Liz Truss was desperately clinging to her premiership last night after she sacked her chancellor and ripped up the mini-budget but failed to calm the financial markets or furious Conservative MPs.
In a humiliating reversal, the prime minister backed down on plans to scrap a £18bn rise in corporation tax and replaced Kwasi Kwarteng as chancellor with Jeremy Hunt.
She insisted that staying in her own position as prime minister would help to “reassure the markets of our financial discipline”, but the cost of government borrowing rose and the pound fell after her press conference to announce the changes.
Senior Tory MPs are now plotting how to remove her from office, with some considering whether to publicly call for her to resign in the coming days.
One former minister said they thought it was “50-50 whether she will make it till Christmas”, adding: “If I could wave a magic wand and get rid of her now then I would, but the problem is the mechanism.”
Some Tory MPs thought that the appointment of Hunt, a Tory centrist who has twice failed to win the leadership, could buy Truss some time, potentially until the next fiscal event on 31 October.
In a sign that the former health secretary may be a powerful figure, one of his allies among Tory MPs, Steve Brine, told the BBC that people could regard “Truss as the
chairman and Hunt as the chief executive” of the government.
But others said they regarded Truss as “finished” and that it was now a matter of time before she was ousted, particularly if there were a succession of further polls showing the Tories more than 30 points behind Labour – a situation that would lead to a landslide win for the opposition.
The former Tory leader William Hague told Channel 4 News it had been a “catastrophic episode” and while he was still hoping Truss could recover, it would be honest to say her premiership “hangs by a thread”.
With Downing Street in disarray, Keir Starmer, the Labour leader, called for a general election, regardless of whether Truss stays or goes, saying the government had “completely run out of road”.
“We are in the absurd situation where we are on the third or fourth prime minister in six years, and within weeks we have a got a prime minister who has the worst reputational ratings of any prime minister pretty well in history,” he said.
“Their party is completely exhausted, and clapped out … For the good of the country we need a general election.”
Labour could also look at calling a vote of confidence in the government as soon as next week, putting pressure on Tories to back Truss or trigger an election, according to some of the party’s MPs.
The prime minister set out her change of course in a very brief press conference yesterday, acknowledging that parts of the mini-budget “went further and faster than markets were expecting”.
However, she refused to take responsibility for her own part in the situation and rejected calls to apologise.
She also suggested she would stop public spending increasing as quickly as previously planned, in remarks that appeared at odds with her promise in parliament this week not to cut public spending.
Paul Johnson, the director of the Institute for Fiscal Studies, said higher inflation has “already eaten into plans set out a year ago”, pointing out that she could not increase spending much less quickly “without it actually going down”.
Truss’s decision to sack Kwarteng and raise the maximum corporation tax rate to 25% is her second major U-turn after she scrapped the abolition of the 45p income tax rate.
Her huge package of unfunded tax cuts and spending sent the pound tumbling and plunged markets into turmoil in September.
But in a downbeat performance yesterday, she showed no contrition, and insisted she would not resign. Asked why she should stay on, she replied: “I am absolutely determined to see through what I have promised – to deliver a higher growth, more prosperous United Kingdom.”
She hurried away from the podium after eight minutes, in which she took four questions from a list of handpicked journalists.
She provided no answers to why she was staying on when Kwarteng was taking the blame for their joint plan, but sources said Truss wanted him to “carry the can” as she sought to calm the markets and the nerves of jittery Tory MPs.
Her ousted chancellor reportedly believes Truss has only bought herself “a few more weeks”.
A source close to Kwarteng told the Times: “His view is that the wagons are still going to circle.”
Christopher Chope, one of the Tory MPs most loyal to Truss, admitted to feeling “very badly let down” by the U-turn.
Speaking to BBC Newsnight last night, he said: “I expressed disbelief at what I heard today because it’s totally inconsistent with everything
that the prime minister stood for when she was elected.”
Other senior ministers such as Nadhim Zahawi, the chancellor of the duchy of Lancaster, and Simon Clarke, the levelling up secretary, appeared to rally around Truss, while Thérèse Coffey, the deputy prime minister and Truss’s closest ally, held a Zoom call for restive Tory backbenchers .
But only a third of them tuned in. According to one of those on the call, she said she was “not sure what I can say right now”, which rattled their nerves.
The appointment of Hunt infuriated some of Truss’s earliest backers, one of whom said: “She is removing every reason why I voted for her.”
Several Tories said they were submitting letters to Graham Brady, the 1922 Committee chairman but others had reservations about this for fear a change of leader could add to the pressure for a general election.
One Tory grandee said: “Liz owns this mess, not Kwasi.
She must go immediately and be replaced by Rishi [Sunak] and Penny [Mordaunt].” A former minister added: “She should be resigning because it’s not good enough that she gets rid of a chancellor with whom she has been in complete agreement from day one.”
