Liz Truss has performed a humiliating U-turn over her flagship plan to cut corporation tax, as she grimly insisted she would hang on as prime minister despite being forced to sack her chancellor, Kwasi Kwarteng, over the government’s disastrous mini-budget.
At a hastily called and notably brief Downing Street press conference, soon after she replaced Kwarteng with Jeremy Hunt, a notably subdued-looking Truss told reporters that parts of the mini-budget “went further and faster than markets were expecting”.
“So the way we are delivering our mission right now has to change. We need to act now to reassure the markets of our fiscal discipline,” Truss said, adding that she would thus not, as promised, cancel the scheduled rise in corporation tax from 19% to 25% next year.
This would save £18bn a year on the largely uncosted mini-budget, Truss said, and would “act as a down payment on our full medium-term fiscal plan”.
The move is the second climbdown after Truss’s massive package of unfunded tax cuts and spending sent the pound tumbling and plunged markets into turmoil.
But in a downbeat performance that seems unlikely to reassure her critics in the party, Truss showed no contrition, and insisted she could stay on as prime minister.
Asked why she should stay in the post, Truss replied: “I am absolutely determined to see through what I have promised – to deliver a higher growth, more prosperous United Kingdom.”
Answering just four questions, Truss declined to apologise or take personal responsibility for the turmoil in the markets since the mini-budget, and for the Tories’ subsequent poll slump.
“What I’ve done today is made sure that we have economic stability in this country,” she said when asked what credibility she had left. “Jeremy Hunt as chancellor is somebody who shares my desire for a high-growth, low-tax economy.”
Asked if she would apologise to her party, Truss said only: “Well, I am determined to deliver on what I set out when I campaigned to be party leader.”
Earlier, Truss 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.
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.
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.”
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.”
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