Senior Conservative government figures ruled out any reversal of the poorly received mini budget, denying it had an impact on market turmoil. The government has ruled out a U-turn on the costly tax-cutting mini-budget and the chancellor will not resign despite mounting pressure.
It comes after a day in which the Bank of England was forced to launch a temporary bond-buying programme as it took emergency action to prevent “material risk” to UK financial stability.
Sky’s political editor Beth Rigby was told that the chancellor, Kwasi Kwarteng, would not be resigning and that there would be “no reversal of policy”.
A minister told deputy political editor Sam Coates it was “bulls***t” to say that today’s market movement was related to the mini-budget announcement.
And on The Take with Sophy Ridge, chief secretary to the Treasury Chris Philp denied that the government had any responsibility and said there would be no change of course.
The Bank will buy as many long-dated government bonds as needed between now and 14 October in a bid to stabilise financial markets in the wake of the mayhem that followed the government’s mini-budget last Friday.
In addition to the plunge in the value of the pound, it has also seen investors demand a greater rate of return for UK government bonds – essentially IOUs.
That is because the level of borrowing required to fund the government giveaway, including tax cuts and energy aid for households and businesses, shocked the market which immediately questioned the sustainability of the public finances.
City minister Andrew Griffith told Sky’s economics editor Ed Conway: “Every major economy is dealing with exactly the same issues.”
“They [the bank] have made a targeted and timely intervention in the market. That’s their decision, but they’ve done so working very closely with the chancellor.”
The Bank’s action comes after the International Monetary Fund added its voice to criticism of the growth plan.
What the Bank’s action is aimed at doing is tackling the consequences of rising bond yields, in this instance a liquidity crunch facing pension funds.
The pound fell back in response but bond yields did ease back from multi-year highs.