The prime minister is fighting for her political survival after abandoning a major part of the mini-budget and sacking her chancellor and close ally Kwasi Kwarteng.
But it is unclear whether Liz Truss’ bid to stay in power will pay off, with financial markets still jittery and reports of a number of Tory MPs plotting to replace her.
After three tumultuous weeks in the financial markets following the £45bn tax haul from Mr. Kwarteng, the Prime Minister acknowledged yesterday that “the way we are carrying out our mission now has to change”.
He replaced his “great friend”, Mr. Kwarteng, for former foreign secretary Jeremy Hunt, who backed his rival Rishi Sunak in the Conservative leadership contest.
While his appointment was welcomed by some Tory MPs as “an experienced pair of hands”, others questioned why Mr Kwarteng was the one to go when he was following the policies Mrs Truss espoused in her campaign of leadership
Image: Liz Truss appoints Jeremy Hunt as chancellor. Image: Andrew Parsons / No 10 Downing Street
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At a hastily arranged press conference in Downing Street on Friday, Mrs Truss rejected calls for her to resign, saying she was “absolutely determined to see through what I have promised”.
He announced that he was abandoning the engagement of Mr. Kwarteng to reduce the planned rise in corporation tax from 19% to 25%, saving the Exchequer £18 billion a year.
He also suggested a further reduction in public spending which would “grow less rapidly than had been expected”.
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2:25 Do voters trust Truss?
Ms Truss said it was a “down payment” on the medium-term tax plan on October 31, when Mr Hunt will now set out how he aims to get the public finances back on track. It suggests further measures will need to follow to plug the estimated £60bn gap created by the mini-budget.
“It’s clear that parts of our mini-budget went further and faster than the markets expected, so the way we’re carrying out our mission now has to change,” he said.
“We will do whatever it takes to ensure debt falls as part of the economy over the medium term.”
Read more: Make no doubt, the Prime Minister is in deep trouble, writes Sky’s Beth Rigby. Having sealed the fate of its chancellor, the markets could seal the fate of the prime minister.
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2:26 Analyzing the market reaction to the latest U-turn
Voter response to her U-turn appeared reasonably favorable, with a YouGov snap poll finding 49% of voters said Mrs Truss was right to sack her chancellor.
Cabinet ministers also remained publicly loyal, tweeting their support for Ms Truss and her new chancellor.
But other Tories appeared to be divided over Mrs Truss’s future as prime minister.
Heated messages were shared on Conservative Party WhatsApp groups after his press conference, with a screenshot sent to Sky News deputy political editor Sam Coates showing Crispin Blunt calling for Rishi Sunak and Penny Mordaunt take over
“Step up Rishi and Penny, with our support and encouragement in everyone’s interest,” it read.
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3:03 Kwarteng fired after 38 days
There have also been several reports of Tory MPs and senior Tories planning moves to force Mrs Truss out of Downing Street.
A source apparently close to Mr Kwarteng suggested Ms Truss had only bought herself a few more weeks in office, according to The Times.
Former leader Lord Hague warned Ms Truss’s premiership was “hanging by a thread”, while former Tory chancellor Lord Hammond said the events of recent weeks had damaged the party’s reputation for fiscal discipline.
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During her press conference, Ms Truss said she was “incredibly” sorry to lose Kwarteng, but insisted Mr Hunt shared his vision for a “low-tax, high-growth economy”.
But Mr Hunt’s appointment signals a major shift in political direction: he is a more centrist figure than Mr Kwarteng or Mrs Truss and is unlikely to share their free-market ideological commitment to tax cuts.
Hunt told Sky News in July that the cut in corporation tax was “not sexy, but necessary” as he backed plans to reverse planned rises.
:: The new chancellor, Jeremy Hunt, will speak to Sky News from 7am today