Liz Truss has announced that Kwasi Kwarteng has been fired from his position as chancellor as the prime minister attempts to regain political control ahead of a U-turn on some aspects of her disastrous mini-budget later on Friday.
In a tweeted letter to Truss, Kwarteng began: “You have asked me to stand aside as chancellor. I have accepted.”
The prime minister wanted Kwarteng to “carry the can” on her climbdown as she attempted to soothe the markets and the nerves of uneasy Tory MPs, according to Downing Street sources earlier.
After Kwarteng hurriedly returned from an International Monetary Fund (IMF) conference in Washington, DC, Truss met with him in Downing Street for crisis talks. Kwarteng had previously been her closest political partner and a co-author of her development strategy.
Later on Friday, Truss was scheduled to make a press conference in Downing Street.
In the letter, Kwarteng argues that their plan to rapidly cut taxes was the correct one despite the turbulent market reaction to his 23 September mini-budget, saying: “Following the status quo was simply not an option.”
He went on: “The economic situation has changed rapidly since we set out the growth plan on 23 September. In response, together with the Bank of England and excellent officials at the Treasury we have responded to those events, and I commend my officials for their dedication.”
Noting that he and Truss had been “colleagues and friends for many years”, Kwarteng backed Truss’s economic vision and said it had been “an honour” to serve her.
He added: “It is important now we move forward to emphasize your government’s commitment to fiscal discipline. The medium-term fiscal plan is crucial to that end, and I look forward to supporting you and my successor to achieve that from the backbenches.”
According to officials in Whitehall, the two had different opinions about how far the government should go in rolling back important aspects of its plan to calm the markets and reassure worried Conservative MPs.
They said that Kwarteng had pushed for a full retreat on the corporation tax policy, boosting it from the proposed 19% rate to 25%, while the prime minister had preferred to go for a far smaller increase.
Despite receiving the majority of the blame for the measures, a Treasury official claimed that Kwarteng had always been “more prepared to U-turn” than Truss on company tax and the 45p rate.
Insiders from Downing Street, however, claimed that Truss was likely to completely abandon the proposal.
The prime minister’s own position is seemingly in such peril, with Tory MPs actively plotting her downfall amid chaos, that she concluded sacking the chancellor was essential for her political survival.
But the move is unlikely to appease angry Tory MPs, with one telling Sky News: “The idea that the prime minister can just scapegoat her chancellor and move on is deluded. This is her vision. She signed off on every detail and she defended it.”
Treasury officials predicted that Kwarteng might be replaced by either Simon Clarke, the leveling up secretary, or Nadhim Zahawi, the Cabinet Office minister who served as chancellor for 63 days this summer.
Truss is facing significant pressure from Conservative MPs and the markets, which has caused No. 10 to redraw the mini-budget and open the door for a significant U-turn on her campaign promise to lower business taxes.
Government sources claim that a retreat on the intention to drop the increase in company tax is now “on the table” after weeks of defending the proposal for significant unfunded tax cuts.
Kwarteng earlier this week denied that his job as chancellor was in danger, declaring that he was “absolutely, 100%” certain that he would still hold the position come next month despite a brewing Tory uprising.
When asked by the Daily Telegraph on Thursday whether people should expect a U-turn in corporation tax, he replied: “Let’s see.”
