Liz Truss is facing growing pressure from jittery Conservative MPs to sack Kwasi Kwarteng or face a mutiny after the Bank of England’s emergency intervention to address the turmoil in the financial markets.
The move prompted comparisons to 1992’s Black Wednesday, when the UK was ignominiously ejected from the European exchange rate mechanism.
Tory MPs expressed disbelief at how sterling had slumped after the government’s mini-budget sparked market turbulence, compounded by the chancellor’s subsequent remarks, at a time when households across the country were already struggling with the cost of living.
They said Kwarteng would have to resign for the party to survive the financial crisis, as they urged the prime minister to reverse her plan to scrap the top 45p tax rate, which they said had been received badly in their constituencies.
Simon Hoare, the Tory MP for North Dorset, tweeted: “In the words of Norman Lamont on Black Wednesday: ‘Today has been a very difficult day’. These are not circumstances beyond the control of govt/Treasury. They were authored there. This inept madness cannot go on.”
Yet Downing Street insisted the prime minister was standing by her chancellor. A spokesperson told the Guardian: “The PM and the chancellor are working on the supply-side reforms needed to grow the economy, which will be announced in the coming weeks.”
Neither Kwarteng nor Truss was prepared to comment publicly to calm the markets and reassure the public. Instead, they sent out the Treasury financial secretary, Andrew Griffith, who argued that “all major economies” were experiencing the same volatility as the UK as a result of Russia’s war in Ukraine.
“That’s impacting every major economy,” he told Sky News. “[In] every major economy you are seeing interest rates going up as well. Every major economy is dealing with exactly these same issues. The Bank of England has made this timely intervention. What the chancellor and I are focused on is delivering that economic growth plan.”
However, there was growing unease on the Conservative backbenches over the mini-budget, with MPs calling for the government to make changes – and some even warning privately of a rebellion when the Commons returns on 11 October unless Truss backs down.
The former cabinet minister Julian Smith, a backer of Rishi Sunak during the leadership campaign, tweeted: “It is critical that the government is honest about the current situation & plays its part in stabilising markets. It can keep a growth plan but needs to make changes. Not doing so will only continue further stress & strain on UK citizens.”
Robert Largan, the Tory MP for the “red wall” seat of High Peak, said: “I have serious reservations about a number of announcements made by the chancellor. I do not believe that cutting the 45p top tax rate is the right decision when the government’s fiscal room for manoeuvre is so limited. In my view, this is a mistake.”
The Tory chair of the Treasury select committee, Mel Stride, said the party must try to avoid a political crisis on top of an economic one. “The question is whether the plan is going to succeed. It’s had an adverse reaction from the markets,” he added.
Privately, MPs went further, suggesting the financial package had been a disaster and only a reversal of Friday’s mini-budget and the sacking of the chancellor could get the party back on an even keel, while others said the damage was now irreversible.
One MP said: “Kwasi will have to go. She won’t have any option. They are actually crashing the economy and she will need somebody to blame.”
Another added: “It’s extinction-level stuff. This is like 2008 but worse. We’re messing with the fundamental principle of providing a home for your family. That’s why it’s different: it’s real stuff. The public won’t forgive or forget.”
Another MP said: “The markets have completely lost confidence in the British government. If you reverse everything, the government falls, so they’re not going to do that. She could sack Kwasi and appoint somebody who could then make a few tweaks. But I think people are seriously underpricing the chance that it’s all over, that this government is dead on arrival.”
Another senior Tory MP said the mood within the Conservative party, which will meet for its annual conference in Birmingham on Saturday, was one of disbelief. They said: “I don’t think it is sustainable. I predict the chancellor will get the sack and it will unravel from there.”
One former minister said Kwarteng should go but said Truss could not escape responsibility. “They aren’t really Kwasi’s policies, they are her policies,” they said. “Where we are now is so catastrophic that it is hard to know what to demand that she does. Everything about this is unforced.”
They urged the prime minister to ditch her chancellor and bring back a more experienced figure to oversee the Treasury. “The only change possible that might prove reassuring is to change course and bring more of the old back. No Kwasi, no Chris Philp, install someone calm and confident,” they said.
Ken Clarke, the Tory former chancellor, said that Truss and Kwarteng had made a “catastrophic start” to their time in government and that he hoped the mini-budget was “torn up”. However, he told Sky News he did not believe Kwarteng should resign, adding: “We cannot have a different chancellor every other week.”
Labour is planning a series of uncomfortable votes for the Conservatives – though legislation on the majority of tax cuts may not be necessary for months, with the changes due in April.
The first opposition day debate is likely to be on fracking, which Labour can use to target individual MPs in their constituencies.
Another senior MP said those votes could crystallise anger and lead to mass rebellions in parliamentary votes. “The real turning point for her might be when you start to see colleagues slaughtered in the voting lobbies.
“Aside from the economic crisis, we will win absolutely no votes with the public on deregulation. And Labour will force us to vote one after another on 45p, bonuses, more nurses. If they start cutting public spending budgets, that will be disastrous.”