Kwasi Kwarteng has paid the price for the chaos unleashed by his mini-budget as he flew back to London to be dramatically sacked by Liz Truss.

The Chancellor cut short his attendance at the International Monetary Fund’s annual meeting in Washington to be told of his fate in a brief meeting with the Prime Minister.

In a letter to Ms Truss posted on social media, Mr Kwarteng said: “You have asked me to stand aside as your Chancellor. I have accepted.”

He said her “vision of optimism, growth and change was right” and pledged to support her from the backbenches.

Downing Street said former foreign secretary Jeremy Hunt would be Mr Kwarteng’s replacement, a move likely to signal a major shift in policy direction.

A more centrist figure, Mr Hunt is unlikely to share Mr Kwarteng and Ms Truss’s ideological free market commitment to tax cuts.

Mr Kwarteng’s dismissal follows weeks of turmoil after his £43 billion package of unfunded tax cuts spooked the financial markets.

His departure may give Ms Truss some brief breathing space as she seeks to shore up her battered authority – but it will also raise fresh questions about her chances of survival.

The Prime Minister is closely linked to Mr Kwarteng’s tax-cutting agenda having strongly defended his plan to get the economy going again.

The commitments to reverse a hike in national insurance rates and ditch a planned rise in corporation tax, without explaining how they would be paid for, were the key planks of her leadership election campaign.

But after the financial markets took fright – with the pound plummeting against the dollar and the cost of government borrowing soaring – the Conservatives have seen their opinion poll ratings tank.

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,” she said.

“It was a crisis made in Downing Street. Liz Truss and the Conservatives crashed the economy, causing mortgages to skyrocket, and has undermined Britain’s standing on the world stage.

“We don’t just need a change in chancellor, we need a change in Government.”

Even before Mr Kwarteng’s sacking there were reports that Tory MPs were plotting to get rid of the Prime Minister amid fears she was set to lead them to certain defeat at the next general election.

There were reports that some MPs were looking to install her main rivals for the leadership – Rishi Sunak and Penny Mordaunt – on a joint ticket at the head of a new administration.

The manoeuvring was condemned by former culture secretary Nadine Dorries who angrily accused Mr Sunak’s supporters of agitating to get rid of the Ms Truss.

She tweeted: “They agitated to remove Boris Johnson and now they will continue plotting until they get their way. It’s a plot not to remove a PM but to overturn democracy.”

Mr Kwarteng appeared to be unaware of his impending fate when he spoke to broadcasters in Washington on Thursday.

Asked if he would still be in office in a month’s time, Mr Kwarteng replied “Absolutely 100%”, adding: “I’m not going anywhere”.