LONDON - British Prime Minister Liz Truss fired Finance Minister Kwasi Kwarteng on Friday, as she scrapped parts of her economic package in a desperate bid to stay in power and survive the financial and political turmoil gripping Britain.

Mr Kwarteng said he resigned at Ms Truss’ request.

“You have asked me to stand aside as your Chancellor. I have accepted,” he said in a resignation letter he posted on Twitter. “It is important now as we move forward to emphasise your government’s commitment to fiscal discipline."

In a letter to Mr Kwarteng, Ms Truss said: "I deeply respect the decision you have taken today. You have put the national interest first."

She added: "I know that you will continue to support the mission that we share to deliver a low tax, high wage, high growth economy that can transform the prosperity of our country for generations to come.

“We need to act now to reassure the markets of our fiscal discipline.”

Hours later, Ms Truss told reporters she would now allow a key business levy to rise from next year, raising £18 billion (S$29 billion), as she accepted she had gone “further and faster” than markets had been expecting.

Ms Truss said Mr Kwarteng has put the national interest first by resigning after less than six weeks on the job.

Mr Kwarteng is now the second shortest-serving British chancellor on record.

The shortest-serving chancellor, Mr Iain Macleod, died of a heart attack 30 days after taking the job in 1970.

Since 2019, Britain has had four chancellors, including Mr Nadhim Zahawi, who served the third-shortest tenure with 63 days during a short-lived reshuffle under former prime minister Boris Johnson, and Mr Sajid Javid, who served 204 days, the fourth shortest tenure on record.

Ms Truss appointed former foreign and health secretary Jeremy Hunt, a centrist politician, to replace Mr Kwarteng.

Mr Hunt has twice tried unsuccessfully to become Conservative leader. He has been on the backbenches since Mr Johnson became prime minister in 2019, and is seen as coming from the more one-nation wing of the party.

His appointment indicates Ms Truss wants to broaden her support.

The Prime Minister's Office also announced that Mr Chris Philp is no longer Britain’s chief secretary to the Treasury and will be replaced by lawmaker Edward Argar, who is currently minister for the Cabinet Office.

The chief secretary is the Treasury’s second most important job and includes management of public spending.

The pound plunged against the US dollar, as investors seized on reports of Mr Kwarteng's sacking over his debt-fuelled budget that sparked markets chaos. The currency sank 1.1 per cent to US$1.1199.

There had been a growing clamour for the embattled Prime Minister to reverse course since Sept 23, when Mr Kwarteng announced Britain’s biggest set of unfunded tax cuts in half a century.

That spooked the markets, sending the pound plummeting to a record low against the US dollar and forcing the Bank of England into an emergency intervention to support the bond market.  That was due to end on Friday, adding pressure on the government to act.

While the details were unclear as to which bits of her plan she would unpick, that Ms Truss was having to do so at all was a major blow to her just over five weeks into her tenure.

She and Mr Kwarteng had staked their reputations on an all-out pitch for growth, and Ms Truss sought to portray herself as a leader who would be resolute in pursuing her goals.

But with the Conservative Party tanking in the polls, Tory MPs openly demanding a change of course, and financial markets still in turmoil, the pair found themselves boxed into a corner with no easy exit.

They had to either stick to their guns and face the prospect of more market chaos, or shred their reputations by changing tack.

Officials have been drafting options for Ms Truss on how to change course and plug the £60 billion black hole that the Institute for Fiscal Studies estimated has opened up in the public finances.

Corporation tax is seen as the most likely target of a policy reversal, especially as it was one area Mr Kwarteng refused to rule out reversing on Thursday.

Under Mr Johnson’s administration, the levy was due to rise to 25 per cent from 19 per cent in April. Ms Truss’s government had vowed to scrap the rise.

When Mr Kwarteng unveiled his strategy in September, the Treasury estimated it would cost an average of more than £13 billion a year over five years.

Other options include reversing a planned cut in the basic rate of income tax to 19 per cent from 20 per cent – a politically unpalatable course of action; cuts to spending – something Ms Truss vowed not to do on Wednesday; and reversing smaller measures including a VAT refund on shopping for tourists and a planned cut in dividend tax. BLOOMBERG, REUTERS