The value of the pound rallied today after Jeremy Hunt was appointed as the new Chancellor following Kwasi Kwarteng’s sacking.
The pound had fallen 1.2 per cent from $1.13 against the dollar to $1.119 following news shortly before 12.30pm today that Mr Kwarteng had been relieved of his duties by an embattled Liz Truss.
The FTSE 100 also took a hit, dropping from today’s high of 6,946 to 6,903 by 1pm.
But after Number 10 announced just before 2pm that former Foreign Secretary Mr Hunt has stepped in to replace Mr Kwarteng, the pound rallied back to just below $1.13 and the FTSE climbed to 6,972.
The Prime Minister will hold a press conference later in which she is widely tipped to bow to political and economic pressure to reverse the mini-budget and increase corporation tax.
But she is will now face the cameras alone without long-term ally Mr Kwarteng by her side after tearing up another central strand of his tax-cutting mini-Budget for growth.
Mr Hunt, who was Health Secretary from 2012 until 2018, when he became Foreign Secretary and served until the end of Theresa May’s premiership in July 2019.
The value of the pound rallied today after Jeremy Hunt was appointed as the new Chancellor following Kwasi Kwateng’s sacking
After Number 10 announced just before 2pm that former Foreign Secretary Mr Hunt has stepped in to replace Mr Kwarteng, the pound rallied to just below $1.13 and the FTSE climbed to 6,972
Mr Kwarteng’s departure makes him the second shortest-serving chancellor in modern British politics, behind Iain Macleod, whose career was ended by his death after 30 days in office in 1970
But the FTSE 100 rallied as the Square Mile reacted to the shock sacking of Chancellor Kwasi Kwarteng
Mr Kwarteng’s departure makes him the second shortest-serving chancellor in modern British politics, behind Iain Macleod, whose career was ended by his death after 30 days in office in 1970.
Since 2019, the UK has had four chancellors, including Nadhim Zahawi who served the third shortest tenure with 62 days during a short-lived reshuffle under Boris Johnson, and Sajid Javid who served 204 days – the fourth shortest tenure on record.
Mr Kwarteng posted a letter to the PM on Twitter shortly after news of his sacking emerged.
He said he had ‘accepted’ Ms Truss’s request for him to ‘stand aside’ as Chancellor.
‘When you asked me to serve as your Chancellor, I did so in the full knowledge that the situation we faced was incredibly difficult, with rising global interest rates and energy prices,’ he went on.
‘However, your vision of optimism, growth and change was right. As I have said many times in the past weeks, following the status quo was simply not an option.
‘For too long this country has been dogged by low growth rates and high taxation – that must still change if this country is to succeed.
‘The economic environment has changed rapidly since we set out the Growth Plan on 23 September.
‘In response, together with the Bank of England and excellent officials at the Treasury, we have responded to those events, and I commend my officials for their decision.
‘It is important that 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.
‘We have been colleagues and friends for many years. In that time, I have seen your dedication and determination. I believe your vision is the right one. It has been an honour to serve as your first Chancellor.
‘Your success is this country’s success and I wish you well.’
Mr Hunt is making a shock return to the cabinet as a ‘safe pair of hands’.
One bewildered Cabinet source told MailOnline of the prospect of Mr Hunt taking over at No11: ‘I think my rationality barometer is broken.’
Chris Philp has also been ousted from Treasury Chief Secretary, after a series of gaffes including tweeting that the Pound was strengthening during Mr Kwarteng’s mini-Budget speech – minutes before it crashed. He is swapping jobs with Paymaster General Edward Argar.
Truss made scrapping plans to up the corporation tax rate from 19 per cent to 25 per cent – at a cost of £18billion – a central part of her leadership campaign and it was unveiled as a policy three weeks ago as a major growth lever.
But she is expected to announce the rate will go up next year after all, after weeks of economic and political turmoil in Westminster that now threaten her position.
Mutinous Conservative MPs have given the PM 17 days to save her job, with claims that Rishi Sunak and Penny Mordaunt, both failed leadership challengers in the summer, are being lined up to replace her.
Mr Kwarteng had been set to give an economic statement on October 31, but this date is now in doubt following news of the Chancellor’s departure.
Mr Kwarteng’s departure makes him the second shortest-serving chancellor in modern British politics, behind Iain Macleod, whose career was ended by his death after 30 days in office in 1970
Since 2019, the UK has had four chancellors, including Nadhim Zahawi who served the third shortest tenure with 62 days during a short-lived reshuffle under Boris Johnson, and Sajid Javid who served 204 days – the fourth shortest tenure on record
The markets have been volatile and the Conservative Party febrile since Mr Kwarteng’s announced tax cuts paid for by borrowing last month.
The Government had to announce a U-turn and reinstate the 45p income tax rate for the UK’s richest people, following a revolt.
Asked about the prospect of another humiliating U-turn, the Chancellor said yesterday: ‘Let’s see.’
Government bonds and the pound steadied at the start of London trading as the Bank of England’s bond-buying programme comes to a close, a sign markets are pricing in a U-turn.
Yields on gilts, UK Government bonds, surged amid a sell-off after Kwarteng announced unfunded tax-cutting plans in the mini-budget last month and lifted again earlier this week.
On the opening of the markets, yields on UK 30-year gilts fell back by 1.6 per cent to 4.47 per cent, while 10-year gilt yields moved 1.8 per cent lower to 4.11 per cent.
On the opening of the markets, yields on UK 30-year gilts fell back by 1.6 per cent to 4.47 per cent, while 10-year gilt yields moved 1.8 per cent lower to 4.11 per cent.