Chancellor Kwasi Kwarteng has insisted that he is “sticking with” his mini-Budget, also dubbed the “right plan” by prime minister Liz Truss – despite it spooking markets and forcing an emergency Bank of England intervention.
Breaking days of silence as the markets roiled, the prime minister admitted the huge tax cuts in the mini-Budget “disproportionately” benefit the wealthy, and announced she was looking for spending cuts, as the Treasury wrote to all Whitehall departments demanding plans for “efficiency savings”.
Meanwhile, the PM was accused by former Bank of England governor Sir Mark Carney of “undercutting economic institutions” and “working at some cross-purposes” with the bank, hours after it was forced to intervene in the gilt market to prevent a crisis in the UK’s major pension funds.
The intervention buoyed Sterling with its largest leap since mid-June and, after an initial tumble on Thursday morning, the pound turned positive, rising above $1.096. The FTSE 100, however, lost 2 per cent of its value, dropping as Ms Truss appeared repeatedly lost for words during a series of regional radio interviews.
UK economy was better off having Liz Truss ‘missing in action’, says Nicola Sturgeon
The UK economy was “better off” when Liz Truss was “missing in action”, Nicola Sturgeon has said, after the prime minister ended six days of silence with a round of radio interviews in which she appeared repeatedly lost for words.
“Having heard her this morning and watched the market reaction as she spoke, perhaps we were all better off when the prime minister was missing in action than when she was actually out talking about the disaster she has inflicted on this country.”
Sturgeon: Economy better off when Prime Minister was ‘missing in action’
First Minister Nicola Sturgeon’s comments come as Liz Truss faced scrutiny on local radio about her Government’s mini-budget proposals.
Ministers will be asked to focus spending on ‘things that matter most’, says Treasury
Ministers will be asked to “take a responsible and disciplined approach to spending focused on the things that matter most”, a Treasury spokesperson has said.
In response to reports that the Treasury would write to Cabinet ministers asking them to make efficiency cuts after the mini budget, a spokesperson said: “The British taxpayer expects government to run as efficiently and effectively as possible.
“As usual, it is critical that we stick to budgets which is why we’re asking departments to take a responsible and disciplined approach to spending focused on the things that matter most, including driving growth.”
Further details are expected to be set out by government departments in coming weeks.
Voices | Is it time to sack Kwarteng?
In his latest column, our chief business commentator James Moore asks whether it is already “time to sack” the new chancellor Kwasi Kwarteng? He writes:
“This, we are told, is the view of a subset of panicking Tory MPs. The chancellor would thus serve as the sacrificial lamb, to be held up before the government’s suffering public – a public who are fearfully contemplating mortgage misery, the markets in meltdown and savage cuts to public services already stripped to the bone.
“Pinning the blame on Kwarteng and booting him out, would – I suppose – allow for a replacement to be drafted in, someone with credibility who might be able to undo the worst of the millionaires’ mini-Budget and reassure the markets and everyone else that the government hasn’t completely lost the plot.
“Attacking the subordinate as a means of damaging the leader, or more to the point, reigning them in when they’re going too far is an age-old political tactic. I’m just not sure why anyone would think it could work in this case. After all, whose budget was this? Kwarteng’s or Truss’s?”
You can read his analysis in full here:
Is it time to sack the government’s sacrificial lamb, Kwasi Kwarteng? | James Moore
Pinning the blame on Kwarteng and booting him out would, I suppose, allow for a replacement to be drafted in – someone with credibility
Government ‘sticking to the growth plan’, says Kwarteng
Chancellor Kwasi Kwarteng has again doubled down on his mini-Budget, insisting that the government is “sticking to the growth plan”.
Asked if he had a message for the financial markets as he prepared to visit a local business in Darlington, Kwasi Kwarteng told the Press Association news agency: “Absolutely.
“We are sticking to the growth plan and we are going to help people with energy bills. That’s my two top priorities.’’
Truss warned businesses will ‘go on strike’ by halting investment without clear plan
Companies will halt investment and effectively “go on strike” until they receive more clarity from Liz Truss’s government on its economic plan, a top business figures has warned.
Ms Truss and chancellor Kwasi Kwarteng have “created even greater uncertainty” with the “the lack of specific plan” for public finances, warned Martin Sorrell, the founder of advertising giant WWP.
“We have a whacking great communications gap at the moment, a black hole in terms in communications. Businesses will just go on strike – they won’t invest until they see some clarity,” he told BBC Radio 4’s World at One programme.
Our political correspondent Adam Forrest has the full report:
Liz Truss warned businesses will ‘go on strike’ without clear plan
Companies ‘won’t invest until they see some clarity’, says business chief Martin Sorrell
Tory MPs ‘told to argue government plans are ‘responsible’
Conservative MPs have reportedly been told to argue that the government’s economic policy is “responsible” and stress that other countries are also experiencing disruption, according to a leaked briefing note published by Politics Home.
Charities raise alarm over potential failure to increase benefits in line with inflation
U-turning on a commitment to increase benefits in line with inflation would lead to disabled people “starving and freezing in their own homes”, charities have warned, after Treasury minister Chris Philp failed to confirm a previous commitment by ex-chancellor Rishi Sunak would be upheld.
“Refusing to increase benefits in line with the true inflation rate would show an utter disdain towards people who need this support,” said James Taylor, director of strategy at disability equality charity Scope.
Child Poverty Action Group chief executive Alison Garnham said: “Struggling families will not forgive a chancellor who comes to them for efficiency savings when their cupboards are already bare. Families have lost enough; they need support that is realistic and actually enables them to pay the bills.”
Anastasia Berry, policy manager at the MS Society and policy co-chair of the Disability Benefits Consortium, said the groups are “horrified that the government is considering breaking a promise to disabled people while at the same time giving a tax break to millionaires”.
Why is the pound weak after the mini-Budget announcement?
My colleagues on The Independent’s video desk have this explainer on why the pound has fallen following the chancellor’s mini-Budget:
Unions write to Truss amid fears of another ‘crippling round of austerity’
Eighteen unions, representing millions of public sector workers, have written a joint letter to Liz Truss and Kwasi Kwarteng, urging them to provide a “cast-iron assurance” that they will not make further spending cuts to public services.
Insisting that strong public services are vital to the country’s health and the economy, the letter states: “But since 2010 our hospitals, schools, councils, care homes, prisons and other essential services have been forced to absorb savage spending cuts. And every month the bills they face are rising, leaving much less for actual services. This has come at a huge cost to communities across Britain.
“NHS waiting lists are at record highs, school buildings are literally crumbling before our eyes and local government is on its knees. Meanwhile, nurses, teachers, firefighters and millions of other key workers you clapped during the pandemic have seen their living standards decimated with over a decade of pay cuts and wage freezes.
“Every month dedicated staff are quitting in their droves – tired of being taken for granted and of services being run down. This cannot go on.”
Government departments have been told by the Treasury to find “efficiency savings” – described by the TUC general secretary as “usually code for cuts”. The unions called for an urgent meeting amid fears of another “crippling round of austerity this November”.
Sterling ‘not out of the woods’, analyst says, as pound recoups day’s losses
The pound is hovering around the $1.087 mark, sitting near the previous day’s close and having recovered from a drop to $1.076 early this morning.
“Sterling is not out of the woods,” DBS currency strategist Philip Wee told Reuters. “The BoE is seen addressing the symptom and not the cause.”
Liz Truss’s government “has yet to address the credibility of the tax cut plans, which critics see adding to the inflation woes”, he added.
