British Chancellor Jeremy Hunt, who was parachuted into office on Friday, will attempt to calm the markets on Monday with details of how he intends to dismantle elements of the mini-budget introduced by his predecessor Kwasi Kwarteng.
Mr Hunt will set out billions of pounds of savings to stabilise the public finances in an emergency statement, seeking to stem a dramatic loss of confidence among investors in the government.
Prime Minister Liz Truss was heavily involved in Mr Kwarteng's mini-budget last month. As her economic strategy is ditched, she has faced calls to be replaced.
Her fate could be sealed by the mood of markets and her own backbench MPs, as she battles to save her post.
The financial markets have endured weeks of turmoil following a £45 billion ($50.3bn) mini-budget tax giveaway by Mr Kwarteng.
There were concerns the markets would blow another hole in the UK's economic plans when they opened today, the first day since the Bank of England withdrew its bond-buying support.
The battered pound and UK government bonds rallied on Monday ahead of Mr Hunt’s emergency statement after the Treasury issued a 6am statement saying Mr Hunt would announce further details of his plans this morning, followed by a statement in the House of Commons later in the day.
Yields on 30-year and 10-year government bonds – also known as gilts – tumbled by around 8 per cent in early trading as the Chancellor’s announcement that he will bring forward a fiscal statement soothed volatile markets.
Sterling leapt more than 1 per cent to 1.131 US dollars at one stage after the news, which was unveiled before markets opened and ahead of what many feared would be a testing day for the pound and gilts.
The Treasury said Mr Hunt's move — two weeks earlier than scheduled and coming after talks at the weekend between Mr Hunt and Ms Truss — was designed to “ensure sustainable public finances underpin economic growth”.
Mr Hunt met Bank of England governor Andrew Bailey and the head of Britain's Debt Management Office government agency late on Sunday to brief them on his plans, the Treasury said.
The publication of the full medium-term fiscal plan is still scheduled to be published on October 31.
After his surprise appointment on Friday, Mr Hunt effectively tore up Ms Truss and Mr Kwarteng’s previous economic strategy to cut taxes in an attempt to boost growth.
Mr Kwarteng survived just 38 days as chancellor — the second shortest tenure ever.
Instead, Mr Hunt said taxes would have to go up while spending would rise less quickly than had previously been planned.
Among the measures announced by Mr Kwarteng expected to be ditched are his promise to bring forward a 1p cut in the basic rate of income tax to April.
“Strong start by Jeremy Hunt as chancellor,” Mel Stride, the Conservative MP who chairs parliament's Treasury committee, said on Twitter.
“Gets what needs to be done and is acting fast. Surprising markets positively on the upside with an early statement to House of Commons today is a wise move. Message is: ‘We get what needs to be done and it’s being sorted.'”
A back bench Conservative MP has said Ms Truss’s political weakness means that Mr Hunt is now “de facto prime minister”.
Sir Roger Gale told Sky News: “I think Jeremy Hunt has taken on the job … on his own terms.
“He’s said he will do it, but he will only do it if he can do what he believes to be necessary to stabilise the markets, to stabilise the economy and to get the show back on track … There is real power in Downing Street, but it’s not in No 10, it’s in No 11.
“I think Jeremy Hunt is de facto prime minister at the moment.
Labour's shadow chief secretary to the Treasury said the move was “evidence of the panic in government”.
Pat McFadden told BBC Breakfast: “The reason [Mr Hunt] is doing this is because ministers are terrified of what happens when markets open this morning.
“It is testament how much chaos has been caused by Liz Truss since she became prime minister.”
The measures come as Ms Truss continues to fight to hold on to her leadership, with three Conservative MPs already breaking ranks to call on her to go.
Crispin Blunt, Andrew Bridgen and Jamie Wallis all called on the prime minister to quit on Sunday, while other senior figures within the parliamentary party expressed deep unease with her leadership but stopped short of calling for her to go.
Mr Blunt was the first MP to demand her exit, telling Channel 4’s Andrew Neil Show on Sunday: “I think the game is up and it is now a question as to how the succession is managed.”
It came at the end of another extraordinary weekend in British politics, in which even US President Joe Biden intervened to call Ms Truss’s economic vision a “mistake”.
Mr Hunt, who carried out something of a media blitz on behalf of the prime minister at the weekend, insisted that she was still in charge even as he diagnosed the need for a tough package of tax rises and spending cuts in order to steady the UK economy.
Leader of the House of Commons Penny Mordaunt — a former candidate for the Tory Party leadership — also offered the prime minister her full support, using a piece in the Telegraph to warn that the UK “needs stability, not a soap opera”.
She told colleagues that the “national mission” was clear but said it “needs pragmatism and teamwork”.
“It needs us to work with the prime minister and her new chancellor. It needs all of us.”
Meanwhile, former transport secretary Grant Shapps — who has reportedly been floated as a potential successor to the prime minister — wrote in The Times that the party needed to “bin the infighting and ideology”, but did not explicitly back Ms Truss.
“We, as a party, have two years to get ourselves out of this hole, and it is a deep hole when it comes to public confidence,” he said.
“But we have a couple of things on our side. Despite the factionalism in the run-up to and aftermath of Brexit, our MPs are overwhelmingly predisposed to supporting a competent leader.”
Mr Hunt told the BBC’s Sunday With Laura Kuenssberg programme that Ms Truss remained “in charge” and insisted voters can still put their faith in her.
“She has listened. She has changed. She has been willing to do that most difficult thing in politics, which is to change tack,” he said.
“What we are going to do is to show not just what we want but how we are going to get there.”
The presence of Mr Hunt was welcomed by many MPs, but many senior figures admitted it was an open question whether the prime minister could still survive the current crisis.
Tory MP Robert Halfon, chairman of the Commons education committee, appeared on Sky News and declined to deny that MPs were considering installing a new leader.
“We are all talking to see what can be done about it.”
Over the past few weeks, the government has “treated the whole country as kind of laboratory mice”, he said.
Senior Conservative Alicia Kearns also told Times Radio that the question of whether Ms Truss should continue in charge was “incredibly difficult”.
And writing in the Telegraph, former minister Liam Fox called the current situation the “deepest political hole that we have experienced in a generation”.
Stuart Rose, a Tory peer and the chairman of the Asda supermarket chain, told the Financial Times the prime minister was a “busted flush”.
Labour added to that pressure, with Sir Keir Starmer calling on the prime minister to appear before the Commons on Monday.
The Labour leader quipped that Ms Truss is now “in office but not in power”.
It comes as a new poll, first published in the Guardian, predicted a landslide for Labour and wipeout for the Tories.
The poll, by Opinium for the Trades Union Congress, put Labour on 411 seats, compared with the Tories on 137.
In a sign of how divided the party is, former culture secretary Nadine Dorries hit out at her party colleagues.
“I cannot imagine there is one G7 country which thinks we are worthy of a place at the table.
“The removal of one electorally successful PM, the disgraceful plotting to remove another by those who didn’t get their way first time round is destabilising our economy and our reputation,” she tweeted.
