Truss premiership ‘hanging by thread’ after Kwarteng sacking and latest U-turn

Liz Truss is desperately clinging to her premiership after she sacked her chancellor and ripped up the mini-budget but failed to calm the financial markets or furious Conservative MPs.

In a humiliating reversal, the prime minister backed down on plans to scrap an £18bn rise in corporation tax and replaced Kwasi Kwarteng as chancellor with Jeremy Hunt.

She said staying in her position as prime minister would help to "reassure the markets of our financial discipline", but the cost of government borrowing rose and the pound fell following her press conference announcing the changes.

Senior Conservative MPs are plotting how to remove her from office, with some mulling whether to publicly call for her to resign in the coming days. One former cabinet minister said they thought it was "50/50 whether she will make it till Christmas", adding: "If I could wave a magic wand and get rid of her now then I would, but the problem is the mechanism."

Some Tory MPs thought the appointment of Hunt, a Tory centrist who has twice failed to win the leadership, could buy Truss some time, potentially as long as the further fiscal event on 31 October. In a sign that the former foreign secretary may be a powerful figure, one of his allies among Tory MPs, Steve Brine, told the BBC that people could regard "Truss as the chairman and Hunt as the chief executive" of the government.

Others said they regarded Truss as "finished" and it was a matter of time before she was ousted, particularly if there were a succession of further polls showing the Tories more than 30 points behind Labour - a situation that would lead to a landslide win for the opposition.

The former Tory leader William Hague told Channel 4 News it had been a "catastrophic episode" and while he was still hoping Truss could recover, it would be honest to say her premiership "hangs by a thread".

With No 10 in disarray, Keir Starmer, the Labour leader, has called for a general election regardless of whether Truss stays or goes, saying the government has "completely run out of road".

He told the Guardian: "We are in the absurd situation where we are on the third or fourth prime minister in six years and within weeks we have got a prime minister who has the worst reputational ratings of any prime minister pretty well in history. Their party is completely exhausted, and clapped out. It has got no ideas, it can't face the future and it has left the UK in a defensive crouch. For the good of the country we need a general election."

Labour could also look at calling a confidence vote in the government as soon as next week, putting pressure on Tories to back her or trigger an election, according to some of the party's MPs.

Truss set out her change of course in a very brief press conference on Friday, acknowledging that parts of the mini-budget "went further and faster than markets were expecting". However, she refused to take responsibility for her own part in the situation and declined calls to apologise.

She also suggested she would stop public spending increasing as quickly as previously planned in remarks that appeared at odds with her promise in parliament this week not to cut public spending. Paul Johnson, the director of the Institute for Fiscal Studies, said higher inflation had "already eaten into plans set out a year ago", pointing out that she could not increase spending much less quickly "without it actually going down".

Truss's decision to sack Kwarteng and raise corporation tax to 25% is the second major U-turn after she scrapped the abolition of the 45p income tax rate. Her massive package of unfunded tax cuts and spending sent the pound tumbling and plunged markets into turmoil in September.

Asked why she should stay in the post, Truss replied: "I am absolutely determined to see through what I have promised - to deliver a higher growth, more prosperous United Kingdom."

She hurried away from the podium after eight minutes in front of the cameras in which she took four questions from a list of journalists handpicked by No 10. She provided no answers to why she was staying on and Kwarteng was taking the blame for their joint plan, but sources said the prime minister wanted him to "carry the can" over her climbdown as she sought to calm the markets and the nerves of jittery Tory MPs.

The appointment of Hunt infuriated some of Truss's earliest backers who endorsed her tax cutting plan. One who was among the original 24 who nominated her for the leadership in July said: "She is removing every reason why I voted for her." A previously loyal backbencher also said there would be gatherings over the weekend and she would be "told to go on Monday".

Several Tories said they were submitting letters to Graham Brady, the 1922 Committee chair, as the best way of showing they want her to resign, but others had reservations about this for fear a change of leader could cause pressure for a general election. The rules of the party state that she is safe from a party confidence vote for a year after taking office.

But one Tory grandee said Truss had to go. "Liz owns this mess, not Kwasi," they said. "She must go immediately and be replaced by Rishi and Penny. No question." A former cabinet minister added: "She should be resigning because it's not good enough that she gets rid of a chancellor with whom she has been in complete agreement from day one."

Jackie Doyle-Price, a Truss ally and minister, admitted to colleagues on WhatsApp: "Party discipline has totally broken down."

Truss's unceremonious dismissal of Kwarteng, her longtime friend and ideological ally, came after he had said on Thursday he was "not going anywhere". He then rushed back from an International Monetary Fund (IMF) meeting in Washington to be sacked on Friday morning.

Chris Philp, Kwarteng's deputy in the Treasury, has been moved to the Cabinet Office, with Edward Argar, formerly a Cabinet Office minister serving as paymaster general, taking over as chief secretary to the Treasury. In a tweeted letter to Truss, Kwarteng began: "You have asked me to stand aside as chancellor. I have accepted." In her reply, Truss said she was "deeply sorry" to lose him and that she respected him for standing aside "in the national interest".