Jeremy Hunt has been appointed chancellor after the prime minister sacked Kwasi Kwarteng.
Mr Hunt returns to the frontbenches after three years, having served as foreign secretary under Theresa May and, before that, health secretary and culture secretary under David Cameron.
His appointment, just an hour after his predecessor was sacked, is a sign that Liz Truss is trying to get her opponents on side.
Mr Kwarteng’s downfall was set in motion by the mini-budget on 23 September, in which he announced £45bn in unfunded tax cuts.
The mini-budget pushed the pound to a record low against the dollar, sent the cost of government borrowing and mortgage rates up and led to an unprecedented intervention by the Bank of England.
Chris Philp, who was heavily involved in plans for the mini-budget, has also lost his job as chief secretary to the Treasury but has been moved to the Cabinet Office as paymaster general.
In Mr Kwarteng’s letter to Ms Truss accepting he had been sacked, he said: “You have asked me to stand aside as your chancellor. I have accepted.”
He said he accepted the job “in full knowledge that the situation we faced was incredibly difficult, with rising global interest rates and energy prices”.
But he said the PM’s “vision of optimism, growth and change was right” and “following the status quo was simply not an option”.
He finished his letter by saying they have been “colleagues and friends for many years” and he believes her “vision is the right one”.
“It has been an honour to serve as your first chancellor. Your success is this country’s success and I wish you well,” he wrote.
Moments later, he was seen leaving No 11 Downing Street and was driven away from the home he had only occupied for just over a month.
Ms Truss replied to his letter by saying she is “deeply sorry to lose” him from government and said “I deeply respect the decision you have taken today” – despite her sacking him.
She said they “share the same vision” for the UK and praised him for the energy price guarantee and the energy bill relief scheme, saying “thanks to your intervention, families will be able to heat their homes this winter and thousands of jobs and livelihoods will be saved”.
Ms Truss and Mr Kwarteng, who have been close friends for years, have insisted over the past few weeks that the turbulence in the UK economy was part of a global problem exacerbated by the war in Ukraine and post-pandemic recovery.
But last week, after open revolt by Tory MPs and a record surge for Labour in the polls, the prime minister announced the first major reversal of mini-budget policies when she backtracked on scrapping the 45p top rate of income tax.