Media: UK Treasury chief absent as PM plans U-turn

A police officer waits to enter 10 Downing Street in London, Friday, Oct. 14, 2022. Britain's Chancellor Kwasi Kwarteng returns early from an IMF meeting in the United States as the top British government official dismissed suggestions on Thursday that Prime Minister Liz Truss should step down after lawmakers from her own party criticized Truss for his economic policies that caused turmoil in financial markets.  It is reported that a number of measures from the recent mini-budget may have to be reversed to calm the markets.  (AP Photo/Kirsty Wigglesworth)

A police officer waits to enter 10 Downing Street in London, Friday, Oct. 14, 2022. Britain’s Chancellor Kwasi Kwarteng returns early from an IMF meeting in the United States as the top British government official dismissed suggestions on Thursday that Prime Minister Liz Truss should step down after lawmakers from her own party criticized Truss for his economic policies that caused turmoil in financial markets. It is reported that a number of measures from the recent mini-budget may have to be reversed to calm the markets. (AP Photo/Kirsty Wigglesworth)

PA

UK media say Treasury chief Kwasi Kwarteng left government ahead of Prime Minister Liz Truss’s announcement of changes to an economic package that caused market turmoil.

The BBC and Sky News announced Kwarteng’s departure on Friday. It comes after a month of work – and three weeks after he announced a tax cut ‘mini budget’ that sent the pound plunging to record lows against the dollar.

On Thursday, Kwarteng denied he was about to lose his job, saying “I’m not going anywhere”.

Truss is scheduled to hold a press conference later Friday. She is under intense pressure to remove some of the 43 billion pounds ($48 billion) of unfunded tax cuts that have rattled financial markets and led the Bank of England to intervene to prevent a wider economic crisis.

THIS IS A BREAKING NEWS UPDATE. AP’s previous story follows below.

LONDON (AP) — Embattled British Prime Minister Liz Truss scheduled a hastily organized press conference on Friday, after her Treasury chief rushed to London for urgent talks on an economic package that has caused turmoil on the markets.

Truss’ office did not reveal the subject of the press conference, but she and Treasury chief Kwasi Kwarteng are under intense pressure to cut unfunded tax cuts to calm financial markets and suppress a snowball revolt by members of their own Conservative Party,

Kwarteng left the International Monetary Fund’s annual meeting a day early amid the crisis sparked by investor fears that 43 billion pounds ($48 billion) in tax cuts will push up government borrowing in Britain to unsustainable levels and fuel inflation.

Kwarteng initially dismissed suggestions on Thursday that the government would back down, but in a later interview with the Daily Telegraph he said only “let’s see” when asked if he could abandon his promise on the ‘Corporation tax.

Senior leaders of the Conservative Party are publicly advising the government to act. The pound rose 1.7% against the dollar on Thursday and bond markets stabilized as Truss and Kwarteng, whose official title is Chancellor of the Exchequer, revise their economic growth plan.

“So my advice to the Chancellor would be firmly, do it, do it now,” Mel Stride, chairman of the House of Commons Treasury Committee, told the BBC. “Make sure it’s something substantial, not just chipping away at the edges, but something that’s going to be firm and bold and compelling, and get it done ASAP.”

Truss, a free market libertarian, came to power last month pledging to cut taxes to spur growth. But his ability to keep this commitment is now in doubt.

Analysts suggest the most likely change in his program would be to drop a promise to halt his predecessor’s plan to raise corporation tax from 19% to 25%. This would reduce its program bill by around £18 billion a year.

James Athey, the chief investment officer at abrdn, said he now seemed certain the government “is on the verge of reversing its decision not to reverse its outsized tax cut policies”. . Rumors calm the markets, he said.

“The risk now is that investors forget that there are a lot more problems than just misguided and untimely tax easing to manage,” he said. “Inflation is at a multi-decade high, government borrowing is huge, as is the current account deficit. The housing market is set to take a hammer blow from soaring mortgage rates and the war in Ukraine. We may be going through the worst of the volatility, but I fear the UK is far from off the hook.”

Kwarteng’s return to London comes as Tory lawmakers debate whether they should try to oust their second leader this year. Truss was elected last month to replace Boris Johnson, who was forced out in July. Some reports suggest senior Tories are plotting to replace Truss with a joint ticket from Rishi Sunak and Penny Mordaunt, his two closest rivals in the summer party leadership contest, although it’s unclear how that might be. be realized.

This story was originally published October 14, 2022 6:51 a.m.

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