London — Britain’s embattled new Prime Minister Liz Truss sacked her finance minister Kwasi Kwarteng and reversed another of her proposed tax cuts on Friday just weeks after the pair took office and unveiled a tax cut-focused economic plan that sent the pound’s value plummeting, interest rates soaring, and financial markets convulsing. Kwarteng is now the second-shortest serving British Chancellor of the Exchequer in modern history.
“You have asked me to stand aside as your Chancellor,” Kwarteng said Friday in a letter addressed to Truss, which he posted to his Twitter account. “I have accepted.”
The reaction to the news in the financial markets was muted, BBC News said.
Economists around the world have questioned the British government’s decision to slash tax rates for virtually everyone in hopes of fueling economic growth. The government’s failure to explain how it would compensate for the massive reduction in national tax income saw the International Monetary Fund take the unusual step of publicly urging the U.K. to reverse course, as economist Larry Summers derided the move as “utterly irresponsible.”
Already, Truss’ government has backtracked on the most contentious tax cut, which would have eliminated a 45% income tax bracket for those on the highest salaries. In a press conference on Friday, she announced another policy u-turn: She said her government would no longer cancel a proposed increase in corporation tax.
“It is clear that parts of our mini-budget went further and faster than markets were expecting,” Truss told journalists Friday. “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.”
Truss announced the appointment of Jeremy Hunt, a veteran of previous Conservative party governments, as her new finance minister.
“I was incredibly sorry to lose [Kwarteng]. He is a great friend, and he shares my vision to set this country on the path to growth,” Truss said. Hunt is “one of the most experienced and widely respected government ministers and parliamentarians and he shares my convictions and ambitions for our country,” she continued.
The British Chambers of Commerce said in a statement that, while it supported a strategy for growth, “returning stability to the economy must be the immediate priority. To do this the Government must quickly set out a longer-term plan to prove it is serious about helping businesses through the difficult months ahead. Time is of the essence.”
The leader of the opposition Labour party, Kier Starmer, said a new finance minister was not enough to fix the economic problems Britain is now facing.
“Liz Truss’ reckless approach has crashed the economy, causing mortgages to skyrocket, and has undermined Britain’s standing on the world stage,” Starmer tweeted after Truss’ press conference. “We need a change in government.”
