Calls for Truss to ‘come out of hiding’ as Bank fights turmoil caused by mini-Budget

‘Inept madness’: Tory MPs fear chancellor’s ‘growth plan’ may cost them next election

Andrew Woodcock,Anna Isaac,Adam Forrest
Wednesday 28 September 2022 20:13 BST
Fallout and reaction to Chancellor Kwasi Kwarteng's mini-budget

Liz Truss was accused of hiding away while her tax giveaway mini-Budget caused economic turmoil, with the Bank of England forced to intervene to prevent a crisis in the UK’s major pension funds.

The Bank embarked on an estimated £65bn buy-up of bonds amid what a Treasury source described to The Independent as “serious concerns about the short-term financial stability of some of the major pension funds in the UK” and others said there were fears of mass insolvencies.

Junior Treasury minister Andrew Griffith was sent out to insist that the government would press ahead with the £45bn of unfunded tax cuts in Kwasi Kwarteng’s mini-Budget, which spooked markets when it was unveiled on Friday.

But there was no sign of Ms Truss, who was last seen in public sitting on the green Commons benches alongside her chancellor for his statement.

The Bank’s intervention to calm volatile gilt markets came after the International Monetary Fund took the extraordinary step of urging the chancellor to “re-evaluate” his plans and warning they would stoke inequality.

Tory MPs said the mini-Budget had turned into a “disaster” which could cost Ms Truss the next election. One former minister told The Independent that Mr Kwarteng may be forced into a humiliating backtrack on his cut to the 45p income tax rate for high earners if it becomes clear the UK has been propelled onto a “doom path”.

Senior backbencher Simon Hoare branded the package “inept madness”, while former chancellor Kenneth Clarke said it was a “serious mistake” which should be “torn up”. MPs questioned the safety of Mr Kwarteng’s position just three weeks after his appointment, with one telling Sky News: “I predict the chancellor will get the sack and it will unravel from there.”

Labour leader Sir Keir Starmer called for the recall of parliament to allow the government to abandon its package, which hands savings worth an average £10,000 to those earning £150,000 or more, funded through borrowing.

Former cabinet minister David Davis told The Independent that it was time for Ms Truss to come out and explain her plan. Downing Street reported that the new prime minister – in office for just 22 days – had spoken by phone on Wednesday to Ukrainian president Volodymyr Zelensky, but she has made no public comment on Mr Kwarteng’s “growth plan” since its launch.

“This was her manifesto for the leadership, so she has to come out and defend it in a forthright way,” said Mr Davis.

Lib Dem leader Sir Ed Davey called on the PM to break cover, warning that she had just “24 hours to fix this economic disaster and prevent people losing their homes”. And the Scottish National Party said the “hopeless” prime minister “seems to have disappeared without trace”.

Tory former minister Andrew Murrison told The Independent that restive MPs expected the prime minister and chancellor to explain the thinking behind the “economically marginal and politically unhelpful” plan when Conservatives gather for their annual party conference in Birmingham on Sunday.

Financial newswire Bloomberg calculated that UK markets had shed $500bn in combined value since Ms Truss became prime minister on 6 September.

Mr Griffith, the financial secretary to the Treasury, insisted that Mr Kwarteng’s measures were “the right plans because those plans make our economy competitive”. Every major economy was dealing with “exactly the same issues”, he said.

But a supporter of Rishi Sunak’s failed bid for the Tory leadership said that Ms Truss’s plans were unravelling just as the former chancellor had predicted.

The ex-minister told The Independent that the “medium-term fiscal plan” promised by the chancellor must be brought forward from the scheduled date of 23 November. But he warned that the step could make matters worse by further panicking the markets.

“Those who warned against this are tearing their hair out. It is exactly what we warned against,” said the MP. “Rishi himself said there could well be a run on sterling if we start to fuel inflation with unfunded tax cuts.

“Everyone is waiting to see how the Bank’s intervention will work. If this drags us into a doom path, then they are going to have to consider walking back some of these interventions, such as the 45p cut. But that in itself carries risk because it looks like panic.”

Mr Sunak himself let it be known that he would not be attending the Conservative conference, with an ally pointedly saying that he wanted his former leadership rival to be able to “own this moment”.

Another Sunak supporter said it was “depressing” to see the former chancellor’s warnings come true. While Tory MPs wanted to offer Ms Truss their support, they understood that “you can’t govern on the back of a couple of think tank pamphlets”, the MP said.

Lord Darling, who led the Treasury through the 2008 global financial crisis as chancellor, said that the current problems were different because “this is a self-inflicted wound”. Backing a recall of parliament to debate the crisis, the Labour peer told LBC’s Andrew Marr: “They either didn’t think through the consequences of their actions or were wholly indifferent to them.”

Former Treasury minister David Gauke, ejected from the Tories by Boris Johnson for opposing a no-deal Brexit, said the party was now “lost in a fantasy world” and had become “a danger to itself and the country”.

Mr Davis backed calls for Mr Kwarteng to bring forward his statement, which will be coupled with a potentially damning assessment of the Budget’s impact from the government’s independent forecasters the Office for Budget Responsibility.

“It’s a confidence issue, so he needs to explain the policy,” said the former minister. “He has to sell the policy.”

One Tory MP told The Independent that most of those on the Conservative backbenches were now writing off the next general election because of the market turmoil and impact on rising mortgage payments.

The backbencher said: “It’s going to be deeply damaging. The tax cuts will reinforce the caricature of the Tory party as the rich looking after the rich. Some of us are thinking about how we rebuild after the next election.”

Former cabinet minister Julian Smith called for changes to the government’s plans.

“It is critical that the government is honest about the current situation and plays its part in stabilising markets,” he said.

“It can keep a growth plan but it needs to make changes. Not doing so will only continue further stress and strain on UK citizens.”

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies


Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in