NEWS… BUT NOT AS YOU KNOW IT
Kwasi Kwarteng has cut short a trip to the US to fly back to London where he is widely expected to announce the mother of all U-turns.
The chancellor is under intense pressure to scrap his economic plans after they caused turmoil in the markets and threatened to split the party in two.
With the Tories miles behind Labour in the polls and talk of a leadership challenge mounting, there is also speculation Liz Truss could sack her close ally in a bid to restore the government’s economic reputation.
Mr Kwarteng had been due to hold further meetings in Washington DC where he was attending a meeting of global finance ministers.
He confirmed to reporters overnight that he plans to fly back to London a day early but sources close to him denied it was a sign of panic.
Speaking about his dash back to London, an unnamed official told the BBC that the chancellor ‘really wants to engage not only with government colleagues, but also MPs’ over the plans.
Trade minister Greg Hands said the early return is ‘not unusual’ and the chancellor’s position is ‘totally’ safe but after a day of rumours that the prime minister was in discussions about dropping key tax pledges, it will be widely seen as an attempt to avert a crisis.
Mr Kwarteng has already been forced to move the publication of his full economic plans forward to October 31 in a bid to calm nerves among investors and MPs but deep scepticism continues to hang over his unfunded tax cuts.
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A pledge to scrap a planned increase in corporation tax from 19% to 25% is widely considered likely to be dropped altogether.
Talks were reportedly under way between the Treasury and Downing Street yesterday about ditching the £43 billion tax proposals in full or in part.
It’s unclear if Mr Kwarteng joined those calls remotely from the US, where he was attending a meeting hosted by the International Monetary Fund.
Despite weeks of insisting there would be no U-turn, he told The Telegraph ‘let’s see’ when asked if a dramatic change in policy is coming yesterday.
After just 38 days there is a very really possibility of Liz Truss’ administration falling apart and the chancellor’s future is in doubt.
Mr Kwarteng said he was ‘100%’ sure the pair would be in office in a month but there is huge discontent among Tory MPs and talk of a change in leadership.
One idea reportedly being discussed by MPs is a unity ticket involving Rishi Sunak and Penny Mordaunt, two former leadership candidates who jointly received more backing from MPs than the PM.
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Mr Hands, who backed Mr Sunak in the leadership contest and whose recent appointment was widely seen as an attempt to reach out to that wing of the party, said he did not ‘recognise’ reports of leadership plots.
Ms Truss has overseen a dramatic collapse in the party’s fortunes in the polls which has seen it trail Labour by historic margins.
A survey of voters in the ‘blue wall’, once considered safe seats, revealed the Tories would be wiped out on current polling trends, including high profile figures like Boris Johnson, Dominic Raab and Iain Duncan Smith.
The timing of Mr Kwarteng’s overnight dash back to London comes with the Bank of England poised to end its emergency action to stabilise the bond market.
It has been propping up the trade after the mini-budget announcement caused havoc and left pension funds exposed, with some facing the prospect of falling into dire financial crisis.
Governor Andrew Bailey warned them earlier this week to balance their books and prepare for the withdrawal of Bank help, saying ‘you’ve got to get this done’.
It will also fuel speculation of a major announcement designed to shore up market confidence between the bond buy-up ending at close of trading today and before markets reopen on Monday.
Mr Hands told Sky News it is ‘not unusual’ for a minister to return home early from an international visit but denied there was a U-turn in the offing.
He also said Mr Kwarteng’s position ‘remains tenable’ and said the PM has ‘total confidence’ in her chancellor.
Asked if his position is safe, Mr Hands said: ‘Totally. I mean, Kwasi Kwarteng himself said yesterday he is 100% sure he will still be in position.’
He added that Mr Kwarteng is ‘an incredibly capable person, a very, very bright person who makes good judgment calls’.
A Treasury spokesperson said: ‘After completing a successful series of meetings at the IMF, the chancellor is returning to London today to continue work at pace on the medium-term fiscal plan.’
Mel Stride, the Tory head of the treasury select committee, has called for the mini-budget to be overhauled but rejected the suggestion Mr Kwarteng would have to fall on his sword.
He told BBC Breakfast that ‘things have reached a stage now with the markets and with confidence in those financial markets where we need a fundamental reset’.
Mr Stride continued: ‘If it doesn’t happen, then the markets may have an adverse reaction to that.
‘So my advice to the chancellor would firmly be, “do it, do it now, make sure it’s something significant, not just nibbling at the edges but something that’s going to be firm, bold and convincing, and do it as soon as possible”.’
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Here’s what could happen in the coming weeks
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