UK Chancellor Kwasi Kwarteng met with global finance ministers at the IMF's annual meeting. According to a source close to him, the Chancellor is keen to discuss the financial plans with both government colleagues and MPs as he is returning to the UK early.

Last month, he offered £45bn of tax cuts, funded by borrowing, which spooked financial markets and caused the pound to plunge. He cancelled plans to cut the top income tax rate, which accounted for just £2 bn of the package.

Liz Truss forced to overturn key policy proposal

Autoplay

1 of 5

Liz Truss

UK Foreign Secretary Liz Truss, a frontrunner in the Prime Minister's race with former Chancellor Rishi Sunak, had said on Monday night, that she would save 8.8 million pounds by introducing regional pay boards instead of national ones to set salaries for civil servants.

Key policy proposal

She was forced to take a sharp U-turn over the key policy proposal after widespread criticism. It was attacked because it would have meant that government employees in the poorer part of the country would earn less.

Public sector pay

By Tuesday afternoon, Truss' team had released an updated statement insisting "current levels of public sector pay will absolutely be maintained". "Our hard-working frontline staff are the bedrock of society and there will be no proposal taken forward on regional pay boards for civil servants or public sector workers," the statement added.

Voting to end on Sept 2

Around 180,000 Conservative members across the UK will vote in the next few weeks in a party leadership contest, with voting set to close on the evening of September 2 and the winner announced on September 5. The new leader will take charge as British Prime Minister right away until the next general election, expected in 2024 unless called earlier.

Tax main battleground

Meanwhile, the two finalists are laying out their stalls of policy proposals if elected, with tax the key battleground issue – with Truss promising immediate tax cuts and Sunak proposing more staggered cuts after curbing soaring inflation rates.

However, the Bank of England intervened to stabilize the value of government bonds due to continuing market turmoil. They announced on Friday they would withdraw that program of emergency support. Despite this, the pound has rallied in value following speculation in Westminster that another U-turn is imminent. Government officials are rumoured to reverse their decision to scrap a planned rise in corporation tax. It was a central promise of UK PM Liz Truss's leadership campaign that she would abandon the rise to the tax in 2023, which had risen from 19% to 25%.

Frequently Asked Questions:

1: What is UK PM Liz Truss's reaction to the economic fiasco?
1: UK prime minister Liz Truss says it would be a "complete betrayal" to the public if this budget doesn't make an offing.

2: Who is Kwasi Kwarteng?
2: Kwasi Kwarteng is a British politician serving as Chancellor of the Exchequer since 2022.

Disclaimer Statement: This content is authored by an external agency. The views expressed here are that of the respective authors/ entities and do not represent the views of Economic Times (ET). ET does not guarantee, vouch for or endorse any of its contents nor is responsible for them in any manner whatsoever. Please take all steps necessary to ascertain that any information and content provided is correct, updated, and verified. ET hereby disclaims any and all warranties, express or implied, relating to the report and any content therein.

UK Chancellor Kwasi Kwarteng cuts short US trip for urgent talks on mini-budget in Downing Street. Read more

A revolt among Tory MPs over UK Chancellor Kwasi Kwarteng's economic plan has resulted in a flight home him. Prime Minister Lizz Truss is under pressure and is keen to change the economic plan to calm market turbulence.