The prime minister has resigned after 44 days in the role.
In a statement outside 10 Downing Street today (October 20), Liz Truss said: “I came into office at a time of great economic and political instability…I cannot deliver the mandate.”
Truss was told to quit by senior Tory members, according to the FT, the day after the home secretary, Suella Braverman, quit the government and used her resignation letter to issue a thinly-veiled swipe at the PM.
There will be a leadership election to be completed in the next week, ahead of a fiscal statement on October 31.
Leader of the Labour party, Keir Starmer, said the Conservative party has shown it no longer has a mandate to govern, and called for a general election.
“The British public deserve a proper say on the country's future," he said.
Chief market analyst at HYCM, Giles Coghlan, said: "Truss’s departure is likely to be mildly GBP positive, depending on her successor for the premiership.
"Already, the UK gilt market was supported as rumours of the prime minister’s resignation came to light this morning, which is a good sign for the pound’s stability.”
Six weeks in power
Truss’s turbulent six weeks in power presided over a spectacular crash in the UK government bond market, after former chancellor Kwasi Kwarteng unveiled £43bn in unfunded tax cuts.
Markets quickly reacted with a sell-off in bonds causing a sharp rise in gilt yields, causing havoc for mortgage holders and lenders, and the pound slumped to historic lows against the dollar.
The IMF warned the UK to scrap the tax cuts, and ratings agencies downgraded the UK as a result.
A crisis in pension funds was narrowly averted after the Bank of England launched an emergency bond-buying intervention after margin calls on derivative products caused a spiral in bond yields.
Truss sacked Kwarteng, replacing him with former health secretary Jeremy Hunt, who quickly U-turned on almost all of the “mini” Budget.
The only measures he kept were the abolition of the health and social care levy, and the changes to stamp duty.
The government decided not to proceed with cuts to dividend tax rates, the reversal of IR35 reforms, the VAT-free shopping scheme for non-UK visitors and the freeze on alcohol duty rates.
The chancellor said these changes will raise £32bn a year.
Hunt said: “The prime minister and I have agreed that beyond that it would not be responsible to expose public finances to unlimited volatility in international gas prices.”
Instead, he launched a Treasury-led review into how best to support energy bills while costing the taxpayer less than originally planned.
“The most important objective for our country right now is stability,” Hunt said as he committed to drop debt as a share of the economy in the medium-term.
sally.hickey@ft.com
