Kwasi Kwarteng was dramatically sacked by Liz Truss today with Jeremy Hunt expected to take the key job as she prepares to make a monster U-turn on the disastrous mini-Budget in a bid to save her premiership.
The Chancellor was given his marching orders after being hauled back to Downing Street from a US summit, with the PM facing a potentially terminal Tory rebellion.
Former foreign secretary and leadership hopeful Jeremy Hunt is making a shock return as a ‘safe pair of hands’ to take over No11.
In a letter, Mr Kwarteng confirmed he had been ‘asked to stand aside’ rather than quitting – and suggested he still believes that the tax-cuts should go ahead. After being fired, the MP left No10 by the front door, smiling and waving to waiting media.
Ms Truss replied by praising their ‘friendship’ and ‘shared vision’, saying he had put the ‘national interest first’ by falling on his sword. Despite Mr Kwarteng leaving no doubt that he had been given the bullet, she said: ‘I deeply respect the decision you have taken today.’
She is now due to front a make-or-break press conference at 2.30pm to abandon a major strand of her radical economic reforms just weeks after taking power.
One bewildered Cabinet source told MailOnline of the prospect of Mr Hunt taking over at No11: ‘I think my rationality barometer is broken.’
Chris Philp has also been ousted from Treasury Chief Secretary, after a series of gaffes including tweeting that the Pound was strengthening during Mr Kwarteng’s mini-Budget speech – minutes before it crashed. He is swapping jobs with Paymaster General Edward Argar.
Ms Truss is widely tipped to bow to political and economic pressure to increase corporation tax, having previously cancelled plans to hike it by 6p in the pound.
The chaos saw the Pound shedding the gains it had made yesterday when the markets moved on the growing likelihood of a big shift on the unfunded tax cuts, although it rose back above $1.12 as the new Chancellor was announced.
Mr Kwarteng becomes the the second shortest-serving chancellor in modern British politics, only behind Iain Macleod – whose career was ended by his death after 30 days in office in 1970.
Since 2019, the UK has had four chancellors, including Nadhim Zahawi who served the third shortest tenure with 62 days during a short-lived reshuffle under Boris Johnson, and Sajid Javid who served 204 days – the fourth shortest tenure on record.
Ms Truss made scrapping plans to up the corporation tax rate from 19 per cent to 25 per cent – at a cost of £18billion – a central part of her leadership campaign and it was unveiled as a policy three weeks ago as a major growth lever.
But she is expected to announce the rate will go up next year after all, after weeks of economic and political turmoil in Westminster that now threaten her position.
Mutinous Conservative MPs have given the PM 17 days to save her job, with claims that Rishi Sunak and Penny Mordaunt, both failed leadership challengers in the summer, are being lined up to replace her.
Tory whips warned she could face a leadership challenge if Kwasi Kwarteng’s economic statement on October 31 fails to end the turbulence in the financial markets.
It has been suggested they could be installed in a ‘coronation’ if no one else runs to be leader, avoiding the need to consult party members who overwhelmingly backed Ms Truss to replace Boris Johnson.
On another brutal day with Britain wracked by political and economic crisis:
- Jeremy Hunt has previously backed slashing corporation tax to just 15 per cent, even lower than Ms Truss wanted to keep it;
- Polls have shown Labour more than 20 points ahead of the Tories, enough for a massive landslide win at an election;
- Ms Truss’s personal ratings are now worse than any other modern PM a month into their term in office;
The Chancellor returned to Downing Street after leaving an IMF summit in Washington a day early amid signs that he and the PM are planning a massive U-turn that would scrap wide-ranging tax cuts
Liz Truss, pictured here at Prime Ministers Questions yesterday, has been given 17 days to save her job by Tory MPs
In a letter, Mr Kwarteng confirmed he had been ‘asked to stand aside’ rather than quitting – and suggested he still believes that the tax-cuts should go ahead. Ms Truss responded that he had ‘put the national interest first’
In his letter, Mr Kwarteng wrote: ‘You have asked me to stand aside as your Chancellor. I have accepted.
‘When you asked me to serve as your Chancellor, I did so in full knowledge that the situation we faced was incredibly difficult, with rising global interest rates and energy prices. However, your vision of optimism, growth and change was right.
‘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.
‘The economic environment has changed rapidly since we set out the Growth Plan on 23 September. In response, together with the Bank of England and excellent officials at the Treasury we have responded to those events, and I commend my officials for their dedication.
‘It is important now as we 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.
‘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. It has been an honour to serve as your first Chancellor.
‘Your success is this country’s success and I wish you well.’
The Chancellor arrived back in London this morning after abandoning a trip to the IMF in Washington to hold crisis talks with the PM.
The markets have been volatile and the Conservative Party febrile since his announced tax cuts paid for by borrowing last month.
They have already had to announce a U-turn and reinstate the 45p income tax rate for the UK’s richest people, following a revolt.
Asked about the prospect of another humiliating U-turn, the Chancellor said yesterday: ‘Let’s see.’
Government bonds and the pound steadied at the start of London trading as the Bank of England’s bond-buying programme comes to a close, a sign markets are pricing in a U-turn.
Yields on gilts, UK Government bonds, surged amid a sell-off after Kwarteng announced unfunded tax-cutting plans in the mini-budget last month and lifted again earlier this week.
On the opening of the markets, yields on UK 30-year gilts fell back by 1.6 per cent to 4.47 per cent, while 10-year gilt yields moved 1.8 per cent lower to 4.11 per cent. Meanwhile, the pound was 0.3 per cent higher at 1.127 against the US dollar as trading sentiment improved.
Tory MP and chairman of the Treasury Committee Mel Stride said he hopes the Chancellor is flying home from the US early to have conversations with the Prime Minister and row back on tax cuts announced in the mini-budget.
Speaking to BBC Breakfast, the Central Devon MP said: ‘What I think I’d like to hear is that these rumours that there will be a reset moment around the tax measures that he announced in late September are correct because I think things have reached a stage now with the markets and with confidence in those financial markets where we need a fundamental reset, so I’m hoping that it’s to engage in conversations with the PM and others and to row back on those unfunded tax cuts announced in September.’
But former minister Nadine Dorries, who backed Truss for the leadership, accused her opponents of ‘a plot not to remove a PM but to overturn democracy’.
Trade Minister Greg Hands insisted there are ‘absolutely no plans to change anything’ in the mini-budget, including on corporation tax.
The trade minister told LBC Radio: ‘The Prime Minister and the Chancellor are absolutely determined to stick to the growth plan, to stick to the changes they outlined.’
It has been reported that leader of the House of Commons Penny Mordaunt (pictured) and former Chancellor Rishi Sunak (right, with his wife) are being lined up on a joint ticket to replace the Prime Minister
Former home secretary Priti Patel last night become the latest high-profile Tory MP to suggest the Government could be forced into a further U-turn.
In an interview with Sky News, she said it was ‘vital’ and ‘imperative’ that the Truss administration now stick to the premise of the 2019 manifesto.
‘There is an irony to this,’ Ms Patel said. ‘In that market forces will probably dictate some of these changes now.
‘The market is going to dictate this, primarily because we want to see stability. Stability is absolutely crucial, for everyone to carry on living their lives, for the institutions to function, but actually for the British people to have the stability that they need in their lives as well.
‘And by that, as well, I mean mortgages, interest rates and all those crucial, crucial levers.’
Another senior Tory MP has joined calls for the Government to reverse course on the mini-budget.
Alicia Kearns, who has just been elected as the new chairwoman of the Foreign Affairs Committee, suggested the Government’s tax cuts should be scrapped to calm the markets.
She was asked on LBC’s Tonight With Andrew Marr whether she would like to see the tax cuts reversed.
‘Do I think we should be borrowing en masse where our children have to pay this back for decades to come? No, I don’t,’ she said.
Pressed by Marr, she stressed that sometimes Governments need to take ‘extraordinary steps’.
‘But clearly, in the approach and the manner in which this has been done, that is the issue. Because the markets are not woke, the markets are not left. The fact they are not lefty, anti-government, the fact they have been spooked, is something that should be taken incredibly seriously. And often it is about the manner, and the fact is we govern only with the support of the people, and we are not bringing them with us currently.
‘We all want Liz Truss to succeed in that the country needs her to succeed. And it is about recognising that actually, sometimes baby steps can result in more meaningful and embraced change than perhaps a bonfire.’
It comes as panicked Tory MPs engaged in fevered discussions about whether to try to remove Miss Truss barely a month into her premiership – and who might replace her.
A former Cabinet minister said: ‘It is all about the statement on October 31 now – she has got days to turn things around, that’s all.
‘She is going to have to reverse the mini-Budget and she is probably going to have to sack Kwasi. Even then it might not be enough if she can’t regain the confidence of the markets.
‘The worry is that she still appears to be in denial about how bad things are.’
A Downing Street source acknowledged that the waters threatening to engulf the PM are ‘choppy and might well get choppier’ but insisted: ‘There is a way through.’
Party grandees are reportedly talking of replacing Miss Truss with a unity ticket of Mr Sunak and Miss Mordaunt – who were second and third in the leadership contest.
Some 20 to 30 senior MPs, including former ministers, are attempting to form a ‘council of elders’ to tell the PM to quit, The Times reported.
One MP said: ‘Rishi’s people, Penny’s people and the sensible Truss supporters who realise she’s a disaster need to sit down together and work out who the unity candidate is.
‘It’s either Rishi as prime minister with Penny as his deputy and foreign secretary, or Penny as prime minister with Rishi as chancellor.’
To avoid more ‘blue on blue’ attacks, one of the two would be selected and enter No 10 in a coronation-style affair.
Greg Hands said he does not recognise reports that senior Tories are plotting the possibility of replacing Liz Truss with a joint ticket of Rishi Sunak and Penny Mordaunt.
The trade minister told Sky News: ‘I don’t recognise that story at all.
‘I was a supporter of Rishi Sunak; somehow I’d be very surprised at that story. I was talking only yesterday with Penny Mordaunt. I don’t recognise that story at all.’
Mr Hands, who was a prominent backer of Ms Truss’s Tory leadership rival Mr Sunak, was asked if the markets would have more confidence if Mr Sunak was in No 10.
He said: ‘Rishi Sunak did not win the leadership contest, Liz Truss did win the leadership contest. I am dealing with the situation that we are in’.
But Foreign Secretary James Cleverly told the BBC that ‘changing the leadership would be a disastrously bad idea politically and economically’.
In a message on Twitter, Mrs Dorries urged warring MPs to unite behind the PM.
She claimed: ‘MPs circulating a smorgasbord of names about who should replace Truss as PM are not taking into account the fact they cannot foist upon the British public another prime minister that the public have not voted for. A totally untenable position.’
And former Tory chancellor Lord Lamont said it would be ‘farcical’ for Tory MPs to move against Miss Truss just weeks after she took office.
The Chancellor is due to fly back from Washington today and is expected to hold crisis talks with the PM and other senior ministers over the weekend about the future of the tax-cutting measures in the emergency mini-Budget.
Mr Kwarteng is set to unveil the Government’s ‘medium-term fiscal plan’ on October 31 where he is expected to set out plans for shoring up Britain’s battered public finances.
Three days later the Bank of England is due to announce a major hike in interest rates, bringing more pain for millions of homeowners.
Miss Truss has ruled out major cuts in public spending to help fill a black hole in the public finances estimated by some forecasters to top £60billion.
The Chancellor has already been forced to abandon his plan to scrap the 45p top tax rate following a backbench Tory revolt.
Westminster was awash with rumours yesterday that the PM is poised to drop the corporation tax pledge which was central to her leadership campaign.
Former home secretary Priti Patel last night suggested a U-turn on corporation tax was almost inevitable given the negative market reaction.
Under Tory party rules, Miss Truss cannot face a formal leadership challenge until September next year.
But senior Tories are already looking at options for removing her if the situation deteriorates.
One said: ‘The rules can be changed at any time. If she loses the confidence of the parliamentary party and cannot regain it, then she will have to go. Of course it will look bad. But we have a duty to stop things descending into the kind of chaos that causes long-term damage.’
It comes as the PM’s approval ratings have plummeted by almost half to just 9 per cent in the three weeks since the mini-Budget.
The survey by People Polling, commissioned by GB News, suggested she’s on the same popularity level as Prince Andrew.
From ‘ideological soulmates’ to a shock sacking after just 39 days: How Liz Truss came to fire Kwasi Kwarteng – her long-time ally and neighbour from the same south London street – in bid to save her premiership
Liz Truss has sacked her ‘ideological soulmate’ Kwasi Kwarteng after just 39 days as she battles to save her premiership.
Mr Kwarteng has now become the second shortest-serving Chancellor in modern British political history, after Iain Macleod who died 30 days after taking the job in 1970.
When Ms Truss entered No10 last month and Mr Kwarteng moved into No11, there were expectations that frequent tensions between No10 and the Treasury – a feature of British politics in recent years – would end.
A sign of their close relationship was the fact they had become not just neighbours in Downing Street, but were also neighbours in the same leafy south London borough.
Mr Kwarteng moved to the same Greenwich street as Ms Truss earlier this year.
Their friendship dates back to 2010 when they first entered Parliament together following that year’s general election.
Mr Kwarteng was a member of the Free Enterprise group of Tory MPs that Ms Truss founded in 2011, which aimed to ‘free individuals to create, innovate and take risks’.
Kwasi Kwarteng has become the second shortest-serving Chancellor in history after being sacked by Liz Truss
One friend of the pair previously described the ‘slight social misfits’ and ‘amiable geeks’ as being like ‘Batman and Robin’
In 2012, Ms Truss and Mr Kwarteng – along with Priti Patel, Dominic Raab and Chris Skidmore – co-authored a book titled ‘Britannia Unchained’ that has since been viewed as a blueprint for the PM’s vision for her premiership.
The book bemoaned the ‘legacy of a bloated state, high taxes and excessive regulation threatens to take the drive out of the British economy’.
There was a slight fracture in the pair’s joint political viewpoint during the EU referendum in 2016, when Mr Kwarteng backed Brexit but Ms Truss campaigned fiercely for Remain.
But they were soon aligned again as Cabinet ministers in Boris Johnson’s Government.
Both were opposed to former Chancellor Rishi Sunak’s hike in National Insurance, as well as the decision to slap a windfall tax on energy firms’ profits.
Mr Kwarteng was said to have been among a small group of Tory MPs sat around Ms Truss’s kitchen table when they plotted her leadership campaign after Mr Johnson’s resignation in July.
When Ms Truss assumed the position as frontrunner in this summer’s Conservative contest, one friend of the pair described the ‘slight social misfits’ and ‘amiable geeks’ as being like ‘Batman and Robin’.
Mr Kwarteng was said to have been among a small group of Tory MPs sat around Ms Truss’s kitchen table when they plotted her leadership campaign this summer
Ms Truss and Mr Kwarteng announced a U-turn on scrapping the 45p top rate of tax during this month’s Conservative Party conference in Birmingham
Ms Truss was said to have been intimately involved as Mr Kwarteng and his Treasury officials put together the mini-Budget he unveiled on 23 September
Mr Kwarteng was soon widely-tipped to become Ms Truss’s Chancellor if she entered No10 – a prediction that was proved right when she beat Mr Sunak to become PM on September 5.
Ms Truss was said to have been intimately involved as Mr Kwarteng and his Treasury officials put together the mini-Budget they unveiled on September 23.
The package delivered a number of Ms Truss’s leadership campaign pledges – including a cut to National Insurance and the scrapping of a planned hike in corporation tax.
But Mr Kwarteng and Ms Truss – often referred to as ‘ideological soulmates’ – also went further than she had outlined during the Tory leadership contest.
They announced of a scrapping of the top rate of income tax, the bringing forward of 1p cut in the basic rate of income tax, the removal of the bankers’ bonus cap and the slashing of stamp duty.
Widespread surprise at the size of the tax-cutting agenda the pair had embarked upon – and fears over an increase in borrowing to fund the measures – spooked financial markets and Tory MPs.
As pressure grew, Ms Truss and Mr Kwarteng announced a U-turn on scrapping the 45p top rate of tax during this month’s Conservative Party conference in Birmingham.
But their action was not enough to settle the financial turmoil – or mutinous Tory MPs – which has now forced the PM to sack her Chancellor as she battles to remain in No10.
In a letter to Ms Truss, Mr Kwarteng confirmed he had been asked to ‘stand aside’ by the PM.
He wrote: ‘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. It has been an honour to serve as your first Chancellor.’
But the departing Mr Kwarteng defiantly stood by his low-tax ethos, adding: ‘For too long this country has been dogged by low growth rates and high taxation – that must change if this country is to succeed.’
In her reply to Mr Kwarteng, the PM also referred to the man she had just sacked as a ‘long-standing friend and colleague’.
‘I am deeply sorry to lose you from the Government,’ Ms Truss wrote.
‘We share the same vision for our country and the same firm conviction to go for growth.’
She added: ‘Thank you for your service to this country and your huge friendship and support.
‘I have no doubt you will continue to make a major contribution to public life in the years ahead.’