British chancellor Kwasi Kwarteng has said he has accepted British prime minister Liz Truss’s request he “stand aside”.
Mr Kwarteng flew back early from International Monetary Fund (IMF) talks in Washington on Friday to be informed of his fate in a brief meeting with Ms Truss, it was reported.
Ms Truss will stage a press conference in Downing Street later in which she is expected to announce major changes to Mr Kwarteng’s mini-budget.
Downing Street has since confirmed former British foreign secretary Jeremy Hunt has been appointed to Mr Kwarteng's vacated role.
In his letter to Ms Truss, which he shared on Twitter, Mr Kwarteng wrote: “Dear Prime Minster. You have asked me to stand aside as your Chancellor. I have accepted.
— Kwasi Kwarteng (@KwasiKwarteng) October 14, 2022
“When you asked me to serve as your Chancellor, I did so in full knowledge that the situation we faced was incredibly difficult, with rising global interest rates and energy prices. However, your vision of optimism, growth and change was right.
“The economic environment has changed rapidly since we set out the Growth Plan on 23 September. It is important now as we move forward to emphasise your government’s commitment to fiscal discipline. The Medium-Term Fiscal Plan is crucial to this end, and I look forward to supporting you and my successor to achieve that from the backbenches.”
Earlier, Mr Kwarteng left Downing Street after accepting Ms Truss’ request that he stand down as chancellor, waving to reporters as he left via the front entrance of Number 11 before getting in a car.
During his time in the US, Mr Kwarteng had been told by the head of the IMF of the importance of "policy coherence", underlining how far Britain's reputation for sound economic management and institutional stability had fallen.
Meanwhile in Westminster, Ms Truss was trying to find agreement with her cabinet ministers on a way to preserve her push for growth while also reassuring the markets and working out which of the measures could be supported by her lawmakers in parliament.
Earlier, a minister in the trade department, Greg Hands, had said people wanting details on the budget would have to wait until October 31st when Mr Kwarteng was due to set out his full plan alongside independent forecasts that will show the cost of the tax cuts to the public finances and whether they will boost economic growth.
Critics of the government had said that wait was unacceptable.
Rupert Harrison, a portfolio manager at Blackrock and once an adviser to former British chancellor George Osborne, said markets have now almost fully priced in a U-turn.
"(That) means if the U-turn doesn't come markets will react badly," he said on Twitter.
A Conservative Party lawmaker, who asked not to be named, said Ms Truss's economic policy had caused so much damage that investors may demand even deeper cuts to public spending as the price for their support.
"Everything's possible at the moment," said the lawmaker, who backed former chancellor Rishi Sunak in the leadership race. "Problem is the markets have lost trust in the Conservative Party – and who can blame them?"
Another lawmaker told Reuters earlier this week that Ms Truss needed to appreciate that there was not a huge amount of enthusiasm for her at the moment.
According to a source close to the prime minister, Ms Truss is now in "listening mode" and inviting lawmakers to speak to her team about their concerns to gauge which parts of the programme they would support in parliament.
Credit Suisse economist Sonali Punhani said markets needed to see a credible fiscal plan, with the government needing to find around £60 billion through tax cut U-turns and further spending cuts.
"It would be challenging to deliver the scale of these cuts, but for them to be credible, these need to be delivered sooner rather than in the latter part of the forecast," Ms Punhani said.
One policy that is expected to be reversed is their plan to hold corporation tax rates at 19 per cent. That had formed a key part of their package after Mr Sunak proposed increasing it to 25 per cent when he was chancellor under Truss's predecessor Boris Johnson.
That could save £18.7 billion by 2026/27.
The latest bout of political drama to grip Britain comes as the Bank of England prepares to end its intervention in the gilt market. -Reporting by Reuters and Press Association