Threadneedle Street will buy UK government bonds as pound tumbles in response to Truss and Kwarteng’s mini-budget

In 25 years of reporting, I have never seen a financial crisis so utterly avoidable, and dragging so much human misery in towBritish politics is being reshaped this week – but not because of Keir Starmer. After only 22 days as prime minister, Liz Truss is already facing her demise. Party conferences, those jamborees of suited choreography and confected excitement, look utterly irrelevant beside the financial meltdown engulfing the country. Yet politics and finance are, in this moment, deeply bound up with each other. This crisis was largely manufactured by our failing political class and it will now determine their terms of trade. For the rest of us, the result threatens to be austerity 3.0: the third big wave of spending cuts to follow the third crisis in the last 12 years, with even more social wreckage and human misery in tow.I covered my first financial crisis 25 years ago, in 1997, and I have never before seen one so entirely avoidable as this is. It began with the Tory leadership election in the summer, when Liz Truss promised tax cuts of £30bn in order to win the keys to No 10. It picked up last Friday, as Kwasi Kwarteng unveiled his “plan for growth”, which turned out to be a further £15bn of handouts – and mainly to people who didn’t need them.Aditya Chakrabortty is a Guardian columnist Continue reading...

Opposition leaders urge PM and chancellor to take action over economic fallout and recall parliament

Underlying profits for 13 weeks to end of July fell to £177m from £356m in same period a year earlierMorrisons has revealed its profits dived 50% this summer as it battled “unprecedented inflationary pressures” at its in-house food processing arm.The supermarket, which lost its spot as the UK’s fourth largest grocer this month when it was overtaken by Aldi, said underlying profits had dived to £177m in the 13 weeks to 31 July from £356m in the same period a year earlier. Continue reading...

Bank of England’s fourth round of QE could still fail to calm markets and be followed by an emergency interest rate rise

MPs say financial measures have been disaster for Conservative party as pound tumbles again

We rate PM’s likely next steps as she sets about navigating path through crisis of her government’s makingBattered by financial markets and besieged by MPs whose constituents’ mortgage payments are set to rocket, Liz Truss must now navigate a serious economic crisis of her government’s own making.Does she stick, twist – or gamble again? Continue reading...

Bank of England takes urgent steps to buy long-dated UK government bonds

Will PM and chancellor ignore advice under mounting pressure, which is also coming from US and Germany?

Our economic system depends on the natural world. Growth that results in the destruction of nature will, in the end, ceaseAs we debate how best to integrate environmental and economic goals, it is perhaps worth remembering that even central bankers need to eat, drink and inhale clean air. Food and water security, protection from climatic extremes, the carbon cycle, public health and the replenishment of the very air we breathe all depend on nature. It is less that nature is part of our economy, and rather that our entire economic system is a wholly owned subsidiary of nature.During recent years there has been a series of expert reviews revealing the scale of the social and economic risks that accompany the continued degradation of nature. Some interpret these findings as a reason to oppose economic growth. The key question is, however, not about growth per se, but the style and quality of growth that we pursue. Growth that results in the destruction of nature will, in the end, cease. Economic development that, by contrast, moves toward net zero greenhouse gas emissions and the recovery of nature is a very different prospect.Tony Juniper CBE is chair of Natural England. Before taking up this role in April 2019, he was executive director for Advocacy and Campaigns at WWF-UK, a Fellow with the University of Cambridge Institute for Sustainability Leadership and president of the Wildlife Trusts Continue reading...

Staple products such as margarine, pasta and tinned tomatoes hit new highs in September

Labour leader accuses government of losing control of economy, branding budget a ‘self-inflicted’ problem

International Monetary Fund says measures should target households worst affected by energy crisis and inflationThe International Monetary Fund has launched a stinging attack on the UK’s tax-cutting plans and called on Liz Truss’s government to reconsider them to prevent stoking inequality.In rare public criticism of a leading global economy, the Washington-based fund said Kwasi Kwarteng’s mini-budget risked undermining the efforts of the Bank of England to tackle rampant inflation amid the cost of living emergency. Continue reading...

If the US pushes up interest rates to the point where it’s about to bring on a recession, Australia would be well advised to stand back and not lift ratesGlobal stock markets are tanking on fears of recessions in the US, the UK and Europe, and the OECD is actually forecasting recessions in Europe.So is recession now inevitable in Australia? Not at all.We don’t know, no one knows, whether this process will lead to a recession or if so, how significant that recession would be. That’s going to depend on how quickly wage and price inflation pressures come down, whether expectations remain anchored, and whether also we get more labour supply. Continue reading...

Amid extraordinary market changes, the Bank of England seems unlikely to sit on its handsIf one looks only at the pound, the governor of the Bank of England, Andrew Bailey, scored a small victory with his statement on Monday about not hesitating to raise interest rates. His line was little more than a weak holding position, but Tuesday’s action in currency markets was mostly calm during London trading hours.Sterling was a shade under $1.08 against the dollar in late-afternoon – not good, but no worse than 24 hours earlier. Huw Pill, the Bank’s chief economist, even got through an arranged speech without upsetting the applecart any further. Continue reading...

Bank of England’s chief economist speaks out after mini-budget, with financial markets expecting rates to reach up to 6%Britain’s homeowners have been warned to brace themselves for a “significant” increase in interest rates from the Bank of England in response to Kwasi Kwarteng’s tax-cutting mini-budget last week.Huw Pill, Threadneedle Street’s chief economist, added to the concerns of millions of mortgage payers who have already seen hundreds of home loan products pulled by lenders in anticipation of a big increase in the cost of borrowing. Continue reading...

To make the sums work, some suggest Kwasi Kwarteng may include deep spending reductions in his medium-term fiscal planWhen Kwasi Kwarteng met City figures on Tuesday, the Treasury said he had “reiterated the government’s commitment to fiscal sustainability”: though the grim faces of attendees in the official photos suggested they may not have been terribly reassured.Some analysts are now warning that with borrowing costs rising sharply, and the chancellor determined not to water down his radical tax plans, “fiscal sustainability” points to one thing: spending cuts. Continue reading...

BoE chief economist Huw Pill says Bank should wait until next scheduled meeting in the first week of November rather than respond through an emergency rate hike

If they lose the next election this will leave the incoming Labour government with a wrecked economy to repair and only five years to do it, writes Ray PerhamLiz Truss and Kwasi Kwarteng’s budget plan may be more cunning than it first appears (Kwarteng accused of reckless mini-budget for the rich as pound plummets, 23 September). There is little doubt that in all likelihood the Boris Johnson government was heading for defeat at the next general election. If by some miracle this budget delivers on most of what it promises, then Truss and Kwarteng can cast themselves as the country’s economic saviours and put the Conservatives in with a chance of prevailing at the election. If, as is much more likely, the budget ends in long-term catastrophe, then they will still lose the election. But this will leave the incoming Labour government with a wrecked economy to repair and only five years to do it.This will be an impossible task and could result in a fickle electorate voting against them in the following general election, thus returning the Conservatives to government after a short break. In the meantime, Truss and Kwarteng will be in a position to reap a variety of rewards from their even richer friends who have benefited from the tax changes that this government has made.

Meals for married life | Exotic animals | Far-right governments | Fiscal rectitude | Trickle-down cash | Wheelbarrow moneyRe Emma Beddington (After 25 years of feeding other people I’ve had enough of cooking – from now on it is toast in front of the telly, 25 September), our children left home years ago, and after 63 years of marriage we quite happily have an evening meal of a boiled egg, homemade bread, blueberries (frozen, defrosted) and yoghurt. We do have a choice of meals in the freezer for other days.

Crispin Odey among hedge fund managers cashing in on UK markets crisisMultimillionaire and Tory donor Crispin Odey is among the hedge fund managers cashing in on the UK’s market meltdown, saying that his bets against Britain’s government bonds were “the gifts that keep on giving”.The investor – who is known for profiting from the Brexit referendum by making similar bets – said his position against the pound had “been helpful”, adding that sterling was unlikely to gain substantial ground against rival currencies such as the dollar. Continue reading...

The turmoil stirred condemnation in the US, bitter memories in Greece and interest among holidaymakers in SingaporeInternational reaction to the turmoil in the financial markets which saw the pound fall to its lowest level ever against the dollar is devastating in its condemnation of the new government’s policies, and the astonishment and shock focused in particular on the chancellor’s willingness to experiment with one of the world’s most stable economies.In the US, criticism was led by the former US treasury secretary Larry Summers, who took to Twitter to attack what he called the “utterly irresponsible UK policy”, expressing at the same time his surprise that the markets had reacted so quickly and harshly. He said this in itself indicated a loss of credibility. Continue reading...

Chief economist says mini-budget will increase inflationary pressure in remarks likely to further spook mortgage borrowers

Chancellor seeks to calm investors as government bonds continue to collapse

Five-year British government bonds fall dramatically as traders price in higher risk of default on debt

Britain’s borrowing costs have soared as investors turn sour on prospects for economy

Airline boss says weak sterling is hurting both the UK economy and consumers

In today’s newsletter: The Guardian’s special correspondent Heather Stewart talks us through the best, worst and most likely result of another chaotic day in the money markets

In the US they call it ‘starving the beast’ – cut taxes and, as revenue decreases, you create irresistible pressure for austerityMarkets have delivered a devastating judgment on Kwasi Kwarteng’s tax-cutting mini-budget. The pound has collapsed to historic lows. And investors have sold UK government debt, driving the price of bonds down and the effective interest upwards at a rate not seen since the currency crises of the 1950s. The combination of the two is particularly worrying because it signals what some fear could become a comprehensive loss of confidence in the pound and UK assets.You might ask how it could be otherwise. How did the government expect the markets to react when it followed a giant energy crisis-fighting package, roughly costed at £150bn, with a further £45bn in tax cuts that primarily benefit the rich? It also delivered this news at a time when inflation is running faster than at any point since the 1970s and flouted the need for vetting by the Office for Budget Responsibility. What did it expect?Adam Tooze is an economic historian at Columbia University and the author of Crashed: How a Decade of Financial Crises Changed the WorldDo you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 300 words to be considered for publication, email it to us at guardian.letters@theguardian.com Continue reading...

Bank of England says it ‘will not hesitate’ to change interest rate but appears to be trying to squash expectations of an emergency rise

The chancellor claimed he would triumph over Treasury orthodoxy. But it has triumphed over himHaving beckoned the chancellor, Kwasi Kwarteng, with the lure of growth, the invisible hand of the market has grabbed his plans by the scruff of the neck and shaken them mercilessly. Investors plainly do not believe that tax cuts will lead to the economic growth Mr Kwarteng desires. They worry that the Bank of England won’t raise rates to bring down inflation. The gyrations in the markets led to emergency statements from the Treasury and the Bank on Monday afternoon that sought to restore confidence. It’s unclear whether these will be enough to calm things down.The mess was predictable – and largely down to Mr Kwarteng’s refusal to explain what he was doing. City analysts were left in the dark on Friday about how the government would increase the value of goods and services in the economy. Mr Kwarteng also did not provide a comprehensive Treasury plan. He shrugged when asked about market reaction to his ideas, nonchalantly saying they “will react as they will”. While Mr Kwarteng had little to say about the markets, they had a lot to say to him. Continue reading...

Loud cheering as motion on PR is carried even though Labour leader says he will ignore vote. This live blog is now closed.In June, as the RMT union launched what has become an ongoing series of strikes, Keir Starmer ordered Labour frontbenchers and shadow ministerial aides not to join picket lines. This infuriated leftwing Labour MPs and some union leaders, notably Sharon Graham, the general secretary of Unite.At one point it looked as if there might be a huge row at conference about whether shadow ministers should or should not be allowed to join picket lines. But, in an interview with the Today programme this morning, Graham suggested that a truce of sorts has been agreed – even if the two sides do not entirely see eye to eye.My issue about this … isn’t necessarily around one person on a picket line because, quite frankly, that isn’t the issue. The issue is the mood music [ordering shadow ministers not to join picket lines] suggests. It suggests a mood music that being on the picket line is somehow a bad thing. It’s a naughty step situation.The party who is there to stick up for workers should not give the impression – that’s the problem, it gives the impression – that they are saying picket lines are not the place to be. And I think that it was unfortunate. I think it was a mistake. I think, to be honest with you, Labour knows it was a mistake. And I don’t actually think it’s holdable.When people go on strike it is a last resort at the end of negotiations. And I can quite understand how people are driven to that … I support the right of individuals to go on strike, I support the trade unions doing the job that they are doing in representing their members.I’m incredibly disappointed that as delegates we’ve been excluded from this key part of the conference’s democratic process.This is an unprecedented move silencing members’ voices. Our CLP sent us here to Liverpool to promote our motion on public ownership and a Green New Deal, but we’ve been unfairly denied that right. Continue reading...

As Truss and Kwarteng unleash economic chaos, Labour conference all feels a bit pre-1997 – though no one in the party will say that out loud“The markets will react as they will,” said the chancellor in the House of Commons, as he launched the tax cuts that sank the pound and sent borrowing costs soaring. And so they did. As sterling plunged again, the Treasury reported he was “sanguine”, promising yet more tax cuts for the rich, this time to let them accumulate fatter, tax-free pensions. Liz Truss has arrived in office without any significant poll bounce – which makes her unique in polling history. YouGov’s associate director, Patrick English, tells me to expect further plunging numbers. A panicky Treasury promise of a “new fiscal event” in November sounds more of a threat than a promise.Here ends the arrogance, the self-regard, the cultish obsession with economic fantasies that failed and failed again. Here dies the nonsensical Laffer curve, the theory that tax cuts for the rich yield more than they cost. This should render the Tories unelectable for a generation, because this crash is all their own.Polly Toynbee is a Guardian columnist Continue reading...

Shadow chancellor’s conference speech amid sterling crisis highlights Labour’s claim to be party of economic competence

The chancellor has refused to comment as sterling plummeted to an all-time low against the dollar, with speculation the Bank of England could intervene as soon as Monday. As he walked to his office in Westminster, Kwasi Kwarteng was repeatedly questioned by reporters about the turmoil in the markets caused by his sweeping tax cuts and the need for tens of billions of pounds in extra borrowing

Analysts expect Bank of England to convene meeting to raise rates with further increase in November

Chancellor added to market worries by pledging further tax cuts in full budget planned for later this year

How the currency crisis affects imports, prices, investors and the Bank of England

Odds of sterling hitting parity with dollar jump, as analysts say UK bond market ‘getting smoked’ by giveaway

The government’s policy approach risks stagflation. It is making history for all the wrong reasons

Average price of homes coming to market in September increased by 0.7% on previous month to £367,760, says RightmoveHouse sellers have continued to raise their asking prices despite borrowers facing higher interest rates and the cost of living squeeze, data from property portal Rightmove shows.The average price of a home coming to market increased by £2,587, or 0.7% month-on-month in September to £367,760, according to the company. Continue reading...

Giving handouts to the rich is a fiscal and moral outrage, writes Prof Alan Walker; plus letters from Howard Fielding, Ivor Morgan, Richard Heller, Helen Briggs, John Platt, Jeffrey Borinsky and the parent of a City workerKwasi Kwarteng and Liz Truss’s mini-budget is a fiscal and moral outrage, because it ignores the extensive negative evidence from previous attempts to boost growth by giving handouts to the rich (Kwarteng accused of reckless mini-budget for the rich as pound plummets, 23 September). It is also a constitutional outrage. Apart from a very small group of relatively rich people, no one voted for this radical policy change. Hopefully the British public will recognise this as a reckless gamble aimed at bolstering Truss’s election prospects. Recent history shows, however, that the public cannot necessarily be relied upon to make wise political decisions, so our outrage must be transformed into practical action to persuade voters that there is a viable, socially just alternative to this morally bankrupt government.

Corporations are using rising costs as an excuse to increase their prices even higher, resulting in record profits. We need limited price controls to break this cycleOn Wednesday, policymakers at the Federal Reserve – America’s central bank – continued their battle against inflation with a third straight supersize interest-rate increase. And they warned that they’re not done. They’ll continue to raise borrowing costs until inflation is tamed.They assume that the underlying economic problem is a tight labor market, causing wages to rise – and prices to rise in response. And they believe interest rate increases are necessary to slow this wage-price inflation.Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com Continue reading...

A reckless dash for growth is nothing new. Ted Heath’s chancellor Anthony Barber tried one in 1971, but it didn’t turn out wellThe recklessness of chancellor Kwasi Kwarteng’s “budget for growth” evokes memories of the disastrous outcome of the last great Conservative “dash for growth”: the so-called “Barber boom” of 1971-73.I say so-called because the wildly expansionist policy of those years was essentially the work of PM Edward Heath. His preferred chancellor, Iain Macleod, had died within a month of taking office in 1970, and Heath was thenceforth the driving force in economic policy. Continue reading...

Liz Truss is banking on a failed policy. The focus should be on the real driving force behind economic growthAs millions of British families struggle to pay the costs of food, fuel and rent, Liz Truss and her chancellor, Kwasi Kwarteng, have unveiled their economic plan: cut taxes for corporations and rich people.The policies announced in the mini-budget – reversing planned rises in corporation tax and national insurance, cutting stamp duty, scrapping the top income tax rate – will put millions of pounds into the pockets of the wealthiest people, not to mention bankers, who will have the cap on their bonuses removed. Continue reading...

Labour has a better plan for growth than Kwasi Kwarteng’s sugar-rush of tax cuts. Now it needs to pitch it to votersBoris who? Theresa who? David who? The names escape her. Rishi who? Philip who? George who? The names elude him. Liz Truss and Kwasi Kwarteng, the devil-may-care duo of Downing Street, declare themselves an audacious break with the failed orthodoxies of the past and bold heralds of a new era for Britain.After the chancellor had finished unveiling his debt-financed bonanza of tax cuts on Friday, I heard one of the cabinet describe this as “a new administration” that had “only been in office for two weeks”. This is one of the oldest tricks in the Conservative playbook. Declare that you have arrived with a radically novel agenda to rescue Britain from the appalling mess inherited from your predecessors and hope that a frenetic display of activity will dizzy the public into forgetting that those predecessors were also Tories. In the case of Ms Truss, the feat can only succeed if voters are induced not to care that she was first given a ministerial job by David Cameron and has sat in the cabinet for eight of the dozen years that the Tories have been in power. In the case of Mr Kwarteng, he’d prefer us not to recall that he voted for every one of the Conservative budgets since 2010, the budgets he now repudiates for dooming Britain to a “vicious cycle of stagnation”. Continue reading...

The chancellor’s plans manage to be both the best ever and economically incoherent, depending on who you listen toAllister Heath, Daily Telegraph Continue reading...

The markets have no faith in the mini-budget and the British people will soon feel its effectsBritain is on the cusp of a financial crisis. On Friday, the prime minister, Liz Truss, and the chancellor, Kwasi Kwarteng, comically parading false claims of their toughness, elected for the softest of economic options.In a “mini-budget” – an obvious misnaming to avoid presenting elementary fiscal arithmetic required by law for a proper budget – they pretended to shrink the state’s financial claims while launching an unprecedented extra £411bn of public borrowing over the next five years as a “plan for growth”. Never in British public life has the gap between rhetoric and reality been so gaping. Continue reading...

PM expected to expand shortage occupation list to help businesses fill jobs amid recession warnings

Money spent on the green transition or skills would reap a dividend. But this cash is just going to the richThe billions of pounds of extra borrowing signalled by Kwasi Kwarteng in his not-so-mini budget can be justified as long as the money isn’t flushed down the toilet.Funds for renewable energy projects or to boost skills training would generate a return over the next decade. Continue reading...