UK’s Liz Truss fires finance chief Kwasi Kwarteng, makes U-turn on tax cuts : NPR

Journalists raise their hands for questions as Britain’s Prime Minister Liz Truss holds a news conference in the Downing Street Briefing Room in central London, Friday. Truss let go her finance chief Kwasi Kwarteng and reversed course on sweeping tax cuts.

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Journalists raise their hands for questions as Britain’s Prime Minister Liz Truss holds a news conference in the Downing Street Briefing Room in central London, Friday. Truss let go her finance chief Kwasi Kwarteng and reversed course on sweeping tax cuts.

Daniel Leal/AP

LONDON — British Prime Minister Liz Truss fired her finance minister and close ally Kwasi Kwarteng. Then hours later, she announced a U-turn on their economic package, attempting to calm financial markets and reinforce her shaky leadership position little more than a month after taking office.

The government said former Health Secretary Jeremy Hunt is taking over as chancellor of the Exchequer, the United Kingdom’s treasury. He is the fourth chancellor this year.

Shortly after sacking the finance minister, Truss held a news conference at Downing Street, and appeared visibly nervous, saying, “We need to act now to reassure the markets of our fiscal discipline.”

She announced she was canceling a proposed corporation tax cut, a central part of the new government’s economic plan that created turmoil in British politics and financial markets and sent the pound plunging late last month.

The plan sent the pound dropping to a record low against the dollar and prompted the Bank of England to intervene.

Truss’ course correction comes as her administration has sustained mounting criticism from opposition politicians and legislators within her own party, as well as international economists and investors who have continued to divest themselves of British assets.

U.K. Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng visit a construction site in Birmingham earlier this month. The two met this morning over finance policy.

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U.K. Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng visit a construction site in Birmingham earlier this month. The two met this morning over finance policy.

Stefan Rousseau/WPA Pool/Getty Images

Kwarteng had to depart early from Washington, D.C., Thursday evening, where he had been meeting with counterparts at the International Monetary Fund. He and Truss held urgent talks in Downing Street shortly after his return to London.

“When you asked me to serve as your Chancellor, I did so in full knowledge that the situation we faced was incredibly difficult, with rising global interest rates and energy prices,” Kwarteng said in his departure letter. “However, your vision of optimism, growth and change was right.”

Prior to her public speech, Truss’ office and her supporters had repeatedly said she would not change her broader approach to kick-starting economic growth, and that she and Kwarteng would continue to work together toward a common goal.

Truss took over from former Prime Minister Boris Johnson in early September. Within days, then-finance minister Kwarteng had proposed a series of tax cuts and spending measures, without saying how they would be funded.

The proposal led the pound to weaken to a record low against the dollar. Millions of homeowners faced steep increases to their mortgage rates and government borrowing costs skyrocketed. That prompted the Bank of England to step in to prevent a crisis.

Earlier this month, the government backtracked on another part of its controversial economic package, by scrapping proposed tax cuts for higher earners.

As confidence and anticipation have grown for further changes, the pound inched up in value Thursday and bond markets stabilized some. In the minutes that followed Truss’ speech Friday, the currency rallied significantly — often a sign of increased investor confidence in a country’s economic future.

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