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Chancellor Kwasi Kwarteng to return to London from Washington early as major mini-budget U-turn expected | UK News

Chancellor Kwasi Kwarteng has cut short his trip to the International Monetary Fund in Washington and is returning to the UK earlier than planned, as another major mini-budget U-turn is expected.

Mr Kwarteng was due to attend a final day of meetings at the IMF’s annual gathering today.

Instead, after a hasty briefing with journalists late on Thursday, he announced he would fly home overnight.

A source close to him dismissed suggestions that this represented a sign of panic.

Truss is out ‘and we have the numbers’, says Tory MP – politics latest

Pressed on why there was a need for a last-minute schedule change, a Treasury official insisted that it was for talks on “the medium-term fiscal plan”.

The chancellor had “a very constructive time, spoke to Janet Yellen (the US Treasury Secretary), spoke to Kristalina Georgieva, the head of the IMF… and it put everything in a global context… a global set of challenges…” according to the treasury official.

The chancellor’s team bristled at comparisons made to the Greek financial crisis of 2011 when the Greek finance minister had to rush home from an international meeting.

“That was completely different. A sovereign debt crisis and on a completely different scale to anything that’s happening in our markets,” a Treasury source said.

Pushing for an explanation for such an unusual change in scheduling, we were told: “Markets have been turbulent and [the chancellor] really really wants to be there engaging with colleagues, engaging with ministers…”

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Pressure builds on Kwarteng

On his return, the chancellor is likely to find a significant section of his mini-budget re-drawn following days of open revolt among Tory MPs and an expectation that another major U-turn is on the cards.

It comes amid speculation in Westminster about the fate of Mr Kwarteng, only a few weeks into the job, if his financial plans are scrapped in the coming days.

However, Mr Kwarteng has insisted that his position is safe, telling broadcasters: “I am not going anywhere.”

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PM’s key pledge could be next casualty

Meanwhile, mounting pressure has been placed on Prime Minister Liz Truss to reassure the UK’s financial markets and rescue her administration, with her key pledge to scrap the planned increase in corporation tax from 19% to 25% widely seen as a likely casualty.

Former home secretary Priti Patel became the latest senior Tory to suggest the government could be forced into another U-turn, telling Sky News “market forces” could make a reversal on corporation tax cuts unavoidable.

Downing Street has not denied the policy could be reversed, despite it being one of Ms Truss’s landmark promises.

Kwasi Kwarteng in Washington DC for talks with IMF as Liz Truss faces revolt at home | UK News

As Liz Truss faces open revolt in her own party over her tax cut plans, her Chancellor Kwasi Kwarteng will today try and reassure the IMF that everything is under control.

Ministers continue to be under pressure for the market chaos that erupted after the government announced its £45bn package of unfunded tax cuts last month.

The prime minister and her chancellor say the cuts are needed to get Britain’s economy growing again, as data published on Wednesday suggested we are heading for recession.

Mr Kwarteng will meet with IMF leaders in Washington DC on Thursday, after the institution’s chief economist said tax cuts threatened to cause “problems” for the UK economy.

The IMF has said Britain’s priority should be tackling inflation rather than adding to the price problem through tax giveaways to achieve economic growth.

The chancellor was seen touring the IMF’s offices and being shown artwork on Wednesday ahead of talks today.

Back at home, Ms Truss is facing growing calls for another policy reversal as her MPs see more and more polls threatening a Labour landslide at the next election.

The PM and her chancellor have already been forced into a U-turn on one of the many tax cutting policies within their plan – namely scrapping the 45p tax rate for the highest earners.

In her first PMQs since the dramatic mini-budget she pledged not to cut public spending to balance the books – despite a leading economics-focused think tank warning the government is billions short of the sums needed.

Liz truss responds to Sir Keir Starmer during PMQs
Image:
Liz Truss responds to Sir Keir Starmer during PMQs

Read more:
What on earth is happening in UK markets?
What are bonds and where do they fit in the mini-budget crisis?

The Institute for Fiscal Studies (IFS) has warned that the government would have to cut spending or raise taxes by £62bn if it is to stabilise or reduce the national debt as promised.

Mel Stride, the Tory chairman of the Commons Treasury Committee, said that given Ms Truss’s commitments to protect public spending, there was a question over whether any plan that did not include “at least some element of further row back” on the £43 billion tax-slashing package can reassure investors.

“Credibility might now be swinging towards evidence of a clear change in tack rather than just coming up with other measures that try to square the fiscal circle,” Mr Stride said.

Conservative former minister David Davis called the mini-budget a “maxi-shambles” and suggested reversing some of the tax cuts would allow Ms Truss and Mr Kwarteng to avert leadership challenges for a few months.

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Time ticking for pension managers

Meanwhile, Jacob Rees-Mogg has suggested the government could ignore gloomy Office for Budget Responsibility forecasts if they predict low growth and rising debt.

The Business Secretary told ITV’s Peston that “its record of forecasting accurately hasn’t been enormously good” and that the chancellor could draw on “other sources of information”.