Kwasi Kwarteng has announced that he has been sacked as chancellor by Liz Truss as the prime minister tries to restore her political authority ahead of a U-turn on parts of her disastrous mini-budget later on Friday.
In a tweeted letter to Truss, Kwarteng began: “You have asked me to stand aside as chancellor. I have accepted.”
Earlier, Downing Street sources had told the Guardian 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.
Truss was due to hold a press conference at Downing Street later on Friday.
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.”
He went on: “The economic situation 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 commend my officials for their dedication.”
Noting that he and Truss had been “colleagues and friends for many years”, Kwarteng backed Truss’s economic vision and said it had been “an honour” to serve her.
He added: “It is important now we move forward to emphasise your government’s commitment to fiscal discipline. The medium-term fiscal plan is crucial to that end, and I look forward to supporting you and my successor to achieve that from the backbenches.”
Whitehall insiders said the pair had held different views on how far the government should go in reversing key elements of its plan to steady the markets and placate anxious Conservative MPs.
They said Kwarteng had been pushing for a full retreat on the corporation tax policy, raising it from the current 19% rate to the planned 25%, while the prime minister had wanted to go for just a fraction of the rise.
One Treasury insider said Kwarteng had all along been “more prepared to U-turn” than Truss on corporation tax and previously the 45p rate, despite him largely getting the blame for the policies.
However, Downing Street insiders said Truss was expected to fully retreat on the plan.
The prime minister’s own position is seemingly in such peril, with Tory MPs actively plotting her downfall amid chaos, that she concluded sacking the chancellor was essential for her political survival.
But the move is unlikely to appease angry Tory MPs, with one telling Sky News: “The idea that the prime minister can just scapegoat her chancellor and move on is deluded. This is her vision. She signed off on every detail and she defended it.”
Treasury insiders speculated that the Cabinet Office minister, Nadhim Zahawi, who held the post of chancellor for 63 days this summer, or the levelling up secretary, Simon Clarke, could replace Kwarteng.
Truss is under intense pressure from Conservative MPs and the markets, leading No 10 to redraw the mini-budget, paving the way for a major U-turn on her signature corporation tax cut.
After weeks of defending the proposal for unfunded tax cuts on a huge scale, government sources have said a climbdown on the plan to scrap the rise in corporation tax was now “on the table”.
Kwarteng had earlier this week denied his position as chancellor was in peril, saying he was “absolutely, 100%” confident he would still be in post next month despite a growing Tory rebellion.
When asked by the Daily Telegraph on Thursday whether people should expect a U-turn in corporation tax, he replied: “Let’s see.”
