Kwasi Kwarteng will be sacked as chancellor as Liz Truss tries to restore her political authority ahead of a U-turn on parts of her disastrous mini-budget later on Friday, according to sources.
A Downing Street source confirmed to the Guardian the prime minister intended to get Kwarteng to “carry the can” over her climbdown as she sought to calm the markets and the nerves of jittery Tory MPs.
Truss is meeting Kwarteng, previously her closest political ally and co-architect of her plan for growth, for crisis talks in Downing Street after he dashed back overnight from an International Monetary Fund (IMF) meeting in Washington.
Whitehall insiders told the Guardian the pair held different views on how far the government should go in reversing key elements of its plan to steady the markets and placate anxious Conservative MPs.
They said that Kwarteng was pushing for a full retreat on the corporation tax policy, raising it from the current 19% rate to the planned 25%, while the prime minister had wanted to go for just a fraction of the rise.
“The markets are pricing in a full reversal of the freeze and that will be Kwasi’s biggest concern,” said one.
One Treasury insider said Kwarteng had all along been “more prepared to U-turn” than Truss on corporation tax and previously the 45p rate, despite him largely getting the blame for the policies.
However, Downing Street insiders said that Truss, who is to hold a press conference on Friday afternoon as she prepares a humiliating climbdown, was expected to fully retreat on the plan.
The prime minister’s own position is in such peril, with Tory MPs actively plotting her downfall amid chaos, that she appears to have concluded that sacking the chancellor is essential for her political survival.
But the move is unlikely to appease angry Tory MPs, with one telling Sky News: “The idea that the prime minister can just scapegoat her chancellor and move on is deluded. This is her vision. She signed off on every detail and she defended it”.
Treasury insiders predicted that the former chancellor Sajid Javid or Cabinet Office minister Nadhim Zahawi, who held the post for 63 days this summer, could replace Kwarteng.
Truss is under intense pressure from Conservative MPs and the markets, leading No 10 to redraw the mini-budget, paving the way for a major U-turn on her signature corporation tax cut.
After weeks of defending the proposal for unfunded tax cuts on a huge scale, government sources have told the Guardian that a climbdown on the plan to scrap the rise in corporation tax was now “on the table”.
Kwarteng has been forced to deny his position as chancellor is in peril, insisting he was “absolutely, 100%” confident he would still be in post next month despite a growing Tory rebellion.
When asked by the Daily Telegraph on Thursday whether people should expect a U-turn in corporation tax, he replied: “Let’s see.”
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