U.K. prime minister fires finance chief amid economic turmoil

Transcript

A MARTINEZ, HOST:

British Prime Minister Liz Truss has fired Britain's equivalent of a treasury secretary, Kwasi Kwarteng. The move comes after Kwarteng's budget, which included massive tax cuts, sent financial markets reeling in the U.K. And Truss said, today, something had give.

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PRIME MINISTER LIZ TRUSS: It is clear that parts of our mini-budget went further and faster than markets were expecting. So the way we are delivering our mission right now has to change.

MARTINEZ: Today's move is a massive U-turn for the prime minister. And it threatens her hold on a job she's had for just six weeks. For more, we turn to NPR's London correspondent Frank Langfitt. Frank, tell us a little more about what's behind Truss' decision today.

FRANK LANGFITT, BYLINE: Yeah, A, basically what happened is this budget sparked financial panic. And that's the last thing you want when you've just taken a job like this. And so what Liz Truss was saying is in order to restore financial stability, she needed to make changes. She decided specifically to go ahead with raising corporate taxes, which is something that she'd opposed. And of course, this wasn't just to calm markets, but actually to try to keep her job.

MARTINEZ: What about this budget, Frank? What's the problem with it?

LANGFITT: There were a lot of problems with it, A. One thing, it was $50 billion in unfunded tax cuts. That's the biggest cut in this country in half a century. Kwarteng said it would drive growth and cut inflation, but there were really big risks. You know, the tax cuts would be expanding the money supply here by tens of billions of dollars at a time when inflation is almost at 10%. Now, the markets responded to this. And they basically said, this is a terrible idea. The pound crashed to a record low. It was almost at the equal value with the dollar. Bank of England had to buy up a lot of bonds to support pension funds here. And it was basically seen as a big mess.

MARTINEZ: Well, now that he lost his job, what did Kwarteng have to say about all this?

LANGFITT: Well, it's interesting. I was reading his letter, A, and he kind of stuck to his guns. He said he accepted Truss' decision. But he also said that, you know, the U.K. economy has been dogged by low growth and high taxation for many years. And he's right. That's absolutely true. And he said, those policies are going to have to change for the country to move forward. But I guess what Liz Truss was saying is maybe not quite right now. And now she's named a new head of the treasury, basically. His name is Jeremy Hunt. He's a former health secretary. And he's seen as - the British like to say, you know, a safe pair of hands.

MARTINEZ: Now, Kwarteng is gone. What about Liz Truss? Can she hold onto her job?

LANGFITT: I think there are real doubts about that right now. I was just watching the press conference here, A. And reporters kept asking, how can you stay when this was your own policy, was like a cornerstone of the way she won the premiership? And the former treasury secretary here, Philip Hammond, said that he had - she had basically trashed the Conservative Party's reputation for economic competence, which is, really, very much a part of their brand. If you look at the polls now, A, the Conservative Party is running over 30% behind the opposition Labour Party in the polls. I've never seen a gap like that. So we'll have to see. I mean, the big picture here, also, I think, for our listeners is, you know, since 2016, the Brexit vote, this country has been in intermittent political chaos. And from the perspective you'd see in Paris or New York or elsewhere in the West, this is not good, to have a reliable ally that's been very helpful in Ukraine, for instance, be in such political disarray. So I'm sure that this is being watched very closely in a lot of capitols in the West.

MARTINEZ: That's NPR's Frank Langfitt in London. Frank, thanks.

LANGFITT: Good to talk, A. Transcript provided by NPR, Copyright NPR.