Liz Truss has sacked Kwasi Kwarteng as her chancellor and replaced him with Jeremy Hunt ahead of a U-turn on key sections of her disastrous mini-budget, as she launched a desperate attempt to restore her crumbling political authority.
In a rapidly moving sequence of events, the prime minister first dismissed Kwarteng, her longtime friend and ideological ally, as well as Chris Philp, the No 2 minister in the Treasury, who is being moved to the Cabinet Office.
In a tweeted letter to Truss, Kwarteng began: “You have asked me to stand aside as chancellor. I have accepted.”
Hunt, the former foreign secretary and health secretary who has been on the backbenches since Boris Johnson took over in 2019, was then named as Kwarteng’s replacement, an apparent move by Truss to reach out more broadly to Conservative MPs.
In a straight swap with Philp, Edward Argar, formerly a Cabinet Office minister serving as paymaster general, takes over as chief secretary to the Treasury.
The sudden reshuffle came just before Truss was due to hold an emergency Downing Street press conference, at which she was expected to U-turn on plans set out last month to not raise corporation tax, part of a largely unfunded mini-budget that sparked turmoil in the markets and shredded Truss’s credibility, just weeks into the role.
Hunt’s appointment appears to be a response to criticism from Tory MPs that Truss’s initial cabinet was chosen for loyalty rather than competence and experience, being packed almost entirely by those who supported her in the leadership race.
Both Labour and the Liberal Democrats said Truss now needed to stand down. Rachel Reeves, Labour’s shadow chancellor, said: “We don’t just need a change in chancellor, we need a change in government.”
Earlier, sources had said the prime minister wanted Kwarteng to “carry the can” over her climbdown as she sought to calm the markets and the nerves of jittery Tory MPs.
Truss met Kwarteng, previously her closest political ally and co-architect of her plan for growth, for crisis talks in Downing Street after he dashed back overnight from an International Monetary Fund (IMF) meeting in Washington DC.
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.
In a letter in response, Truss paid tribute to Kwarteng’s brief time in the job, adding: “I deeply respect the decision you have taken today. You have put the national interest first.”
Whitehall insiders said the pair had held different views on how far the government should go in reversing key elements of its plan to steady the markets and placate anxious Conservative MPs.
They said Kwarteng had been pushing for a full retreat on the corporation tax policy, raising it from the current 19% rate to the planned 25%, while the prime minister had wanted to go for just a fraction of the rise.
One Treasury insider said Kwarteng had all along been “more prepared to U-turn” than Truss on corporation tax and previously the 45p rate, despite him largely getting the blame for the policies.
However, Downing Street insiders said Truss was expected to fully retreat on the plan.
The prime minister’s own position is seemingly in such peril, with Tory MPs actively plotting her downfall, that she concluded sacking the chancellor was essential for her political survival.
But his dismissal 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.”
Kwarteng had earlier this week denied his position as chancellor was in peril, saying he was “absolutely, 100%” confident he would still be in post in November despite a growing Tory rebellion. When asked by the Daily Telegraph on Thursday whether people should expect a U-turn in corporation tax, he replied: “Let’s see.”