Latest book: Bank of England steps in as Tories slam Truss’ ‘inane folly’
Bank of England won’t shy away from raising interest rates amid market turmoil
A senior Tory MP has warned ‘this inane madness cannot continue’, hitting Liz Truss’ government after the Bank of England was forced to intervene to stabilize the bond market.
Tories were appalled and called for parliament to be dismissed after the Bank announced a decision to temporarily buy 30-year government bonds, which hit a 20-year high on Wednesday.
The bank said it wanted to stave off a “significant risk to UK financial stability” with the move, which followed warnings that the gilt market was becoming “almost untradable” due to volatility.
The economic turmoil comes in the wake of Chancellor Kwasi Kwarteng’s mini-budget, which led the pound to fall to an all-time low on Monday.
After rebounding on Tuesday, the pound fell again this morning as FTSE-100 shares fell nearly 18 months ahead – after the International Monetary Fund intervened to urge Mr Kwarteng to ‘reassess’ cuts in taxes in its mini-Budget.
Chancellor’s tax cut for the wealthy is a ‘mistake’, says Tory MP
Tory MP Robert Largan criticized Chancellor Kwasi Kwarteng’s decision to scrap the top rate of income tax, as he stressed that politicians must “be honest about the choices we face”.
“I have serious reservations about a number of announcements made by the Chancellor,” said the MP. “I don’t believe cutting the top tax rate by 45p is the right move when the government’s fiscal room for maneuver is so limited. In my opinion, this is a mistake.
He added: “This is a deeply worrying time. Elected officials need to be honest about the choices we face, and government needs to take a pragmatic and fiscally responsible approach to the short-term support people need and long-term strategic thinking to ensure our energy security.
Andy GregoireSeptember 28, 2022 2:26 p.m.
The pound still down the day before despite the intervention of the Bank of England
As of 2 p.m., the pound was worth $1.0659, down from $1.0751 at the previous day’s close.
Following criticism from the International Monetary Fund last night, the pound briefly dipped below $1.064 on Wednesday morning, before heading back north to just under $1.069.
After the intervention of the Bank of England in the late morning, the pound strengthened slightly, rising to $1.07, but has since fallen to the above figure.
At 2pm, the euro was at £0.8983, up slightly from £0.8943 at the previous close.
Andy GregoireSeptember 28, 2022 2:21 p.m.
‘This inane madness cannot continue’: Tory backbench MP hits out at government
A Tory backbencher has warned this ‘inane madness cannot continue’ as he blames the government for the current economic turmoil.
Simon Hoare quoted the former Tory chancellor during the 1992 sterling crisis as saying: ‘Today was a very difficult day’, adding: ‘These are not circumstances beyond the control’ of the government.
“They were written there. This inane madness cannot continue,” he said.
Andy GregoireSeptember 28, 2022 1:59 p.m.
Kwarteng ‘stresses clear commitment to fiscal discipline’ in meeting with city leaders
Kwasi Kwarteng “stressed the government’s clear commitment to fiscal discipline” during a meeting with investment bank executives, aimed at reassuring the City.
Representatives from Bank of America, JP Morgan, Standard Chartered, Citi, UBS, Morgan Stanley and Bloomberg all attended a meeting with the Chancellor on Wednesday.
According to minutes of the meeting, published by the Treasury, Mr Kwarteng “underscored the Government’s clear commitment to fiscal discipline and reiterated that he is working closely with the Governor of the Bank of England and the ‘OBR before delivering its medium-term plan Fiscal plan of November 23’.
He added: “The Chancellor also discussed with participants how last Friday’s growth plan will broaden the supply side of the economy through tax incentives and reforms, helping to deliver greater opportunities and fight against inflation.
“Ahead of the next moment of Big Bang 2.0 deregulation for financial services, the Chancellor discussed potential sector reforms aimed at boosting growth, generating investment and delivering higher wages across the UK.
“The Chancellor reiterated his view that ‘a strong UK economy has always depended on a strong financial services sector’.”
Andy GregoireSeptember 28, 2022 1:54 p.m.
Sunak Predictions of Truss’ “Fairy Tale” Economic Plans
Rishi Sunak is reportedly avoiding the Conservative Party conference this year, so that Liz Truss can “own” the unfolding economic chaos.
The former chancellor and leadership candidate can certainly claim reason for optimism. Analysis by Jon Stone:
What Rishi Sunak Predicted About Liz Truss’ ‘Fairytale’ Economic Plans
The former chancellor warned of an “inflationary spiral”
Jane DaltonSeptember 28, 2022 1:50 p.m.
Bank of England faced ‘disaster’, says G7 official
Our Economic Editor Anna Isaac spoke to G7 officials, several of whom warned that Liz Truss’ government risked wasting the “extraordinary luxury” of international trust and respect for the Bank of England and the Office for Budget Responsibility.
Following the International Monetary Fund’s criticism of Kwasi Kwarteng’s mini-budget last night, a G7 finance official said: ‘I wouldn’t be so bold in criticizing the IMF right now if I were British. It’s a little crazy to say it, but you might end up needing [it] rather soon.
Andy GregoireSeptember 28, 2022 1:45 p.m.
“A lot of concern” within the Conservative Party, warns a Conservative MP
There is ‘a great deal of concern’ within the Conservative Party about the economic situation, the chairman of the Commons Treasury Committee has said – but added that ‘now is not the time for fussing and writhing hands”.
Asked about the future of Chancellor Kwasi Kwarteng, Mel Stride, a Tory MP who backed Rishi Sunak for the leadership, said Sky News“Well there’s a lot of concern within the parliamentary party, there’s no doubt about it.
“I don’t want to speculate on the Chancellor’s future, other than to say I think the party should be right now, it’s really uniting in times of economic crisis. The last thing we want now, it’s a political crisis to compound that, and I think we’re really focused on this issue of growth.
“Every department has to throw the kitchen sink away and we have to communicate to the markets that we are capable of growing this economy, even though we have all kinds of headwinds now that we didn’t have before Friday, but it’s really where, in a positive and constructive way, the parliamentary party must concentrate its energy in my opinion.
But he warned that “there is a lot of concern within the parliamentary party, there is no doubt about it”.
Andy GregoireSeptember 28, 2022 1:37 p.m.
Truss urged to recall Parliament
There have been calls from all parties for Liz Truss to recall Parliament from the conference recess after the Bank of England was forced to intervene to calm markets following the government’s cut mini budget. government taxes last Friday:
Liz Truss urged to recall parliament as pound tumbles despite BoE intervention
The Central Bank’s emergency intervention to ‘reduce the damage’ from government policies was ‘extraordinary’, says Nicola Sturgeon
Jane DaltonSeptember 28, 2022 1:30 p.m.
Sunak’s predictions are coming true alarmingly, says Tory
A conservative backbench source said it was depressing to see Rishi Sunak’s predictions “alarmingly come true”.
They said: “For Rishi supporters, we love our party very much and wanted to support Liz because unlike Boris she actually seems to be a conservative.
“However, you cannot govern on the back of a few think tank pamphlets.
“Governing is a serious and mature business – it is somewhat depressing to see all the predictions made by Rishi’s campaign come true alarmingly.
“Liz’s flyer was either going to be lucky and work out brilliantly or be an absolute disaster that would cost us the election.”
Jane DaltonSeptember 28, 2022 1:21 p.m.
The pound plummets 1.5% against the dollar
The pound lost further in value against the US dollar, falling 1.5% to $1.0570.
Earlier, the Bank of England announced that it would buy government bonds to stabilize the market.
Jane DaltonSeptember 28, 2022 12:37