UK's Truss sacrifices close friend Kwarteng over unloved fiscal plan

He was one of her closest friends and supporters, but Prime Minister Liz Truss sacked Britain's first black finance minister Kwasi Kwarteng just 38 days into the job.

Such was Kwarteng's ideological alliance with Truss that some insiders said the two all but shared the same brain, at least in their commitment to small-state, free-market economics.

Yet he ultimately carried the can for a fiscal plan that roiled bond markets, spooked investors and sparked a major backlash from governing Conservative Party lawmakers.

Kwarteng, 47, cut short his attendance at  the International Monetary Fund meeting in Washington and while he was in the air it was decided he had to go. Truss has appointed Jeremy Hunt to replace him.

In a resignation letter, Kwarteng made it clear that Truss had requested his departure.

Truss was selected by Conservative members last month to run the country on a low-tax agenda that vowed to challenge “Treasury orthodoxy”.

Charged with delivering that vision, Kwarteng fired the finance ministry's most senior official, Tom Scholar, and unveiled unfunded tax cuts with a view to  turning “the vicious cycle of stagnation into a virtuous cycle of growth”.

What he unleashed instead was a vicious cycle of falling market confidence, flight from British assets and such damage to the British bond markets that the Bank of England was forced to intervene and start buying gilts.

Critics said the scrapping of the top rate of income tax, and the removal of a cap on banker bonuses, favoured the rich during one of the toughest cost-of-living crises in decades.

On October 3, the government was forced into a U-turn on the top rate of income tax. And on Friday, Truss said she would now allow a key business levy to rise from next year, raising £18bn (about R367bn). 

The son of Ghanaian immigrants, Kwarteng attended Eton and scored a “double-first” at Cambridge University in classics and history, and  attended Harvard in the US.

His tenure as finance minister is the shortest since 1970, when Conservative Iain Macleod died one month into the job. 

Reuters