Money

You could tell Kwasi Kwarteng was aware of his words and tone as he delivered his Conservative party conference speech to a hall full of Tory members this afternoon. It was a delicate set of circumstances, with him having had to U-turn on his plan to abolish the 45p tax rate only this morning. But perhaps more importantly he learned a lesson after the mini-Budget: his words can move markets. And he’d be loathe to push them into freefall again. Kwarteng worked hard to compensate for the total lack of lip-service he had paid to fiscal discipline in his mini-Budget. He praised the UK’s status of having the ‘second lowest

Liz Truss goes into her first Conservative party conference with the latest Opinium polling giving Labour a 19-point-lead and her own approval ratings down at -37 – worse than Boris Johnson’s in his final days in office. Yet despite this, the new Prime Minister used her first big sit down interview since the fallout from the not-so-mini Budget to insist that she was not for turning. Truss told Laura Kuenssberg that she stands by all the measures announced last Friday – including abolishing the 45p rate of income tax for the highest earners. The furthest Truss would go in accepting that her first fiscal event – which has spooked the markets, voters

Markets are nervous and they are right to be. The government has announced a huge, open-ended package of energy subsidies expected to cost over £100 billion but that could cost over £200 billion if energy prices rise and stay high. At the same time, the Bank of England is making large losses on its QE bond-holdings as government bond prices fall as an automatic result of current and future-expected interest rate rises – by some estimates costing potentially another £200 billion. This leaves a possible £400 billion hole in the nation’s finances. The government says it will spell out how that will be paid for in November. From a policymaking perspective

When the Liz Truss camp floated the idea of side-lining the Office for Budget Responsibility for her government’s first fiscal statement, the argument went that the announcements would be targeted at the energy crisis – and they couldn’t wait. As anticipation around the fiscal event grew, and it became clear that it would include much more than an energy update, MPs started to suspect foul play – that this was an overtly political attempt to avoid scrutiny of Kwasi Kwarteng’s growth plans and spending splurge. This suspicion is only going to grow now that the OBR has confirmed that draft forecasts were presented to the Chancellor on his first day

If you can keep your head when all about you are losing theirs and blaming it on you then, as Rudyard Kipling almost wrote, there is a strong possibility you haven’t appreciated the gravity of the situation. Or as Corporal Jones put it more pithily in Dad’s Army: ‘Don’t panic!’ It is undeniable that Liz Truss is in a bind. Her first big play following national mourning for the Queen – the ‘fiscal event’ of last Friday – has not gone well, contributing to a meltdown about UK prospects in financial markets and emergency intervention by the Bank of England. Two successive opinion polls have put Labour 17 points ahead –

Aggggghhh! Woooaaaah! Urrrggghhhh! Those screams you hear are ten thousand self-appointed financial experts howling into the existential abyss. The Bank of England this morning announced its ‘operation’ in the gilt market, and every pundit with a social media account is thrashing around in the ever greater ocean of economic jargon and incomprehensible data. It’s hard enough to remember what a gilt is: now we are all expected to comment knowingly on how gilt yields operate, how government interventions shape the bond market, and how markets will react. ‘It’s unprecedented. Then again, we are living in an age when the unprecedented is the precedent’ Seasoned bluffers need not be afraid, however.

Tonight the International Monetary Fund has weighed in on the UK’s mini-Budget, offering a direct rebuke of Liz Truss and Kwasi Kwarteng’s tax cuts. ‘We are closely monitoring recent economic developments in the UK and are engaged with the authorities,’ its spokesperson said, in reference to the fluctuating pound and rising borrowing costs. ‘Given elevated inflation pressures in many countries, including the UK, we do not recommend large and untargeted fiscal packages at this juncture’ – suggesting some concern that the measures could be inflationary. The IMF seems more frustrated with the ethics of the policies rather than their economic impact It’s the kind of intervention that does little to

It has dawned on the government that last week’s mini-Budget might have been a bit too one-sided: £70 billion worth of extra borrowing and not a single mention of spending cuts or efficiency gains has seen borrowing costs spike (up by 0.3 per cent just today). As James Forsyth reports on Coffee House, this afternoon’s announcement that a ‘medium term fiscal plan’ will be announced next month is an attempt by the Treasury to reassure markets – and convince them that fiscal responsibility has not totally disappeared from this government’s agenda. Emphasis is being placed on previous promises to make sure debt falls as a percentage of GDP in the