Kwasi Kwarteng was ousted as chancellor on Friday as U.K. Prime Minister Liz Truss announced a reversal on corporate tax cuts, in measures meant to stabilize the U.K. debt market.
Truss in a press conference said the government acted out of the need for financial stability. “We need to act now to reassure markets of our fiscal discipline,” she said.
Kwarteng, in a statement, acknowledged the poor reception to his mini budget, saying “the economic environment has changed rapidly.”
Kwarteng will be replaced by Jeremy Hunt, previously health secretary for Truss’ predecessor Boris Johnson.
The yield on the 30 year gilt
— which was high as 5.1% as recently as Wednesday — had dropped earlier, but then rose 3 basis points to 4.58%.
The yield on the 10-year gilt
dropped 3 basis points to 4.16%. Yields move in the opposite direction to prices.
fetched $1.1194, down from $1.1331 on Thursday.
Truss said the reversal in corporate tax cuts — the rate will stay at 25%, rather than move down to 19% as planned — will save £18 billion per year. Truss added that the government will announce spending cuts when it presents its medium-term fiscal plan at the end of October, along with an independent forecast from the Office of Budget Responsibility.
The government has already relented on a planned cut for those making above £150,000.
The Bank of England’s emergency bond-buying plan — designed to ease tensions for pension funds — is due to expire on Friday.
The central bank says it’s purchased £17.8 billion in securities.