Kwasi Kwarteng, the UK’s chancellor of the exchequer, has reportedly been sacked by Prime Minister Liz Truss. Following his unexpected return from the International Monetary Funds (IMF) meeting in Washington DC on Friday.
It makes Kwarteng the chancellor with the shortest tenure since 1970. The UK equivalent of India’s finance minister is the chancellor of the exchequer.
Kwarteng confirmed the development.
Right after meeting Ken Ofori Atta, Kwasi Kwarteng the finance minister of UK has been sacked pic.twitter.com/nnpAqKUAdT
— McMaster 🇬🇭🇬🇧 (@iam__kwame) October 14, 2022
“You’ve asked me to step down as your chancellor. I have agreed, “He wrote to Truss in a letter.
According to The Guardian, Truss was supposed to meet Kwarteng in Downing Street for “crisis talks.” She will withdraw parts of their September economic package.
Truss will hold a press conference later in the day on Friday.
Truss announced corporation tax cuts worth 18 billion pounds on September 23. Kwarteng, her then-finance minister, had also planned to cancel a proposed increase in corporation tax from 19 to 25% set to take effect in April 2023.
Kwarteng’s “mini-budget” is expect to provide GBP43 billion in relief. Based on tax cuts to shake the economy out of a slump.
The “mini-budget” was “very much Truss’s policies. Featured prominently in her Tory leadership campaign,” according to the Financial Times (FT).
However, tax cuts in the UK caused market chaos. The stock market fell, and the returns on government bonds, known as gilts, in the UK. Insurance products soared quickly and demanded a “huge amount of cash.” Borrowing and mortgage costs have also risen.
The Bank of England, the UK’s central bank, had to launch an emergency bond-buying program to shore up gilt-exposed pension funds.
With political and economic pressure mounting, reports from the United Kingdom suggested that Truss was planning a U-turn on her “mini-budget.”
Her decision to fire Kwarteng is a way to calm the markets.
According to the Guardian, “the prime minister intended to get Kwarteng to carry the can’ over her retreat as she sought to calm markets and the nerves of jittery Tory MPs.”
Kwarteng and Truss held opposing views on how far previously announced policies reverse.
Despite the rebellion, Kwarteng recently stated that he “absolutely, 100 per cent” confident that he would be in office in November.
However, if the U-turn is not announced soon. The markets may suffer an adverse reaction.
According to Moneycontrol, Credit Suisse economist Sonali Punhani stated that markets needed to see a credible fiscal plan.
“It would be difficult to deliver the magnitude of these cuts. But for them it is credible. They must deliver sooner rather than later in the forecast,” she said.