Jeremy Hunt has been appointed as the new chancellor after prime minister Liz Truss sacked Kwasi Kwarteng today following weeks of market turmoil triggered by last month’s mini budget.
Hunt is the fourth chancellor this year. According to bookmaker Betfair, Truss is now odds on to step down as prime minister.
Kwarteng wrote to Liz Truss this afternoon saying: “You have asked me to stand aside as your Chancellor. I have accepted.”
However, Truss suggested in her response that Kwarteng stepped down, saying “I deeply respect the decision you have taken today. You have put the national interest first”.
The former chancellor said he took on the role “in full knowledge that the situation we faced was incredibly difficult”, while remarking on Liz Truss’s “vision of optimism, growth and change” in the mini-budget.
Kwarteng cut short his trip to Washington to attend International Monetary Fund meetings to fly back to London for emergency talks with Truss about another U-turn on the mini budget.
He has been in Number 11 for 38 days after being appointed by Truss following her Tory leadership race victory, making him the second-shortest serving chancellor one in history.
Commenting on market turmoil that ensued following the mini-budget, he wrote: “The economic environment has changed rapidly since we set out the Growth Plan on 23 September”, praising the Bank of England and the Treasury for their “dedication” in the response.
Urging Truss to continue a “commitment to fiscal discipline,” he said his successor should outline how to get the public finances on a sustainable path at the scheduled second mini budget on 31 October.
Kwarteng, who was a long-time ally of Truss, commented that he and the PM “have been colleagues and friends for many years” and he has seen her “dedication and determination”.
“I believe your vision is the right one. It has been an honour to serve as your first Chancellor.”
Truss is rumoured to be mulling abandoning key parts of the mini budget, which was characterised as the government’s blueprint to turbo charge UK economic growth.
Truss is on course to ditch the corporation tax hike reversal. Last week, Kwarteng was forced to roll back plans to scrap the top 45p rate of income tax.
A government source told The Times corporation tax is unlikely to be raised to 25 per cent, meaning it is likely to be lifted to somewhere in the twenties.
The six percentage point rise was initially tabled by former chancellor Rishi Sunak in the March 2021 budget.
Markets have been roiled by the government’s £43bn worth of unfunded tax and the two year £2,500 typical energy bill freeze ramping up UK borrowing.
In the aftermath of the mini budget on 23 September, yields on UK gilts have climbed to their highest level in over 20 years and the pound hit a record low against the US dollar.
Yields and the pound have since recovered.
Rates on the 30-year UK gilt slid today on rumours of a looming U-turn. Yields and prices move inversely.
London’s FTSE 100 surged 1.64 per cent and the mid-cap domestically-focused FTSE 250 jumped 2.2 per cent.
Kwarteng had been set to outline his plans to put the public finances on a more sustainable path on 31 October.
The Institute for Fiscal Studies estimates the government needs to plug a £62bn hole in the public finances.
The prime minister will hold a press conference at 2.30pm today in which she is expected to confirm which parts of the mini budget will be scrapped.
Shadow chancellor and Labour MP Rachel Reeves said: “A humiliating u-turn is necessary – but the real damage has already been done to millions of ordinary people now paying much higher mortgages and struggling to make ends meet.”
“This is a Tory crisis: made in Downing Street. They have plunged our economy into chaos and crisis with Truss’ discredited trickle down approach. It won’t be forgiven or forgotten.”
“Only a Labour government has the credibility, authority and plan to fix things.”