On Friday, Truss announced the resignation of his development architect Kwasi Kwarteng, Chancellor of the Exchequer, which is Britain’s finance minister.
Truss also said his government would abandon one of his key campaign promises – and allow corporate taxes to rise from 19 per cent to 25 per cent in April 2023.
The British pound edged higher against the dollar on Thursday, after easing slightly on Friday to around $1.12. Britain’s top stock index, the FTSE 100, was essentially flat.
Quartet will be replaced by Jeremy Hunt, who served as Britain’s foreign secretary when he dominated the Brexit debate. Hunt lost the Conservative leadership race to Boris Johnson in 2019. In that race, he wanted to cut corporate taxes.
He is now Britain’s fourth chancellor in four months, taking the economic policy portfolio this winter at a time when the Bank of England is predicting a recession. Costs of living, especially energy prices, are rising. Unions are on strike, and mortgage rates are climbing.
In a remarkably short news conference on Friday, reporters asked no questions about the country’s finances, but instead pressed Truss repeatedly about his future as prime minister.
They pointedly asked why he would fire his president for tax cuts that rocked the markets, when the plan was actually his. A reporter asked, “How will you stay?” if Kwarteng had to go. Another asked, “What credibility do you have to continue the regime?” he asked.
Truss admitted that it was “clear” that his economic plan had “moved more quickly than markets expected”. He explained: “So we now have to change the way we deliver our work” and “we have to act now to reassure the markets of our financial discipline.”
He insisted that his aim was to make Britain a “low-tax, high-wage, high-growth economy”, but gave no answers as to how this would be achieved.
“My priority is to ensure the economic stability of our country,” he said, while many economists say the tax has created the current instability.
When Truss admitted, “I want to be honest, it’s tough, but we will weather this storm,” it was unclear whether he meant the British people or his government.
As he wrapped up his 10-minute, four-question news conference, a reporter asked, “You’re not going to say sorry? “
The rapid unraveling of the Truss plan to improve Britain’s future has been remarkable and has left the country stunned.
He has been in office for less than six weeks. After Conservative lawmakers ousted Boris Johnson as unfit for office, Conservative Party members – who make up just 0.3 percent of the population – chose Truss to succeed him based on his promises to cut taxes.
His opponent, former president Rishi Sunak, said it was irresponsible to cut taxes before reducing inflation. He called his plan for growth through tax cuts “imaginary island” economics.
Investors seem to agree. Kvarteng’s Sept. 23 announcement of the government’s new “growth plan,” driven by the “biggest tax cut package in generations,” sent the currency tumbling and the central bank into quiet markets.
The Bank of England was scheduled to end that extraordinary intervention, an emergency bond-buying program, on Friday.
In a letter posted on Twitter on Friday, Kwarteng wrote that Truss asked him to quit. “As your chancellor you asked me to stand aside. I accepted,” he wrote. “It is now critical that we move forward to emphasize your government’s commitment to fiscal discipline.”
Kwarteng, a free-marketeer and avid Brexiteer, flew from Washington to London earlier on Friday as British newspapers tracked his flight. He attended a meeting of the International Monetary Fund, his first appearance as president at a major economic summit.
“I greatly respect the decision you have made today,” he wrote in a letter to Quarteng. The language struck many as a bit odd as he was asked to resign.
Kwarteng was on duty for only 38 days. Ian McLeod, the only shorter-serving president in office, died of a heart attack in 1970 after 30 days.
The government had already turned on the most controversial part of its tax plan: cutting the top income tax rates paid by high-earning Britons.
Affluent Britons pay 45 percent on annual incomes above £150,000 ($168,000). The truce wants to cut the rate above 40 percent from April 2023.
Lowering the top rate to countries like Norway, Italy and the US would “attract the best and brightest workers to the UK, helping businesses innovate and grow”, argued Quarteng.
A shout of protest – and Kwarteng Cave.
On Friday, Truss scrapped his plan to cut corporate taxes.
Disaster played out quickly.
A source in the Prime Minister’s Office in Downing Street told the BBC on Friday that Truss thought the chancellor was “doing a great job” and that the two were “in lock step”.
The president told reporters on Thursday “Going Nowhere” He agreed as part of the announcement of the government’s fiscal plan despite market turmoil.
Asked if he and his boss, the prime minister, would get their jobs within a month’s time, the chancellor replied, “Absolutely, 100 percent.”
Truss was creamed at the weekly Prime Minister’s Questions on Wednesday, then gave a disastrous performance in a private meeting with lawmakers working in the background, some of whom gave briefings to journalists.
One lawmaker told the Financial Times “The mood is frankly funereal, terrible. I was shocked at how horrible it was.
Mujtaba Rahman, an analyst at Eurasia Group, said in a briefing note on Friday that the truss was more likely to be lifted before the next election, which should finally happen by January 2025.
He said a group of Conservative lawmakers were plotting to oust him by Christmas, and some were floating the idea of a “moderate dream ticket” from Sunak and Benny Mordant, the two incumbents in the last party leadership race.
“While some MPs say the plan to scrap the tress would make the Conservatives more ridiculous than they are now, a growing number believe it is the only way to prevent a Labor landslide in 2024,” he wrote.
Under the current rules of the Conservative Party, there cannot be a leadership contest for another year. But those rules can be changed.
Labor leader Keir Starmer, who has seen the party’s poll ratings rise in the past few weeks, said changing presidents “will not undo the damage” already done. “Lis Truss’ reckless approach has crippled the economy, sent mortgages soaring. And undermined Britain’s standing on the world stage.” We need a change in government. With my leadership, Labor will protect Britain’s economy and get us out of this mess.
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