British PM Truss and Chancellor of the Exchequer Kwarteng visit Berkeley Modular, in Northfleet
British Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng visit Berkeley Modular, in Northfleet, Kent, Britain, September 23, 2022. Reuters

British finance minister Kwasi Kwarteng cut short his trip to Washington to return early to London on Friday, where pressure is mounting for the new government to scrap an economic policy that unleashed turmoil on financial markets.

The battered pound and government bonds rallied on Thursday as Prime Minister Liz Truss's government began re-examining a package for unfunded tax cuts that has sent borrowing costs surging and forced the Bank of England to intervene.

Sources familiar with the matter have told Reuters that Kwarteng left a meeting of global finance ministers in Washington to join colleagues who are looking at how to balance the books for a fiscal plan announced just three weeks ago.

Truss and Kwarteng are now under huge pressure to reverse course as polls show their support has collapsed and colleagues have started openly discussing whether they should be replaced, just 37 days after they entered office.

With pressure mounting on financial markets, the government has already brought forward an announcement for a full fiscal plan that will set out the cost of the unfunded tax cuts and whether they will spark economic growth.

Greg Hands, a junior trade minister, suggested people would now need to "wait and see" what Kwarteng announces at that event, scheduled for Oct. 31.

Asked if the government was preparing to change course, he told Sky News: "I saw the prime minister yesterday. The prime minister and the chancellor are absolutely determined to deliver on the growth plan.

"I think we're just going to have to wait and see what the chancellor says in the medium term fiscal plan on the 31st of October."

Mel Stride, a backer of Truss's leadership rival Rishi Sunak and the head of the influential parliamentary Treasury Select Committee, said that suggestion was unacceptable.

"I think we have reached a point now where we need this very powerful, significant signalling to the market that fiscal credibility is now firmly back on the table. And I think that means doing something right now," Stride told BBC radio.

The sense of chaos at the heart of government has fuelled speculation as to whether Truss and Kwarteng can survive. Truss was elected by the members of the party, and not the broader electorate, as the fourth prime minister in six politically turbulent years in Britain.

(Writing by Kate Holton; additional reporting by Sarah Young and Muvija M; editing by Michael Holden)