British Prime Minister Liz Truss has sacked her finance minister, Kwasi Kwarteng, amid widespread speculation that she is preparing to abandon much of her discredited economic strategy.
In a letter posted on TwitterKwarteng said he agreed to stand aside as a truss request, adding he believes their vision of “optimism, growth and change” is the right one and pledged support.
A senior Downing Street source previously told CNN that Kwarteng was sacked after realizing speculation about his future had become a distraction that was not in the interest of the country. Truss will hold a press conference later.
Just three weeks ago, Kwarteng unveiled a “mini-budget” promising huge tax cuts and increased borrowing in hopes of spurring economic growth in the UK. But the pound and government bonds tumbled on fears the plans would do so further juice inflation at a time when prices are already rising at the highest rate in about 40 years.
That prompted the Bank of England to warn and announce a serious threat to UK financial stability three separate interventions to calm a meltdown in the bond market that has brought some UK pension funds to the brink of default.
The unfunded tax cuts have drawn criticism from investors, the International Monetary Fund, rating agencies and members of Truss’s own party, some of whom are reportedly now talk about removing them just five weeks into their Premiership.
Kwarteng flew back overnight from the IMF meeting in Washington DC to speak with Truss. His sacking on Friday means he held the post of Britain’s Chancellor of the Exchequer for just 38 days, the second-shortest tenure on record.
Markets welcomed signs of government rethinking. As bond prices rose, the 30-year UK government bond yield fell back to 4.3% after peaking at more than 5% in the past few days, while the pound was last seen trading at $1.12. By September it had fallen to a record low of almost $1.03. 26
Bryn Jones, head of fixed income at Rathbones, said his team bought some longer-dated UK government bonds – known as gilts – earlier this week when they looked cheap – but it’s now paying off.
“The gilt market is doing well but we’ll see what happens today and next week. Things can change quickly,” the investment manager said. “The volatility suggests that there is not much confidence here.”
A £65 billion ($73.3 billion) bond purchase program launched by the Bank of England on Sept. 28 is due to expire on Friday, worrying market participants that bonds could tumble again — pushing up mortgage rates and other borrowing costs even further — if the government doesn’t quickly explain how it intends to pay for the tax cuts.
Kwarteng had already done so submitted its full budget statement by October 10. 31, more than three weeks ahead of schedule. But investors may not be ready to wait that long for confirmation on the state of Britain’s public finances.
The British government has already done so Plans to lower top tax rate abandonedand media reports suggest it may also reconsider plans to scrap a corporate tax hike.
— Richard Quest, Zahid Mahmood, and Xiaofei Xu contributed to this article