Liz Truss has appointed the former Conservative leadership contender Jeremy Hunt as her new chancellor after sacking her close ally Kwasi Kwarteng.
Appointing the ex-health secretary, a centrist who backed Rishi Sunak, is viewed as a reversal of economic strategy and a bid to shore up support among Tory MPs in despair over her leadership.
Mr Hunt becomes the fourth Tory chancellor this year, as Ms Truss shuffles her top team in an attempt to reassure markets, the public and her own MPs that she can balance the books.
The PM staged a seven-minute No 10 press conference at which she announced a U-turn on her plan to ditch a corporation tax rise, a move which means an extra £18bn a year to the Treasury.
Ms Truss has also demoted key ally Chris Philp, moving him from his role as chief secretary to the Treasury to the Cabinet Office, where he becomes a junior minister and paymaster general.
Mr Philp will be replaced at the Treasury by Edward Argar, the former paymaster general. Ms Truss sacked Mr Kwarteng at lunchtime on Friday following the disastrous response to last month’s tax-cutting mini-Budget.
The PM iss understood to be have wanted announce a major U-turn on her tax cuts before the weekend in a bid to avoid fresh market panic when the Bank of England ends its bond-purchasing scheme on Friday.
It came after The Independent revealed earlier this week that officials had been asked to go through the tax giveaway mini-Budget “line by line” to see what could be changed.
At Westminster, there have been reports of fevered plotting among Tory MPs amid suggestions that Ms Truss’s two main rivals for the Tory leadership over the summer – Mr Sunak and Penny Mordaunt – could be installed.
MPs are said to have held talks about how to change 1922 Committee rules and arrange a joint Sunak-Modaunt ticket. One senior Tory told The Times that “a coronation won’t be that hard to arrange”.
One former Tory minister told The Independent that the latest moves as “desperate” and said it would not be enough to salvage Ms Truss and Mr Kwarteng’s careers.
The replacement of Mr Kwarteng with Mr Hunt will not please everyone. A group of senior Tories are preparing to publicly call on Ms Truss to resign next week, according to BBC’s Newsnight.
One source told the programme: “Liz Truss campaigned on these tax cuts. Liz Truss won the Tory leadership contest on the basis of this programme. It is absurd for her to blame Kwasi.”
For Labour, shadow chancellor Rachel Reeves said the whole government had to go. “Changing the chancellor doesn’t undo the damage that’s already been done.”
Nick MacPherson, former top civil servant at the Treasury, said Bank of England government Andrew Bailey was responsible for a major change in course from Ms Truss.
“All credit to Bailey of the Bank … whose Friday deadline has forced the government to adopt a more orthodox economic policy and thus restore order to the markets,” he tweeted.
An unrepentant Mr Kwarteng defended the radical growth agenda in his official resignation letter to the PM – and insisted it was one which he shares with Ms Truss. “Following the status quo was simply not an option,” he said.
In a message which may reassure Ms Truss that he is not planning to take revenge, Mr Kwarteng concluded: “We have been colleagues and friends for many years …. I believe your vision is the right one.”
Conservative support has slumped below 20 per cent in the worst poll yet to hit beleaguered Ms Struss, giving Sir Keir Starmer’s Labour a remarkable 34-point lead.
The PeoplePolling survey also found that just 9 per cent of voters have a favourable view of the PM, compared to 65 per cent who regard her unfavourably.
