UK's Liz Truss makes U-turn on tax cuts after sacking finance minister Kwasi Kwarteng



The second most senior figure in the UK government has been sacked by his friend and ally, Prime Minister Liz Truss. The move was forced after weeks of market turbulence caused by a "mini-budget" announced in September.

Kwasi Kwarteng has made unfortunate history by becoming the shortest surviving Chancellor of the Exchequer in post-1945 Britain. The only politician to serve in the senior role for a shorter period was Ian McLeod, who died in office.

Kwarteng has officially resigned, but as his letter to Truss revealed, he was asked to quit by the prime minister and "accepted" that decision. However, he did not apologize for his policy decisions, seen by many to damage the economy, as might have been expected. Instead, he reaffirmed the policies were the result of teamwork and agreement between the leader of the country and his finance department.

After the removal was confirmed, Truss took to the media room at Downing Street to address the nation. But instead of admitting error, or apologizing for the turbulent past few weeks, she stuck to her messaging on growth.

"I want to deliver a low tax, high growth economy", the prime minister said, as she reiterated her belief in the policies she worked on with Kwarteng. Truss attempted to explain her way out of the wide-ranging criticism she's faced, by claiming the 'mini-budget' moved "further and faster" than intended - rather than in the wrong direction, as others have suggested.

But then came an admission that some of the Truss-Kwarteng budget couldn't remain, as Truss announced another U-turn on corporation tax. Kwarteng's predecessor Rishi Sunak had enacted a rise in the levy for companies, which the erstwhile finance minister had reversed. But that increase will now go ahead, in Truss's words, "to reassure the markets of our fiscal discipline."

The journey towards this decision began soon after the "fiscal event" of September 23 was revealed by Kwarteng, also described as a mini-budget. The ambitious policy went down like a lead balloon with the markets.

It was proposed that cutting taxes (and scrapping the top rate for the highest earners entirely) would boost economic growth. But analysts and traders lost confidence in the economic plan, and the pound collapsed on foreign currency markets, and UK government borrowing costs sky-rocketed via what's known as the 'gilt' market.

Despite mounting pressure, Kwarteng and the government initially stuck to their plan and denied any changes would come. Since then, Truss has backtracked on the promise to cut the top rate of tax and has now sacked the architect of her administration's economic vision. There is now doubt as to whether the PM can survive the tumult herself.

Former foreign minister and health minister Jeremy Hunt has replaced Kwarteng in the role of finance minister.

Truss and Kwarteng have been friends for more than a decade, and have been seen as close political allies since they co-authored Britannia Unchained in 2012 with two other Conservative MPs to set out their political vision.

Truss paid tribute to their personal closeness, saying she was "incredibly sorry" to see her "great friend" go. But the prime minister showed no sign that she would follow Kwarteng from Downing Street.

"I'm absolutely determined to see through what I promised - to deliver a higher growth, more prosperous United Kingdom to see us though the storm we face," she told the conference.