Britain's Prime Minister Liz Truss said on Friday that she would fight on to deliver her pro-growth agenda, despite sacking her chancellor and scrapping a promised tax cut on a dramatic day in Westminster.
Ms Truss said her “mission remains” even as she jettisoned a key pledge by announcing that corporation tax would rise next year.
She sacked her chancellor and close ally Kwasi Kwarteng on Friday after his huge package of tax cuts caused mayhem on markets and angered MPs and the public.
Markets were not immediately appeased, with government borrowing costs moving back up after falling earlier on Friday. Sterling was down against the dollar after Ms Truss spoke.
“It is clear that parts of our mini-budget went further and faster than markets were expecting. So the way we are delivering our mission right now has to change,” Ms Truss told a press conference.
“This is difficult. But we will get through this storm and we will deliver the strong and sustained growth that can transform the prosperity of our country for generations to come.”
Former foreign secretary Jeremy Hunt was appointed as the new chancellor, as opposition MPs accused Ms Truss of making Mr Kwarteng a scapegoat for policies she championed.
Liz Truss - in pictures
-
Britain's Prime Minister Liz Truss during Prime Minister's Questions in the House of Commons in London, addressing Parliament for the first time since abandoning her disastrous tax-slashing economic policies. Here, 'The National' looks at her time in power so far. AFP -
Liz Truss speaks to Grant Shapps at Downing Street as he is appointed Home Secretary, after the resignation of Suella Braverman. Photo: Simon Dawson / No 10 Downing Street -
A mural by artist Ciaran Gallagher in Belfast is updated to reflect Liz Truss's current political troubles. PA -
Britain's new Chancellor of the Exchequer Jeremy Hunt announcing tax and spending measures at the House of Commons in London, with Liz Truss sitting on the bench behind him. AFP -
Liz Truss gives a speech after sacking Kwasi Kwarteng as chancellor of the exchequer. Reuters -
A protest by climate change group Extinction Rebellion in central London. Ms Truss has said the group is part of an 'anti-growth coalition' with trade unions and the main opposition Labour Party. AFP -
Ms Truss has come under increasing pressure during her short time as prime minister. AFP -
An Extinction Rebellion protest outside Downing Street on the day Mr Kwarteng was removed from the government. AP -
Ms Truss with members of the England women's football team and the European Championship trophy in Teddington, south-west London. Getty -
Ms Truss arrives for a meeting of the European Political Community at Prague Castle in the Czech Republic. AP -
Ms Truss and her husband Hugh O'Leary wave after her keynote speech at the Conservative Party conference in Birmingham. AP -
Liz Truss gives a speech at the Conservative Party Conference. EPA -
Ms Truss meets with Mr Kwarteng, chancellor of the exchequer at the time. Photo: Andrew Parsons / CCHQ -
Ms Truss and Mr Kwarteng visit a construction site for a medical innovation campus in Birmingham. AFP -
Ms Truss meets US President Joe Biden for talks at the UN headquarters in New York. PA -
Ms Truss delivers a speech at the 77th session of the General Assembly at the UN headquarters in New York. AP -
The British prime minister holds a bilateral meeting with Turkish President Recep Tayyip Erdogan in New York. Reuters -
Ms Truss meets French President Emmanuel Macron at the UN headquarters in New York. Reuters -
Ms Truss speaks to the media during her visit to the Empire State building in New York. AP -
Britain's new leader speaks during the state funeral of Queen Elizabeth at Westminster Abbey, London. PA -
Ms Truss and her husband Hugh O'Leary observe a minute's silence at Number 10 Downing Street following the death of the queen. Reuters -
Britain's Labour Party leader Sir Keir Starmer and Ms Truss leave after a service for the reception of Queen Elizabeth's coffin at Westminster Hall in the Palace of Westminster. AFP -
Ms Truss joins the Speaker Lindsay Hoyle and selected MPs to take the oath and swear allegiance to King Charles III in the House of Commons chamber. PA -
King Charles during his first audience with Ms Truss at Buckingham Palace, London, following the death of Queen Elizabeth. Getty Images -
Ms Truss gives a reading during a service of prayer and reflection, following the passing of Queen Elizabeth, at St Paul's Cathedral in London. Getty Images -
The British prime minister makes a statement outside 10 Downing Street in London following the queen's death. Bloomberg -
Ms Truss speaking during her first weekly Prime Minister's Questions session at the House of Commons in London. AFP -
Front pages of a selection of British national newspapers, each leading with a story about Ms Truss becoming Britain's new prime minister. AFP -
People walk past an image in central London of Ms Truss on the side of a protest bus calling for a citizens' assembly. Reuters -
Ms Truss holds her first Cabinet meeting at 10 Downing Street. Reuters -
Ms Truss speaks at Downing Street on the day she took over as prime minister from Boris Johnson. EPA -
Ms Truss poses with her husband Hugh O'Leary at Downing Street before entering as prime minister for the first time. EPA -
Ms Truss is welcomed by staff in Downing Street as she enters the famous prime ministerial offices for the first time. Andrew Parsons / No 10 Downing Street -
New Health Secretary Therese Coffey and Number 10 staff shelter from a downpour as they wait for Ms Truss to arrive in Downing Street. PA -
Liz Truss makes a speech outside 10 Downing Street, London, after meeting Queen Elizabeth II and accepting her invitation to become prime minister and form a new government. PA -
Queen Elizabeth II greets the newly elected leader of the Conservative Party, Ms Truss, at Balmoral Castle in Scotland. The queen invited Ms Truss to become prime minister and form a new government. Getty Images
Questioned on her credibility and whether she could continue in office, she said: “The mission remains the same. We do need to raise our country’s economic growth levels. We do need to deliver for people across the country.”
Ms Truss's U-turn means corporation tax will rise from 19 to 25 per cent next year as envisaged by Boris Johnson's government. She had campaigned to stop the increase during the Conservative leadership race.
Mr Kwarteng was an early backer of Ms Truss during the contest to replace Boris Johnson.
Seeking to reassure investors who took fright at Mr Kwarteng's unfunded plans, she said the new tax would raise an extra £18 billion ($20.2bn) and that government spending would be kept under control.
"Our public sector will become more efficient to deliver world-class services for the British people. And spending will grow less rapidly than previously planned," she said.
One of Mr Hunt's first tasks will be to deliver a medium-term fiscal plan on October 31 setting out how the government plans to reduce debt as a share of national income.
But rumours swirled of a plot to oust Ms Truss from within her own ranks, as another former chancellor, Philip Hammond, said the Tories were squandering their reputation for economic sobriety.
"I'm afraid we have thrown away years and years of painstaking work to build and maintain a reputation as a party of fiscal discipline and competence in government," Mr Hammond said.
Mr Kwarteng was called back from a trip to the US to learn his fate on Friday, before leaving 11 Downing Street after only 38 days in office.
A former top Treasury official, Nick Macpherson, said the government's hand was forced by the Bank of England ending a multibillion-pound intervention to calm markets.
The end of the Bank's bond purchases "forced the government to adopt a more orthodox economic policy and thus restore order to the markets," he said.
Thomas McGarrity, from investment bank RBC, said Friday's changes did not eliminate market concerns about the health of Britain's economy.
He said: "A sizeable U-turn on the unfunded tax plans should be supportive to UK domestic stocks given their sharp underperformance over the past month. It does not, however, change our caution towards UK domestic stocks and maintain a strong preference for more internationally oriented companies given the challenges the UK economy still faces."
Mr Kwarteng confirmed in a letter that Ms Truss had asked him to stand aside as chancellor, but defended the government's pro-growth policies.
"Following the status quo was simply not an option. For too long this country has been dogged by low growth rates and high taxation," he said.
Ms Truss said her close ally Mr Kwarteng had "put the national interest first" by resigning.
