UK Prime Minister Liz Truss and her finance minister Kwasi Kwarteng are under pressure due to their plans for unfunded tax cuts
London (AFP) - British Prime Minister Liz Truss will on Friday hold her first news conference, Downing Street said as her finance chief rushed home from Washington to contend with market turmoil and civil war in the ruling Conservatives.
Financial upheaval sparked by the new government’s plan to slash taxes – financed via billions in more borrowing – has subsided somewhat since the Bank of England intervened in bond markets.
But the central bank is adamant it will end its bond-buying spree later Friday, and market analysts say only a bigger climbdown by Truss and Chancellor of the Exchequer Kwasi Kwarteng will avert fresh panic with attendant spillover for UK households and businesses.
No timing was given for Truss’s news conference, but the announcement underscored the sense of peril and expectations of a new U-turn, as some Conservative MPs plot to unseat the new leader just five weeks since she succeeded Boris Johnson.
Kwarteng was due to conclude annual meetings of the International Monetary Fund and World Bank in Washington this weekend, after earning a rebuke from IMF chief Kristalina Georgieva on the need for “coherent and consistent” policies.
A Treasury spokesman confirmed Kwarteng had cut short the trip “to continue work on his medium-term fiscal plan” due on October 31, after Truss held hurried meetings with her own financial advisors on Thursday in his absence.
As UK broadcasters showed live footage of Kwarteng’s British Airways plane landing at Heathrow airport, government bond yields eased in a sign that markets do expect a volte-face.
Speculation was rife that the embattled Conservative politicians would row back on planned changes to corporation tax, having already changed their minds about cutting income tax for the highest earners.
The promised tax cuts were the centrepiece of Truss’s successful pitch to Tory party members that she rather than rival Rishi Sunak was the best candidate to replace Johnson.
Asked whether he planned another U-turn following his disastrous “mini-budget” on September 23, Kwarteng told Friday’s edition of the Daily Telegraph newspaper: “Let’s see.”
But speaking in Washington on Thursday, the under-fire minister insisted that his job was safe. “I’m not going anywhere,” he said.
Truss has “total confidence” in her fellow free-marketeer, international trade minister Greg Hands told Sky News.
- ‘Romcom-worthy dash’ -
However, a new YouGov poll for The Times newspaper said 43 percent of Conservative voters want a new prime minister in Downing Street.
Other polls show a mammoth lead up opening up for the opposition Labour party, threatening electoral meltdown for the Tories.
Hands said “I don’t recognise” multiple reports that senior Tory MPs were plotting to unseat Truss by installing a new leadership team under her defeated rival Sunak and Penny Mordaunt, who also ran to succeed Johnson.
The Bank of England had to step in to bolster the bond market
Pressed on whether Truss will still be in 10 Downing Street in a week, Hands told ITV: “Oh definitely.”
The chancellor of the exchequer’s September 23 budget sparked markets chaos because of fears it would drive up state debt.
The pound tumbled to a record dollar low and bond yields surged, before stabilising.
With the Bank of England’s costly interventions ending Friday, markets have already priced in a fresh about-turn by the government, leaving Downing Street with no room for manoeuvre.
“Do it now,” Mel Stride, chairman of the Treasury select committee in the House of Commons, urged Kwarteng.
“If it doesn’t happen, then the markets may have an adverse reaction to that,” he said on BBC television.
Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, agreed with Stride’s analysis.
“There is a sense of urgency in this move and it would seem the market is optimistic that Kwarteng’s romcom-worthy dash through the airport suggests a dramatic reconciliation between stubborn existing policy and the U-turn investors have been waiting for,” she commented.
Reports suggest some Tory MPs want former finance minister Rishi Sunak, defeated by Truss in the Tory leadership contest, to replace her
For many pundits, the self-inflicted damage risks proving terminal for Truss and her hard-right platform.
“This is a government in meltdown and an economic policy in tatters, and frankly I think the Conservative party should be hanging their head in shame at what it’s putting the country through,” senior Labour MP Ed Miliband told Sky News.