U.K. Finance Minister Kwasi Kwarteng Fired After Economic Policy Fallout

Topline

Kwasi Kwarteng, the U.K.’s Chancellor of the Exchequer, was sacked by Prime Minister Liz Truss on Friday morning after her government’s recent mini-budget—which promised large tax cuts for the wealthy—triggered major backlash both from the public and the markets in recent weeks.

Britain’s Chancellor of the Exchequer Kwasi Kwarteng listens as Britain’s Prime Minister Liz Truss … [+] (unseen) delivers her keynote address on the final day of the annual Conservative Party Conference in Birmingham.

AFP via Getty Images Key Facts

According to the BBC, Kwarteng’s sacking is a prelude to an announcement by Truss, which will include u-turns on many key aspects of Kwarteng’s mini-budget.

Earlier on Friday, Kwarteng met with Truss at 10 Downing Street after cutting short a trip to the U.S.

In his resignation letter, which he shared on Twitter, Kwarteng said he was asked by the Prime Minister to “stand aside.”

Kwarteng added that the “economic environment” had rapidly changed since the announcement of his mini-budget but reiterated his opposition to “high taxation” which he says “must still change” to ensure economic growth.

The British pound slumped to $1.12, down 0.4%, after news of Kwarteng’s exit became public.

Conservative lawmaker Jeremy Hunt has been appointed as Kwarteng’s replacement, making him the country’s fourth chancellor in a tumultuous year for the party.

What To Watch For

The drama around Kwarteng’s exit and Truss’ policy u-turns has raised questions about her own future as prime minister, amid growing signs of rebellion inside her party. According to the BBC, several senior members of the Conservative Party are planning to publicly urge Truss to resign. The report notes that many of these senior lawmakers include former cabinet ministers who believe Kwarteng was simply carrying out Truss’ policies and therefore she should be the one who should have stepped down.

Key Background

Truss, who was picked by her party’s members to replace Boris Johnson last month, has been forced to make a series of embarrassing policy u-turns in recent weeks. Truss had vowed to enact sweeping tax cuts if she was voted into power, ignoring concerns that this would further fuel inflation. Late last month, Kwarteng unveiled a mini-budget that included tax cuts that would mostly benefit the wealthiest Britons along with other tax cuts, while also attempting to subsidize spiraling energy costs for households and businesses. If implemented, the policy would have significantly increased government borrowing, something that spooked markets late September and caused the pound to crash. After the initial indication that she and her government would push forward with the budget, Truss was forced to climb down and scrap the planned tax cut for high earners after facing strong opposition from other members of her party.

Further Reading

Liz Truss appoints Jeremy Hunt as UK chancellor ahead of tax cut U-turn (Financial Times)

Liz Truss appoints Jeremy Hunt as chancellor after sacking Kwarteng (The Guardian)