After firing her finance minister, Kwasi Kwarteng, on Friday, British Prime Minister Liz Truss is anticipated to abandon key components of her government’s economic programme in an effort to weather the current market and political instability.
Kwarteng said that he quit at Truss’s request and came back late the night before from IMF meetings in Washington, DC. Downing Street has announced that Truss, who has been in office for only 37 days, will hold a news conference later on Friday.
“You have asked me to stand aside as your Chancellor. I have accepted,” said his resignation letter to Truss, which Kwarteng published on Twitter.
Bond prices in Britain rose even more in the hours leading up to Truss’s announcement, continuing a modest recovery that began after her unfunded tax cuts decimated UK asset values and garnered international condemnation and prompted her administration to hunt for ways to balance the books.
Chancellor Kwarteng has served Britain the shortest term since 1970, and his successor will be the country’s fourth finance minister in as many months. This comes as millions of Britons struggle with a cost of living problem. The death of Britain’s shortest-serving finance minister.
To try to shock the economy out of years of slow development, Kwarteng proposed a new fiscal policy on September 23. This policy entails massive tax cuts and deregulation, as envisioned by Truss.
Market reaction was so severe that the Bank of England had to step in to protect pension funds from the ensuing upheaval, which caused borrowing and mortgage rates to skyrocket.
Since then, the two have been under increasing pressure to change course as polls revealed a precipitous drop in support for their Conservative Party, causing open discussion amongst colleagues over whether or not they should be replaced.
After causing a stock market crash, Truss could lose her job as prime minister if she fails to reach a compromise on public spending cutbacks and tax hikes that will satisfy investors and pass muster in the House of Commons.
The government has been lowering departmental budgets for years, which will make it more difficult for her to find cost savings.
At the same time, the Conservative Party’s discipline has nearly collapsed due to internal strife caused by the party’s failure to reach a consensus on how to exit the European Union and subsequent difficulties in dealing with the COVID-19 pandemic and expanding the economy.
“If you can’t get your budget through parliament you can’t govern,” Chris Bryant, a senior lawmaker from the opposition Labour Party, said on Twitter, “This isn’t about u-turns, it’s about proper governance.”
