iz Truss was standing by Chancellor Kwasi Kwarteng on Wednesday as a Treasury minister rejected calls for the government to abandon last week’s mini-Budget, despite a growing Tory revolt and turmoil in financial markets.
A Downing Street and Chancellor said “are working on the supply side reforms needed to grow the economy which will be announced in the coming weeks”.
The backing for the Chancellor came as Andrew Griffiths, Financial Secretary to the Treasury, said the Government would plow ahead with its controversial growth plans, saying “we think they are…right”.
A growing number of Tory MPs have slammed tax cuts and tens of billions of pounds of extra borrowing which has sent the pound plunging.
Simon Hoare MP tweeted: “In the words of Norman Lamont on Black Wednesday: “today has been a very difficult day”.
Mr Hoare, chairman of the Commons Northern Ireland committee, added: “These are not circumstances beyond the control of Govt/Treasury . They were authorized there. This inept madness cannot go on”. Another Tory MP, Robert Largan, voiced “serious reservations” about some of the Chancellor’s announcements.
“I do not believe that cutting the 45p Top Tax Rate is the right decision when the Government’s fiscal room for manoeuvre is so limited. In my view, this is a mistake,” he tweeted.
Former Chief Whip Julian Smith is among other Tory MPs who have spoken out against the cut in the 45p top rate of tax, a move which he described as “wrong”.
Many Conservative MPs are privately aghast at some of Mr Kwarteng’s plans which have send the pound falling sharply.
Amid turmoil in the markets, the Bank of England made an emergency intervention to protect Britain’s “financial stability” after the mini-Budget.
The bank said it would buy back billions of pounds of Government debt to try to drive down the interest rate on public borrowing which has soared since the fiscal statement on Friday.
It stressed that it was also seeking to protect households and businesses from the crisis, who also face spiraling mortgage and other borrowing costs.
The dramatic move came at 11am, as the Pound continued to fall and as top bankers had been meeting the Chancellor as he sought to defuse the economic crisis which he has sparked.
Decision yet to be made on whether benefits will increase in line with inflation
Ministers have not decided whether benefits will be uprated in line with inflation in the autumn.
Asked about whether the uprating commitment would be carried out, Treasury minister Chris Philp told ITV’s Peston: “It is under consideration and I am obviously not going to make policy announcements here, it will be considered in the normal way in the course of the coming weeks.”
Pressed about the decision, he added: “I am not going to make policy commitments on live TV, it is going to be considered in the normal way, we will make a decision and it will be announced I am sure in the first instance to the House of Commons.”
Cabinet minister urges people to remain ‘calm’ amid mini-budget turmoil
A UK cabinet minister has urged people to remain “calm” amid the turmoil sparked by the Government’s mini-budget announcement.
Welsh Secretary Robert Buckland stood by Chancellor Kwasi Kwarteng’s plans during an interview with ITV Wales on Wednesday.
He told the Wales At Six program that aspects of the budget were “vital for the lives of every business and indeed every family”.
Questioned over the pound’s fall in value, food cost inflation and souring interest rates which have affected the housing market, Mr Buckland said: “I do think it’s very important that we remain very steady and calm through this period.
“The issue for me is how we grow our economy in order to pay for increased public services.
“The only way that we’re going to long term sustain our important public services in Wales and elsewhere is to grow our economy, and the Government is trying to make sure that as many obstacles are in order to allow for that higher growth to take place.
“That will be good for all of the billions at risk.”
Government not considering reversing plan, says Treasury minister
The Government will not reverse its growth plan proposals that have led to market instability, a minister has insisted.
Asked by Sky News if the Government had made any consideration of reversing the plan, Treasury minister Chris Philp said: “No, none at all, because getting Britain’s economy growing is so important. Important to raise wages and important to pay the tax bills of the future.”
He also defended the cut in the 45p rate of income tax, claiming it was less than 1/20th of the “fiscal firepower that was deployed” in the mini-budget and said 30 million workers would benefit from the broader tax cuts.
Mr Philp also claimed that global market “volatility” had led to souring government bond yields.
He said: “I think if you just take a step back and look at the markets … over the last year or so and the last nine months in particular, globally we have seen quite a lot of volatility.”
Responding to reports that Cabinet ministers would be asked to draw up efficiency cuts to slash their departmental budgets in response to economic turmoil, Mr Phip said: “The Government always wants to operate more efficiently.
“We want to make sure that money paid by our neighbors, my constituents, is spent as well as possible and that it is prioritized towards projects that deliver growth, infrastructure for example.”
He added: “Obviously we are constantly looking at that, but I would emphasize again we are going to be sticking to the existing spending envelope which was set out a year ago, it covers a three-year period, we are in the first of those three years now. It makes sure public services are properly and responsibly funded, and we are sticking to that.”
Truss ‘standing by Chancellor’
Prime Minister Liz Truss is said to be standing by Chancellor Kwasi Kwarteng – as backlash grows over his budget and the turmoil into which it has thrust the UK economy.
A Downing Street has said: “The [Prime Minister] and the Chancellor are working on the supply side reforms needed to grow the economy which will be announced in the coming weeks.”
‘The world is wondering what on earth is going on in the UK’, says former Treasury minister
Crossbench peer and former Treasury minister Lord O’Neill of Gatley said investors and companies “all over the world” were “wondering what on earth is going on in the UK”.
He told BBC Radio 4’s PM program: “This is a breathing room for the Government, in my view, to seriously think what on earth is it really trying to do and … this idea that you can just magically quadruple productivity by a tiny corporate tax policy reversal is at the core of why investors and companies all over the world, never mind here at home, are wondering what on earth is going on in the UK.”
Tory MP says Government must make statement to ‘steady the nerves and steady market’
The Government cannot wait until November to give clarity on its economic plans and must make a statement “in very short order”, a senior Conservative MP has said.
North Thanet MP Sir Roger Gale told BBC News: “I don’t think we can wait until November, which is the current intention as I understand it.
“I think, yes, we need a statement in very short order indeed to steady the nerves, steady the market and set out very clearly what the business plan is so that everybody understands properly where we are going.”
He added: “The failing in the statement that was made last Friday is lack of clarity and I think that, in part, is what has led to the run on the pound and the position that we find ourselves in today.”
Treasury minister: ‘Every major economy is dealing with the same issues’
Financial Secretary Andrew Griffith has welcomed the “timely” intervention by the Bank of England in the markets.
Mr Griffith added that all major economies were experiencing the same volatility which the UK is seeing.
During an interview on Sky News, he said “all developed markets” are seeing “unpreceded” volatility.
“We are seeing the same impacts of Putin’s war in Ukraine cascading through things like the cost of energy, some of the supply side implications of that,” he said.
“That’s impacting every major economy. Every major economy you are seeing interest rates going up as well. Every major economy is dealing with exactly these same issues.
“The Bank of England has made this timely intervention. What the Chancellor and I are focused on is delivering that economic growth plan.”
‘Government will continue with plan despite turmoil’: Treasury minister
A Treasury minister has said the Government will press on with Chancellor Kwasi Kwarteng’s growth plan despite the turmoil in the financial markets.
Financial Secretary Andrew Griffith told Sky News: “We think they are the right plans because those plans make our economy competitive.”
He added: “Get on and deliver that plan. That’s what I, the Chancellor and my colleagues in Government are focused on is getting on and delivering that growth.
“That is what is going to allow consumers to benefit. In the meantime, we are protecting every household and every business from the biggest macro shock out there at the moment, which is the cost of energy.”
Starmer calls for Parliament to be recalled
Sir Keir Starmer has called for Parliament – currently on a conference recess – to be recalled immediately to discuss the UK financial crisis.
Speaking to reporters in Liverpool, the Labor leader said: “The Government has clearly lost control of the economy.
“What the Government needs to do now is recall Parliament and abandon this budget before any more damage is done.”
Doubts if Bank of England action will ‘convince the septics’
AJ Bell’s investment director has cast doubt on whether the Bank of England’s move to buy up Government bonds will be enough to “convince the septics”.
Russ Mould said the Bank’s U-turn, due to end on October 14, may not be enough to put “bond vigilantes” – investors who sell off bonds in protest against fiscal policy – “firmly back in their basket”.
He told PA Media: “Having probably given the market a lesser-rate hike than it expected last week and to confirm that it was committed to quantitative tightening, to then have to come back to quantitative easing a week later… it’s not going to convince the septics.”