London
CNN Business
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British Prime Minister Liz Truss has fired Finance Minister Kwasi Quarting and abandoned much of her discredited economic strategy in a desperate bid to salvage her month-long premiership.
At a press conference in Downing Street, Truss said she was canceling plans to reverse a business tax increase, a move that would save 18 billion pounds ($20 billion), after a revolt by investors and Conservative party members who were concerned about the impact. of high government borrowing at a time of decades-high inflation.
This was the second major policy rollback this month: On October 3rd, the government She abandoned her plan to cut the highest rate of income taxJust a week after it was announced.
“It was right, in the face of the problems we have, that I acted decisively to ensure economic stability,” Truss said on Friday.
in a letter Posted on TwitterKwarteng said he agreed to step down at Truss’ request, adding that he believed her vision of “optimism, growth and change” was correct and he pledged support.
Truss appointed former Secretary of State Jeremy Hunt as Quarting’s replacement. He will be Britain’s fourth chancellor in just over three months.
Kwarteng presented a “mini-budget” just three weeks ago, promising 45 billion pounds ($50 billion) in tax cuts and increased borrowing in hopes of boosting UK economic growth. But the British pound and government bonds collapsed due to fears that the plans will do More juice swell At a time when prices are already rising at their fastest rate in nearly 40 years. Mortgage rates rose.
pay it Bank of England To warn of serious risks to financial stability in the UK and to advertise Three separate interventions To calm a bond market crash that has put some UK pension funds on the brink of default.
“It’s clear that parts of our mini-budget have gone further and faster than markets were expecting, so the way we do our job now has to change,” Truss told reporters. “We need to act now to reassure the markets of our fiscal discipline.”
Keir Starmer, leader of the opposition Labor Party, said it was time to change the government.
He said that “Liz Truss’ reckless approach has shattered the economy, causing a rise in mortgages, and undermining Britain’s standing on the world stage.”
The unfunded tax cuts have come under fire from investors, the International Monetary Fund, credit rating agencies and members of Truss’ own party, some of whom are now said to be Talking about removed Only five weeks into her premiership.
Kwarteng flew back from an International Monetary Fund meeting in Washington, D.C., overnight for discussions with Truss. His dismissal on Friday meant he held the position of British Chancellor of the Exchequer for just 38 days, the second shortest on record.
Markets welcomed signs of a rethink by the government. Bond prices rose earlier on Friday, sending the yield on the UK’s 30-year government debt back to 4.3%, down from a high of more than 5% in recent days. The pound was also more stable, trading around $1.12, compared to A record low near $1.03 on September 26.
But the confirmation of the second stark government turnaround in two weeks did not inject any further impetus into British assets. Bond prices and the British pound fell again in the wake of Truss’ announcement.
The Bank of England’s 65 billion pound ($73.3 billion) emergency bond-buying program launched on September 28 is set to expire on Friday, leaving market participants worried that bonds could fall again – driving up mortgage rates and borrowing costs. The other – so the government doesn’t quickly explain how it plans to pay the remaining £25bn in tax cuts.
Former Bank of England Deputy Governor Charlie Bean told CNN that Kwarteng’s dismissal was “probably a necessary step”, but that Truss will now have to unveil a new plan to tackle government debt over the next three to five years. Otherwise, the British pound and British government bonds could be exposed to another sell-off.
“What the markets want to see is a coherent picture, and how it all fits together,” Bean said. “In the absence of that, you will see sterling and gold come under pressure again.”
Kwarteng was already Submitted his full budget statement to October 31, more than three weeks before the planned date. But investors may not be willing to wait that long for reassurance about the state of Britain’s public finances.
– Richard Quest, Zahid Mahmoud, and Xiaofi Shaw contributed to this article
