UK Chancellor of the Exchequer Kwasi Kwarteng fired after tax cuts sparked outrage


British Prime Minister Liz Truss has fired her Chancellor of the Exchequer Kwasi Kwarteng, the BBC reported Friday, shortly before it is expected to cut parts of his economic package in a bid to survive the market and the political turmoil that grips the country.

Downing Street confirmed that Truss, who has been in power for just 37 days, would hold a press conference later on Friday after Kwarteng was forced to rush back to London from IMF meetings in Washington to deal with the chaos.

The BBC said Kwarteng had been fired. Downing Street declined to comment.

If confirmed, Kwarteng would become Britain’s shortest-serving Chancellor since 1970, and his successor would be the country’s fourth Chancellor of the Exchequer in as many months.

UK government bonds rose further on Friday, contributing to their partial recovery since the Truss government looked for ways to balance the books after its unfunded tax cuts crushed UK asset values ​​and triggered international censorship.

Kwarteng had announced a new fiscal policy on Sept. 23, realizing Truss’ vision of massive tax cuts and deregulation to try to shock the economy out of years of sluggish growth.

But the reaction from the markets was so fierce that the Bank of England had to step in to prevent pension funds from becoming entangled in the chaos as borrowing and mortgage costs rose.

Since then, the duo have come under increasing pressure to change course as polls showed support for their conservative party had collapsed, prompting colleagues to openly discuss whether to replace them.

Truss has caused a market breakout and is now at risk of bringing down the government if she can’t find a package of government spending cuts and tax hikes that can appease investors and pass a parliamentary vote in the House of Commons.

Its quest for savings is complicated by the fact that the government has been cutting departmental budgets for years.

At the same time, the Conservative Party’s discipline has all but broken down, broken by infighting as it struggled first to agree on a way to leave the European Union and then how to navigate the COVID-19 pandemic and boost the economy. could grow.

“If you don’t get your budget through parliament, you can’t govern,” Chris Bryant, a senior lawmaker from the opposition Labor party, said on Twitter. “This isn’t about u-turns, it’s about good governance.”

Downing Street has so far declined to comment, but Kwarteng was not expected to appear at Truss’ press conference later on Friday, fueling speculation about his future.

During his stay in the United States, Kwarteng was made aware of the importance of “policy coherence” by the head of the International Monetary Fund, underlining the extent to which Britain’s reputation for sound economic management and institutional stability had fallen.

Shortly before 11 a.m. (10:00 GMT), British news channels switched to live images of a British Airways plane landing at Heathrow with Kwarteng on board.

In Westminster, Truss sought to agree with her ministers on a way to maintain its growth drive while reassuring markets and figuring out what measures could be supported by her legislators in Parliament.

Earlier, a trade minister, Greg Hands, had said that people who want details about the budget would have to wait until Oct. 31, when Kwarteng would lay out his full plan alongside independent forecasts that will cost the tax cuts to public finances and whether they will affect the economy. will stimulate economic growth.

Government critics had said waiting was unacceptable.

Rupert Harrison, portfolio manager at Blackrock and once adviser to former British Chancellor of the Exchequer George Osborne, said markets have now almost fully priced in a turnaround.

“(That) means if the turnaround doesn’t come, the markets will react badly,” he said on Twitter.

INTERNATIONAL CREDIBILITY

A Conservative Party lawmaker, who asked not to be named, said Truss’ economic policies had done so much damage that investors could demand even greater cuts in government spending as the price for their support.

“Anything is possible at the moment,” said the lawmaker, who backed Sunak in the leadership race. “The problem is that the markets have lost faith in the Conservative Party – and who can blame them?”

Another lawmaker told Reuters earlier this week that Truss needed to realize there wasn’t much enthusiasm for her right now.

According to a source close to the prime minister, Truss is now in “listening mode” and inviting lawmakers to speak with her team about their concerns to gauge which parts of the program they would support in parliament.

Credit Suisse economist Sonali Punhani said markets needed to see a credible fiscal plan, with the government finding about £60 billion through tax cuts and further austerity.

“It would be challenging to realize the magnitude of these cuts, but to be credible they need to be implemented earlier than the latter part of the forecast,” Punhani said.

One policy that is expected to be reversed is their plan to keep corporate tax rates at 19%. That was a key part of their package after Sunak proposed increasing it to 25% when he was Treasury Secretary under Truss’ predecessor Boris Johnson.

That could save £18.7 billion by 2026/27.

The latest political drama gripping Britain comes as the Bank of England prepares to end its intervention in the gold market.



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