Truss backs down on tax, replaces Kwarteng with Hunt

LONDON (Reuters) – British Prime Minister Liz Truss said on Friday her government had taken the decision to forego some of the massive tax cuts contained in the budget bill presented at the end of September, which plunged the country into financial turmoil and cost Finance Minister Kwasi Kwarteng his job.

Liz Truss clarified during a press conference that the corporate tax rate, which the Minister of Finance wanted to freeze at 19%, would be raised as planned to 25% next April, which could bring in nearly 19 billion pounds (22 billion euros) in state coffers.

“We have to admit that due to current market conditions, we have to conduct our mission differently,” said the Prime Minister, pressed by journalists with questions about her “credibility”, before cutting the exercise short.

Liz Truss had previously resigned herself, “reluctantly”, she said, to sacrificing her Finance Minister Kwasi Kwarteng, who had presented the “mini-budget” at the end of September providing for tax cuts and aid to households and businesses to cope with soaring energy prices, without specifying how it would finance these measures.

The vagueness of this plan supposed to boost British growth has triggered a storm on the markets, the pound sterling falling while the yields of government bonds soared, which forced the Bank of England to intervene urgently.

This turmoil has undermined the government’s popularity in public opinion and its credibility in the eyes of investors, just weeks after taking office.

Kwasi Kwarteng, who had traveled to Washington to meet several of his counterparts around the world on the sidelines of the International Monetary Fund (IMF) meeting, rushed back to London on Friday morning, where Liz Truss asked him to tender his resignation.

“You asked me to step aside as Chancellor (of the Exchequer). I accepted it,” Kwasi Kwarteng wrote in his resignation letter, posted on his Twitter account.

Liz Truss chose to appoint former Foreign Minister Jeremy Hunt in her place, saying she shared her vision for the future of the British economy, based on “growth and lower taxes”.

(Report William James and Elizabeth Piper, French version Marc Angrand and Tangi Salaün, edited by Sophie Louet)

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