The prime minister is fighting for her political survival after ditching a major chunk of the mini-budget and sacking her chancellor and close ally Kwasi Kwarteng.
But it is unclear whether Liz Truss’s gamble to stay in power will pay off, with financial markets remaining jittery and reports of a number of Tory MPs plotting to replace her.
After a tumultuous three weeks on the financial markets in the wake of Mr Kwarteng’s £45bn mini-budget tax giveaway, the PM acknowledged yesterday that “the way we are delivering our mission right now has to change”.
She replaced her “great friend” Mr Kwarteng” with former foreign secretary Jeremy Hunt, who backed her rival Rishi Sunak in the Tory leadership contest.
While his appointment was welcomed by some Tory MPs as “an experienced pair of hands”, others questioned why Mr Kwarteng was the one who had to go when he was pursuing policies Ms Truss espoused in her leadership campaign.
Politics latest: Tory MPs turn on Truss as PM scrambles to save job
At a hastily-arranged news conference in Downing Street on Friday Ms Truss dismissed calls for her resignation, saying she was “absolutely determined to see through what I have promised”.
She announced she was abandoning Mr Kwarteng’s commitment to drop the planned rise in corporation tax from 19% to 25%, saving the Exchequer £18bn a year.
She also suggested a new squeeze on public spending which would “grow less rapidly than previously planned”.
Ms Truss said it was a “down payment” on the medium-term fiscal plan on 31 October, when Mr Hunt will now set out how he intends to get the public finances back on track. It suggests further measures to plug the estimated £60bn void created by the mini-budget will have to follow.
“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,” she said.
“We will do whatever is necessary to ensure debt is falling as a share of the economy in the medium-term.”
Be in no doubt, the PM is in deep trouble, writes Sky’s Beth Rigby
Having sealed her chancellor’s fate, the markets could seal the PM’s fate
Voters’ response to her U-turn appeared reasonably favourable, with a snap poll by YouGov finding 49% of voters said Ms Truss was right to sack her chancellor.
Cabinet ministers also remained publicly loyal, tweeting their support for Ms Truss and her new chancellor.
But other Conservatives appeared to be divided over Ms Truss’s future as prime minister.
Heated messages were shared in Conservative Party WhatsApp groups after her news conference, with a screenshot sent to Sky News’ deputy political editor Sam Coates showing Crispin Blunt calling for Rishi Sunak and Penny Mordaunt to take over.
“Step forward Rishi and Penny, with our support and encouragement in the interests of us all,” it read.
There have also been multiple reports of Tory MPs and Conservative grandees plotting moves to force Ms Truss from Downing Street.
A source apparently close to Mr Kwarteng suggested that Ms Truss may only have bought herself a few more weeks in office, according to The Times.
Former leader Lord Hague warned that Ms Truss’s premiership “hangs by a thread”, while Conservative former chancellor Lord Hammond said the events of the past weeks had wrecked the party’s reputation for fiscal discipline.
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During her news conference Ms Truss said she was “incredibly sorry” to lose Mr Kwarteng but insisted Mr Hunt shared her vision of a “high-growth, low-tax economy”.
But Mr Hunt’s appointment signals a major shift in policy direction – he is a more centrist figure than either Mr Kwarteng or Ms Truss and is unlikely to share their ideological free market commitment to tax cuts.
In July, Mr Hunt told Sky News cutting corporation tax was “not sexy, but necessary” as he backed plans to reverse the planned rises.
:: The new chancellor, Jeremy Hunt, will be speaking to Sky News from 7am today