- Quarting to leave IMF meeting early
- Pressure mounts for a reversal tax policy
- Pound, bond prices recover
- Prime Minister Truss now faces a political battle
LONDON (Reuters) – British Prime Minister Liz Truss has fired her finance minister, Kwasi Quarting, shortly before she ditched parts of his economic package in a bid to survive market and political turmoil, the BBC reported on Friday. Country.
Downing Street confirmed that Truss, who is in power for only 37 days, will hold a news conference later on Friday after Quarting was forced to return to London from IMF meetings in Washington to tackle the chaos.
The BBC said Courting had been sacked. Downing Street declined to comment.
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If confirmed, Kwarteng would become Britain’s shortest chancellor since 1970, and his successor would be the country’s fourth finance minister within several months.
British government bonds rose further on Friday, adding to their partial recovery since the Truss government began looking for ways to balance the books after unfunded tax cuts crushed UK asset values and sparked international criticism.
Kwarteng had announced new fiscal policy on September 23, which led to Truss seeing broad tax cuts and deregulation in an effort to pull the economy out of years of stagnant growth.
But the market response was so fierce that the Bank of England had to step in to prevent pension funds from falling into disarray, as borrowing and mortgage costs soared.
The duo have since come under mounting pressure to reverse course, with opinion polls showing support for the Conservative Party collapsing, prompting teammates to openly debate whether they should be replaced.
Having battered the market, Truss now risks bringing down the government if she cannot find a package of public spending cuts and tax increases that can satisfy investors and pass any parliamentary vote in the House of Commons.
Her search for savings will be made more difficult by the fact that the government has been cutting departmental budgets for years.
Meanwhile, Conservative Party discipline has all but collapsed, due to infighting as it struggled first to agree on a way to leave the European Union and then how to deal with the COVID-19 pandemic and grow the economy.
“If you can’t get your budget through Parliament, you can’t govern,” senior opposition Labor MP Chris Bryant said on Twitter. “This isn’t about turns, it’s about good judgment.”
Downing Street declined to comment so far, but Courting was not expected to appear at Truss’ press conference later on Friday, fueling speculation about his future.
During his time in the US, the head of the International Monetary Fund told Carting of the importance of “policy coherence,” underlining the extent to which Britain’s reputation for sound economic management and institutional stability had deteriorated.
Just before 11am (10:00 GMT), British television news channels switched to broadcasting live footage of a British Airways plane landing at Heathrow with a quart.
In Westminster, Truss was trying to reach an agreement with her cabinet ministers on a way to keep her momentum on growth while also reassuring markets and outlining measures her MPs could support.
Earlier, Commerce Secretary Greg Hands said people who wanted details on the budget would have to wait until October 31 when Karting was due to lay out his full plan along with independent forecasts that would show the cost of tax cuts to the public finances. and whether it will boost economic growth.
Government critics said the wait was unacceptable.
Robert Harrison, portfolio manager at Blackrock and an advisor to former British chancellor George Osborne, said markets are now almost fully priced at a turn.
“(This) means that if the shift doesn’t come, markets will react poorly,” he said on Twitter.
A Tory lawmaker, who asked not to be named, said Truss’ economic policy had caused so much damage that investors could demand deeper cuts to public spending as the price of their support.
“Anything is possible at the moment,” said the MP who supported Sunak in the driving race. “The problem is that the markets have lost faith in the Conservative Party – and who can blame them?”
Another deputy told Reuters earlier this week that Truss needs to appreciate the lack of enthusiasm for her at the moment.
According to a source close to the prime minister, Truss is now in a “listening mode” and is inviting lawmakers to speak to her team about their concerns to decide which parts of the program they will support in Parliament.
Sonali Bonhani, an economist at Credit Suisse, said the markets needed to see a credible fiscal plan, as the government needed to find around £60 billion through tax shifts and further spending cuts.
“It will be difficult to present the scale of these reductions, but to be credible, they need to be delivered sooner rather than in the later part of the forecast,” Bonhani said.
One policy that is expected to be reversed is their plan to keep corporate tax rates at 19%. It formed a major part of their package after Sunak proposed increasing it to 25% when he was finance minister under Truss’ predecessor Boris Johnson.
This could save £18.7 billion by 2026/27.
The latest bout of political drama taking over Britain comes as the Bank of England prepares to end its intervention in the gold market.
(dollar = 0.8869 pounds)
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Written by Kate Holton; Additional reporting by Sarah Young, David Milliken, and Movija M; Editing by Michael Holden, Catherine Evans, and Hugh Lawson
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