Chancellor Kwasi Kwarteng says mini budget will benefit people ‘across the income spectrum’
The pound fell almost five percent to an all-time low as investors opted for the exits after the government’s new tax plan threatened to stretch Britain’s finances to breaking point.
The currency fell to an unprecedented $1.0327, extending a 3.61 percent drop since Friday, when Finance Minister Kwasi Kwarteng unleashed historic tax cuts.
The fall, which saw the pound fall almost to parity with the dollar, led Shadow Chancellor Rachel Reeves to accuse Mr Kwarteng and Prime Minister Liz Truss of playing “recklessly” with the UK’s finances .
The Labor MP told Times Radio: “Instead of blaming everyone else, the chancellor and prime minister, instead of behaving like two casino gamblers chasing a losing career, should consider the reaction not only in the financial markets but also from the public.
“The trickle-down economy idea, making those at the top even richer, will somehow trickle down to everyone else that’s been tried before, it didn’t work then, it won’t work now” .
key points
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Why has the pound hit an all-time low?
The pound has fallen to its lowest level against the dollar since 1971 after Chancellor Kwasi Kwarteng announced a series of tax cuts.
Sterling fell 4.9 percent to $1.0327 as trading opened in Asian markets on Monday morning. It then regained some ground around $1.05 as the euro also hit a new 20-year low amid recession and energy security fears.
But why has the pound hit an all-time low and what does it mean for the economy? Holly Bancroft has the details:
Why is the pound so weak?
British pound falls to lowest level against dollar since 1971 after Kwasi Kwarteng’s mini-budget
Emily Atkinson September 26, 2022 11:40 am
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Pound fall ‘very serious’, says shadow chief secretary to the Treasury
Labour’s shadow chief secretary to the Treasury, Pat McFadden, has described the fall in the pound as “really serious”.
He told Times Radio: “What the government was doing was taking a huge risk by announcing so many loans at a time when inflation was already high and the Bank of England was already raising interest rates, and what you seen: you saw a Friday a little bit, but then we went through the weekend and today with booster rockets, you saw the reaction of the market.
“Now, it’s pretty easy to think of these things as TV graphics, but that has real-world implications.
“I think the British economy is too important to be used as a kind of experiment by people who have been talking about this for many years and now finally (have) the chance to do it.”
Lord Mandelson said: “What the Tories are offering is the opposite of stability.
“Markets need to have faith that it’s affordable, that it could be sustained, that it won’t be thrown off course by spiraling inflation, borrowing costs that will hit both businesses and mortgage holders.”
Emily Atkinson September 26, 2022 11:24 am
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Conservative MPs are worried about the fall in the pound
Conservative MP Mel Stride, chairman of the Treasury select committee, has suggested Chancellor Kwasi Kwarteng was wrong to signal more tax cuts amid the pound’s slump.
“One thing is certain: it would be wise to take stock of how markets weigh recent economic announcements over time rather than immediately signaling more of the same in the near term,” he said.
As the pound hit an all-time low against the dollar this morning, Tory backbencher Simon Hoare tweeted: “This is not good news. Really worrying.”
Adam Forrest September 26, 2022 11:12 am
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Liz Truss faces more cabinet backlash over moves to bring in more overseas workers
Liz Truss is facing a cabinet backlash over plans to extend the shortage employment list to help companies hire more workers overseas.
Home Secretary Suella Braverman is said to be concerned, wanting the government to deliver on its manifesto pledge to reduce net immigration numbers.
The prime minister and her chancellor Kwasi Kwarteng are understood to be preparing plans to relax visa rules so more migrant workers can deal with labor shortages in areas such as the food and agriculture sectors.
Liz Truss faces cabinet backlash over move to bring in more overseas workers
Work and pensions secretary ‘comfortable’ with relaxing rules to cover shortages, but home secretary says numbers are falling
Emily Atkinson September 26, 2022 11:01 am
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Corbyn loses bid to stand as Labor candidate at next election
An attempt to clear the way for Jeremy Corbyn to stand as Labour’s candidate at the next general election has been defeated.
Former Labor leader Corbyn remains a member of the party but sits in the Commons as an independent MP after pulling the whip over his response to an Equality and Human Rights Commission report on anti-Semitism in match
Some party delegates forced a vote on a proposed rule change to allow Corbyn (Islington North) to be re-elected as Labour’s candidate.
(PA)
Supporters said it focused on allowing a Labor Party (CLP) to control who their candidate is rather than the Parliamentary Labor Party (PLP).
But the party believed the proposal posed a “significant legal risk”.
The proposal – card six vote – was rejected by 40.84% and 59.16%.
Emily Atkinson September 26, 2022 10:48 am
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Public services braced for major cuts as Liz Truss walks away from spending review
Struggling public services face billions more in spending cuts as Liz Truss is set to dash hopes that budgets will be expanded to cope with rising inflation.
During the campaign, the future prime minister suggested she would carry out a review of emergency spending, with allocations made when prices were expected to rise by a maximum of just 4%.
With inflation at around 10%, the Institute for Fiscal Studies (IFS) has warned that an extra £18bn will be needed in each of the next two years to restore “the generosity in real terms that was intended”.
Our Deputy Political Editor Rob Merrick reports:
Public services braced for major cuts as Liz Truss walks away from spending review
Budgets were set when prices were expected to rise by just 4%, but inflation is now 10%
Emily Atkinson September 26, 2022 10:35 am
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Ian Blackford says the blame for the recession “lies squarely” at the doors of Kwarteng and Truss
The UK is heading for a “further recession than should be the case”, Ian Blackford has warned in response to forecasts that the Bank of England’s base rate will rise to 5.8 per cent in a period of 12 months
On Twitter on Monday, the SNP Commons leader said: “With the upward trend, it may not be the peak for interest rates. This will cost in terms of higher mortgage costs and borrowing costs for to businesses. This means a recession beyond what should be the case. The blame lies squarely at the door @trussliz and @KwasiKwarteng.”
Emily Atkinson September 26, 2022 10:26 am
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Exclusive: Free with a value of less than €0.92 at the exchange office in London
The plunge in sterling since the Chancellor’s mini Budget on Friday is already hitting travelers hard, with the pound buying less than a euro or dollar at international exchange offices.
Just before 8am on Monday, Change Group’s London St Pancras International office was selling €100 for £108.84, valuing the pound at less than 92 euro cents.
The station is the hub for Eurostar trains to Paris, Lille, Brussels and Amsterdam.
Our travel correspondent Simon Calder reports:
The pound is worth less than the euro at the exchange office in London
Exclusive: Falling sterling will bite airlines and holiday companies whose costs are mostly in dollars and euros
Emily Atkinson September 26, 2022 10:15 am
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Cabinet minister ‘perfectly comfortable’ with benefits being cut
Work and Pensions Secretary Chloe Smith says it was “absolutely fair” that benefit claimants in part-time jobs worked hours or risk having their money withdrawn.
Claimants currently allowed a “light touch” settlement if they work nine hours a week are asked to take “active steps” to work up to 12 hours a week, then 15 hours a week from January .
Ms Smith said she was “perfectly comfortable” with benefits being cut, saying there were “rights and responsibilities” in the welfare system. “I’m very excited about this move,” she told LBC.
“Essentially what we’re asking people to do is work more hours before they no longer have to come and talk to their job coach at the JobCentre.”
Adam Forrest September 26, 2022 10:05 am
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Gary Neville says Liz Truss is ‘taking the mickey’ over tax cuts for the rich
Gary Neville has condemned the government’s “immoral” mini-budget, which last week outlined tax cuts aimed at benefiting the wealthiest during the cost of living crisis.
The former England international accused Liz Truss of “taking the absolute Mickey out of us” by helping workers at the top end of the tax bracket and offering far less to poorer households.
In Friday’s mini-budget, Chancellor Kwasi Kwarteng cut the top rate of income tax from 45p on top earners earning more than £150,000 by an extra £10,000 a year, while scrapping the limit on bonuses for bankers.
My colleague Thomas Kingsley reports:
Gary Neville says Liz Truss is ‘taking the mickey’ over tax cuts for the rich
The former England international will join Sir Keir Starmer at the Labor Party conference
Emily Atkinson26 September 2022 09:55