Truss fires finance minister in U-turn

British Prime Minister Liz Truss has sacked her finance minister Kwasi Kwarteng, who had served for just 38 days, replacing him with former head of the Foreign Office Jeremy Hunt. The move on Friday came as she reversed plans to cut corporation taxes, which had triggered a market upheaval.

In his letter of resignation, Kwarteng said the prime minister had asked him to step down as chancellor of the exchequer, and he accepted, adding that he still supported Truss’ economic vision. Describing the current situation as “incredibly difficult” due to rising global interest rates and energy prices, he admitted that “following the status quo is simply not an option.”

Meanwhile, speaking at a press conference on Friday, Truss said she was sorry to fire Kwarteng, who she described as her “great friend.” She also stated that she had asked Jeremy Hunt to become the new chancellor, touting him as “one of the most experienced and widely respected ministers.”

She also admitted that global economic conditions were worsening, although she pinned the blame for this on Russia’s “appalling war in Ukraine.”

In another reshuffle, the UK prime minister appointed Edward Argar as chief secretary to the Treasury, replacing Chris Philp. According to Downing Street, the latter will now serve as paymaster general and minister for the Cabinet Office.

The changes come as Truss made a major U-turn, reversing her plans to cut taxes for the highest earners. Just weeks ago, Kwarteng unveiled a controversial “mini budget” which aimed to ramp up borrowing and keep corporation tax at 19% instead of increasing it to 25%, as was planned by the previous government. The move, which was meant to spur economic growth, caused turmoil in the market instead, with the British pound crashing to a record low against the US dollar.

As she scrapped the plan, the prime minister signaled that the authorities should act now to “reassure the markets of our fiscal discipline.” According to Truss, the increased taxes will allow £18 billion ($20 billion) to be raised each year, which will help finance the government’s medium-term fiscal plan.

In late September, the Bank of England said the UK economy, beset by skyrocketing gas prices and inflation, may have already entered recession, with GDP forecasted to contract by 0.1% in the third quarter.