Labour has called for Liz Truss’s resignation. In an interview with Sky News, asked if Truss should quit, Pat McFadden, the shadow chief secretary to the Treasury, said:
We think she should go because she has got no credibility, no authority. She caused this damage, she was 100% co-owner of that mini-budget with Kwasi Kwarteng and therefore if she stays in post, why is she staying in post? It can’t be for the interests of ther country. This is just the Conservative party looking after itself today and they cannot fix the damage they have caused.
George Parker, political editor of the Financial Times, reckons that around two thirds of the tax cuts in the original mini-budget will be abandoned in the update being announced by Jeremy Hunt at 11am.
Sky’s Ed Conway has more on gilt yields this morning.
Commenting on developments in the markets this morning (see 8.27am and 8.31am), Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said:
Today’s developments may hold off a fresh assault on government borrowing costs by the bond vigilantes standing by in the UK gilt market, but it could only be a temporary reprieve.
Trussenomics may have been ripped up and fed to the shredder but the author of the big gamble remains in power, and has the final say on the direction of travel.
Investors are craving more stability but, given the flip-flopping we’ve had so far in her super-short tenure, economic policy uncertainty remains and that’s likely to be the key driver in the bond markets and on foreign exchange desks.
The pound was also up this morning following the announcing that mini-budget 2 has been fast-tracked, PA Media reports. PA says:
Sterling leapt to $1.129 at one stage, having kicked off more nervously, dipping to $1.122 against the greenback in overnight trading ahead of what many have feared would be a testing day on markets.
The initial response from the markets this morning to the news that mini-budget 2 is coming two weeks early was positive, according to Sky’s Paul Kelso.
And this is from Henry Tapper at AgeWage.
And this is from my colleague Graeme Wearden.
The bond market is open … and UK government borrowing costs are falling.
That suggests the City is welcoming Jeremy Hunt’s push to unravel the mini-budget with new tax and spending plans.
The yield, or interest rate, on 30-year government bonds (or gilts) has dropped sharply to 4.55%, down from 4.77% on Friday night.
Yields measure the cost of government borrowing, and fall when bond prices rise (and vice versa).
Graeme has more on his business live blog.
According to the BBC’s political editor, Chris Mason, the statement from Jeremy Hunt today will primarily focus on reversing tax cuts that were included in the original mini-budget. Mason says Hunt is not ready yet to announce decisions on spending.
Good morning. Jeremy Hunt declared that he had a “clean slate” to overhaul the disastrous mini-budget after he was appointed chancellor on Friday, and this morning he is going to deploy it, making a statement consigning yet more of the measures announced by his predecessor, Kwasi Kwarteng to the dustbin.
Announcing Hunt’s appointment, Liz Truss confirmed that the government was going ahead with the corporation tax increase that had been cancelled in the mini-budget. But that was not enough to convince the financial markets that the government had spending under control and on Friday afternoon gilt yields were going up (meaning government borrowing costs were rising). Ministers were braced for more trouble with the opening of the bond markets at 8am this morning.
Instead Hunt has decided to get ahead of events. At 6am this morning the Treasury said he would be making a major statement about tax and spending policy. He will be in the Commons at 3.30pm to give details to MPs, but reassuring the financial markets takes precedence over the convention about big announcements being made in the chamber first, and so Hunt will be releasing the details at 11am.
Labour has called this “evidence of panic”. Pat McFadden, the shadow chief secretary to the Treasury, told the Today programme:
I think it’s evidence of the panic that the government is in and that damage that’s been caused over the past few weeks.
Clearly, ministers are now terrified of market reaction. They’ve concluded that they cannot wait until October 31.
In it’s own terms, that’s right because the country couldn’t carry on for the next two weeks in the way that we’ve been going, but the key thing is where does this now leave the prime minister? She was elected to lead the Conservative party on the basis of the policies that were announced by the previous chancellor on September 23 [in the mini-budget].
It is hard to know what to call Hunt’s statement, but “revised mini-budget”, or “mini-budget 2” would work as acceptable shorthand. Kwarteng said that he would follow his mini-budget with a “medium-term fiscal plan” that would explain how the tax cuts in the mini-budget would be funded. He was going to set out new fiscal plans, and explain what would happen to spending (not covered in the original statement).
Today Hunt is expected to delay or scrap some of the mini-budget measures that have not already been binned. The cut in the basic rate of income tax by 1p in the pound, that was due to take effect from April next year, will almost certainly be shelved.
But he is also expected to give details of the spending cuts that will be needed to balance the government’s books. (See 8.19am for an update on this point.) He gave a hint of what to expect over the weekend when he said:
We are going to have to take some very difficult decisions both on spending and on tax. Spending is not going to increase by as much as people hoped and … taxes are not going to go down as quickly as people thought and some taxes are going to go up.
Today’s statement will not entirely replace the fiscal plan, due to be published on 31 October. That is still going ahead, and the Treasury confirmed this morning that that is when the Office for Budget Responsibility will publish its economic forecast – its assessment of the credibility of the government’s plans.
Hunt’s move is primarily about assuring the financial markets. But the political markets need reassuring too. The Liz Truss shareprice hit rock bottom at the weekend and many Conservatives think that, if Tory MPs can agree on a candidate to replace her, she will be out. Today we may get a better sense of whether or not that is imminent.
Here is the agenda for the day.
11am: Jeremy Hunt will making his statement about changes to the mini-budget.
11am: Nicola Sturgeon holds a press conference in Edinburgh as she publishes the latest paper from the Scottish government making the economic case for independence.
2.30pm: Simon Clarke, the levelling up secretary, takes questions in the Commons.
After 3.30pm: Hunt makes a statement to MPs about his mini-budget overhaul.
4.3pm: MPs hold a debate in Westminster Hall on an e-petition signed by more than 600,000 people calling for an early election.
After 5pm: MPs debate the energy prices bill
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