LONDON — Under relentless pressure from financial markets, Britain’s recent chancellor of the Exchequer, Jeremy Hunt, swept away the free-market economic agenda of Prime Minister Liz Truss on Monday, a humiliating repudiation that left her credibility in tatters and her political survival doubtful.
Mr. Hunt said he would reverse virtually all the federal government’s planned tax cuts, which were the centerpiece of Ms. Truss’s promise to reignite Britain’s economic growth, but which kicked off weeks of market turmoil due to fears that they’d force the federal government into massive recent borrowing.
The wholesale about-face produced a striking tableau in Parliament later within the day when Mr. Hunt rose to defend the revamped fiscal plan. As he fenced with critics, an expressionless Ms. Truss sat silently behind him on the frontbench, already appearing like a bystander in her own government.
While Mr. Hunt’s statement calmed the markets, it set off a tumultuous day in British politics. Lawmakers from the opposition Labour Party demanded that Ms. Truss resign, and a number of other Conservative lawmakers rose to criticize the best way the federal government had rolled out its ill-fated fiscal plan.
Late on Monday, Ms. Truss made her first full apology for the chaos of recent weeks but gave no indication that she plans to face aside, saying she aimed to guide her party into the following general election.
“I do want to simply accept responsibility and express regret for the mistakes which have been made,” she told the BBC’s political editor, Chris Mason, adding “I did make mistakes and I’ve been upfront and honest about that.”
Ms. Truss’s Conservative government had planned to announce the main points of its fiscal plan on Oct. 31, but with the markets pummeling the pound and other British assets, Mr. Hunt rushed forward the schedule. His announcement constituted one of the crucial dramatic policy reversals in modern British political history.
“A central duty for any government is to do what’s mandatory for economic stability,” Mr. Hunt declared. “No government can control markets, but every government can provide certainty in regards to the sustainability of public funds.”
The choices Britain would should make about its economy, he added, were “eye-wateringly difficult.’’
Along with scrapping the tax cuts, the chancellor also said the federal government would end its costly state intervention to cap energy prices next April. It can get replaced by a more targeted, though still undefined, program that would increase uncertainty for households facing soaring gas and electricity bills.
Economic scholars struggled for an example of one other government in a complicated country that had so thoroughly disavowed its economic policy. The closest analogy, said Kenneth S. Rogoff, a professor of economics at Harvard, was France in 1983, when an embattled President Francois Mitterrand pivoted from a left-wing economic plan, based on income redistribution, to considered one of austerity.
“But unlike Truss,” Professor Rogoff said, “Mitterrand had won an actual election and time was on his side to right the ship.”
It was a deeply damaging day for a chief minister who has been in office for less than six weeks. Before appearing next to Mr. Hunt in Parliament, Ms. Truss had sent the leader of the House of Commons, Penny Mordaunt, to reply questions on the crisis on her behalf. That prompted accusations from opponents that she was ducking an ungainly confrontation.
“The prime minister will not be under a desk,” Ms. Mordaunt, who ran against Ms. Truss in the course of the Conservative Party leadership contest this summer, felt compelled to say, when pressed in regards to the prime minister’s whereabouts.
As Mr. Hunt moved to take control of the economic levers of presidency, Conservative lawmakers were plotting ways to force Ms. Truss out of power. The mechanics of removing her remained murky; the lawmakers were casting about for tactics to search out a consensus alternative for her that might avoid one other full-scale and divisive leadership contest. A handful have called publicly for her resignation.
Whatever the strategy, political analysts said that her position appeared untenable, given the gutting of her legislative agenda.
“It’s difficult to think about a possible reason why it is advisable to hang on together with her when you would stem the bleeding and move on by getting another person in,” said Tim Bale, a professor of politics at Queen Mary University of London, “You only need to get the entire episode behind you and pretend it’s a foul dream.”
For the Tories, the urgency of the duty was underscored by a recent poll released Monday that showed Labour ahead by 36 percentage points, 7 points higher than a previous survey last week. Other recent polls have also shown large margins for Labour.
In perhaps the one ray of sunshine for Downing Street, the pound and British bonds steadied after the announcement. Market backlash has driven much of the federal government’s recent actions. Mr. Hunt’s unexpectedly scheduled announcement got here three days after Ms. Truss ousted his predecessor, Kwasi Kwarteng, forcing him to chop short a visit to annual meetings of the International Monetary Fund in Washington.
Mr. Hunt, in announcing the policy shift, said the federal government would shelve a discount in the essential income tax rate, the centerpiece of Ms. Truss’s tax-cutting plan. Mr. Kwarteng had earlier scrapped a tax cut for high-income people and Ms. Truss announced she would, in spite of everything, go ahead with a planned increase in corporate taxes, after initially saying she would cancel it.
On Monday afternoon, Mr. Hunt said he was open to the principle of imposing a windfall profits tax on energy producers, one other measure that Ms. Truss had rejected in the course of the leadership contest. It capped a series of reversals that left Ms. Truss with an economic program much like that of Rishi Sunak, the previous chancellor whom she defeated in that campaign after denouncing his proposals.
The federal government’s goal is to revive Britain’s credibility within the markets by explaining the way it plans to fill an estimated budget hole of 72 billion kilos ($81.8 billion). Mr. Hunt said the federal government’s reversals would raise an extra £32 billion a 12 months. He said he would detail the cuts in spending on Oct. 31.
Whether Ms. Truss will still be prime minister then is up for debate. Under the prevailing rules, she mustn’t face a leadership challenge until next September on the earliest. However the Conservative Party rule book can easily be modified if enough lawmakers need to achieve this.
The larger problem for the Tories is to make sure a swift handover of power to a frontrunner who might be relied on to revive stability. The present rules allow for lawmakers to pick out two contenders and for party activists to make the ultimate selection. However the protracted contest this summer to switch Boris Johnson produced Ms. Truss as its winner, and senior Tories are determined to avoid handing that call to party members again.
The cleanest way can be a coronation of the sort that took place in 2003 when Michael Howard became Conservative Party leader, unopposed. But that took place when the Conservatives were in opposition. Now, with the lure of two years in Downing Street, it could be hard for ambitious politicians to permit considered one of their rivals to take the crown uncontested.
“There are three or 4 individuals who would really like to do the job, reckon they may do the job, and would find it hard to concede to another person it with no fight,” Professor Bale said.
Any election can be less predictable than a coronation. In such a scenario, for instance, Mr. Johnson, the discredited former prime minister, might attempt to get his job back, nonetheless far-fetched that might sound.
One senior Conservative lawmaker, Charles Walker, described Ms. Truss’s position as “enormously precarious.” He said to the BBC, “I feel if you find yourself on this kind of position you’ve got to expect as a chief minister that the party won’t tolerate it for any length of time, definitely not weeks.”