aside” as Chancellor.
"As I have said many times in the past weeks, following the status quo was simply not an option. For too long this country has been dogged by low growth rates and high taxation - that must still change if this country is to succeed," his resignation letter reads.
“It is important that we now move forward to emphasise your government’s commitment to fiscal discipline. The Medium-Term Fiscal Plan is crucial to this end, and I look forward to supporting you and my successor to achieve that from the backbenches,” he said, striking a conciliatory note.
Earlier, the finance minister cut short his visit to the US for an International Monetary Fund (IMF) meeting in Washington to fly back for a meeting with his boss. It had triggered speculation over his job and possible U-turns on the tax cuts he had tabled in Parliament, which had resulted in the pound plummeting against the dollar and the Bank of England stepping in to buy the country’s long-term bonds to shore up the pension funds.
The estimated GBP 45 billion worth of tax cuts without a detailed funding plan to back it up were seen as disastrous for the UK economy at a time when inflation has already been soaring.
Truss and Kwarteng, who have been close friends for years, had insisted that the turbulence in the UK economy was part of a global problem exacerbated by the Russia-Ukraine conflict induced energy crisis and post-pandemic recovery.
"We have been colleagues and friends for many years. In that time, I have seen your dedication and determination. I believe your vision is the right one," Kwarteng notes in this departure letter.
An open revolt by Tory MPs and a record surge for the Opposition Labour Party in the opinion polls meant his position in Cabinet had become increasingly untenable after Truss announced the first major reversal of mini-budget policies when she backtracked on scrapping the 45-pence top rate of income tax for the wealthiest.