The chancellor has cut short his visit to the International Monetary Fund in Washington amid growing speculation that the government is preparing to U-turn on its controversial mini-budget, it was reported on Friday.
It is understood that Kwasi Kwarteng is travelling home ahead of schedule for emergency talks with Liz Truss, the prime minister, and other Conservative MPs.
Speculation mounted on Thursday that the government was set to scrap all or parts of the mini-budget, which included £45bn of unfunded tax cuts but no spending review or economic forecasts. The pound rallied while gilt yields ticked lower on the speculation, although there was no official statement from Downing Street.
Kwarteng’s early return to London coincides with the Bank of England ending its emergency £65bn bond-buying package of support, which it launched in the aftermath of the mini-budget. The statement caused the pound to plunge and gilt yields to rise, and the central bank was forced to step in to prevent at-risk pension funds from collapsing.
There has been no official comment from the Treasury about Kwarteng’s return, although according to the BBC, a source close to the chancellor said: “He was very, very keen to be in London talking to colleagues.” According to the Financial Times, a source said the chancellor’s departure was not based on “panic” but a need to sell his medium-term fiscal plan to both MPs and the public.
Mel Stride, chair of the Treasury Select Committee, told Radio 4’s Today on Friday: “It could well be that a U-turn is about to happen and of course [Kwarteng] will want to be in the room if that is about to happen. My personal view is that it should happen.”
The government has already scrapped the politically-unpopular planned abolition of the 45p tax rate, and has brought forward its spending plans – and the publication of the Office for Budget Responsibility’s forecasts – to 31 October, from the originally scheduled 23 November.
There was speculation on Thursday that Downing Street was considering putting up corporation tax, although Treasury sources continued to insist there would be no changes.