British Finance Minister Kwasi Kwarteng was fired on Friday after less than six weeks in the role, amid mounting political pressure and market chaos.
“The economic environment 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 comment my officials for their dedication,” Kwarteng said in his resignation letter after being asked to step down.
“It is important now as we move forward to emphasise your government’s commitment to fiscal discipline. The Medium-Term Fiscal Plan is crucial to this end, and I look forward to supporting you and my successor to achieve that from the backbenches.”
Prime Minister Liz Truss is reportedly set to announce that the government will abandon key fiscal policy pledges laid out in Kwarteng’s controversial “mini-budget” on Sep. 23, including vast quantities of unfunded tax cuts.
We’ll continue to see a hawkish Bank of England, chief economist says
Among the policies on the chopping block are Kwarteng’s pledge to reverse predecessor Rishi Sunak’s hike of corporation tax from 19% to 25%, estimated to cost around £19 billion by 2026, and a 1.25% cut to dividend tax.
The government earlier this month abolished its plan to scrap the top rate of income tax after a substantial public backlash, but this failed to quell market turbulence.
Kwarteng cut short a visit to Washington on Thursday to fly back to London as government ministers scrambled to address the market chaos unleashed in recent weeks.
This included a sell-off of long-dated government bonds that led the Bank of England to intervene in order to save pension funds from collapse, and a spike in mortgage rates for prospective homeowners.
Truss had been under immense pressure to rethink her economic policies, with opinion polls showing support for the ruling Conservative Party collapsing and lawmakers from within her own party reportedly plotting to oust her after a tumultuous first five weeks in office.
UK 30-year government bond yields since the Sep. 23 ‘mini-budget’
The U.K.’s long-dated bond markets have been mired in volatility since the government’s fiscal policy announcements.WATCHLIST+
Despite this, both she and Kwarteng had remained publicly resolute in recent days, accusing critics of the government’s radical fiscal plans of being part of an “anti-growth coalition.”
“As I have said many times in the past few weeks, following the status quo was simply not an option. For too long this country has been dogged by low growth rates and high taxation — and that must still change if this country is to succeed,” Kwarteng added in his letter.
“We have been colleagues and friends for many years. In that time, I have seen your dedication and determination. I believe your vision is the right one. It has been an honour to serve as your first Chancellor.”