BoE’s move to end bond buying is a big gamble given the magnitude of the bind Britain is in

Statement from No 10 comes straight after PM told MPs she was ‘absolutely’ committed to avoiding public spending cuts. This live blog is now closedSajid Javid, the former Tory chancellor, has been speaking at an event organised by the Legatum Institute thinktank this morning. As Chris Smyth from the Times reports, Javid said the turmoil in the markets was caused by the fact that the tax cuts in the mini-budget went “way beyond” what Liz Truss promised during the leadership campaign, and by the fact that her energy bills bailout was also much bigger than expected.The government has drawn up a plan to cap the unit cost of gas and electricity for two years. Labour proposed its own plan to freeze energy bills, but it only proposed a commitment for six months. Continue reading...

Limp growth would normally require fiscal stimulus, yet concerns about inflation mean we’re unlikely to see a big-spending budget

Price of 20-year UK bonds hit new lows as Bank of England statement rules out considering an extension

Liz Truss committed to 'absolutely' no cuts to public spending at prime minister's questions on Wednesday, after Keir Starmer pressed her on a campaign pledge when she was a contender for leadership of the Conservative party.'During her leadership contest, the prime minister said, and I quote her exactly: "I’m very clear I’m not planning public spending reductions." Is she going to stick to that?' the Labour leader asked. Truss replied: 'Absolutely.'The prime minister also surprised MPs when she said she would honour a Tory manifesto commitment to ban 'no-fault evictions' after the Labour MP Graham Stringer asked what the government's position was

Liz Truss said she was 'absolutely' committed to making no cuts to public spending, during a series of heated exchanges with Labour leader, Keir Starmer, at prime minister's questions on Wednesday. The prime minister has been under public pressure since the chancellor's mini-budget was met with turmoil in financial markets, the pound to sliding against the dollar and mortgage rates increasing.Starmer also challenged Truss on the impact of the mini-budget on mortgages and financial markets. 'The Tories went on a borrowing spree sending mortgage rates through the roof and for two million homeowners their fixed-rate deals are coming to an end next year,' he said. 'They're worried sick and everybody in this house knows it'

Economic confidence in UK seriously undermined by Kwarteng and Truss’s ‘guerrilla tactics’, Commons committee hears

The business secretary, Jacob Rees-Mogg, has accused the BBC of breaching its duty of impartiality by linking the drop in the pound and instability in pension funds to Kwasi Kwarteng's mini-budget.'You suggest something is causal, which is a speculation,' Rees-Mogg said. 'What has caused the effect in pension funds … is not necessarily the mini-budget. I think jumping to conclusions about causality is not meeting the BBC requirement for impartiality'

Business secretary claims impartiality rules breached by suggestion market turmoil is linked to mini-budget

August GDP data from ONS gives strong signal that UK is entering recession

Implementing massively racist Australian-style immigration policies? Tick

In the 1990s, Russia embraced an extreme economics that led to chaos and corruption. Now, writes the maker of explosive new series TraumaZone, Liz Truss is taking Britain down the same toxic pathThe central mystery of our time is why, at a moment when the whole political and social system is out of control and in total chaos, no one seems able to imagine any alternative. The economic system is not delivering the good life it once promised, but is instead creating chaos and hardship for millions. Meanwhile, those in charge of the system are profiting massively from that chaos, feeding off the uncertainty. And the political class are in thrall to an economic theory that has become absurd and corrupted.I’ve just made TraumaZone, a series of films about another time when that was happening. It was in Russia in the 1990s after communism collapsed. Those in charge began an experiment to create an extreme form of capitalism. I made it because I don’t think we in the west understand what the Russians went through: a cataclysm that tore apart the foundations of society. Continue reading...

Pensions hedging crisis shows how the City never seems equipped to handle the next big financial hazardPension funds have found themselves embroiled in a byzantine world of exotic financial trading that many of them appear to have badly misunderstood.On Tuesday, a third rescue mission in little more than a fortnight was announced by the Bank of England, which is reprising its role in the 2008 financial crisis as the City’s lifeboat. Continue reading...

Sterling falls more than a cent to below $1.10 after Andrew Bailey tells pension firms they have ‘got to get this done’The pound has fallen sharply against the dollar after Andrew Bailey warned the Bank of England would not extend its emergency intervention in financial markets beyond this week, after the turmoil sparked by the government’s mini-budget.Sterling skidded by more than a cent against the dollar to below $1.10 after the Bank’s governor insisted the £65bn scheme to purchase UK government bonds would not be continued beyond the deadline on Friday. Continue reading...

Kwasi Kwarteng accused of compounding anxiety as he says announcement on uprating benefits will come in Halloween fiscal statementStruggling households will have to wait until the end of October to find out whether welfare payments will rise with inflation or be subject to a real-terms cut, the chancellor has announced.Kwasi Kwarteng was accused of compounding the anxiety faced by those already at the sharp end of the cost of living crisis by telling them clarity would not come until his Halloween fiscal statement. Continue reading...

After Bank expands action to stave off ‘fire sale’ in wake of mini-budget, investors ask for longer expiry date

The government and its central bank are plotting a path that will create a painful recession. Both ought to change courseIn chess they call it zugzwang – a situation in which any legal move leaves the player worse off. Both the chancellor, Kwasi Kwarteng, and the Bank of England are searching for a winning way out of their predicaments, given the constraints imposed by public opinion. They are unlikely to find one. “Trussonomics” – a mixture of tax cuts, sharp reductions in public spending and higher interest rates – has arrived as Britons back higher investment, nationalised industries and lower levels of inequality. Voters are getting the opposite of what they want, with trust in ministers plummeting.No government has sabotaged its economic reputation as quickly as this one. The Bank has had to step in three times since the chancellor’s mini-budget to stop a big sell-off in UK debt caused by the government announcing a fiscal package that borrows, according to the Institute for Fiscal Studies, £370bn over the next two years for little obvious economic gain. The mayhem was entirely predictable. Mr Kwarteng is spending more than the government gets back in taxes; the difference is funded by selling government debt at a price determined by auctions where finance houses determine the yields. The more debt that is issued, the higher the interest rate investors demand to hold government IOUs – a process that leads ultimately to higher mortgage payments. Continue reading...

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International Monday Fund says a ‘change in fiscal policy’ would help calm bond markets…on day that Bank of England steps up its bond-buying support

Shareholders have enjoyed large payouts at time of meagre workers’ pay growth, says study from thinktanksKwasi Kwarteng is pushing ahead with a multimillion pound tax cut for wealthy individuals despite growing concerns over the public finances, according to a report highlighting a boom for investor dividends since the Covid pandemic.On a renewed day of turbulence in financial markets over the chancellor’s unfunded tax cutting plans, the Treasury confirmed it would reduce the rate of income tax on dividends. Continue reading...

Fund says ‘worst yet to come’ because of rising living costs, Ukraine war and Chinese slowdownThe International Monetary Fund has told central banks to “stay the course” in their fight against inflation, despite warning that a third of the global economy will be in recession next year.In its half-yearly update, the Washington-based IMF said the “worst was yet to come”. It cited a combination of cost of living pressures, Russia’s invasion of Ukraine and a slowdown in China as important factors behind a fresh growth downgrade. Continue reading...

Fund says chancellor’s measures have made Bank of England’s battle against inflation more difficultKwasi Kwarteng has come under fresh fire from the International Monetary Fund after the Washington-based organisation said his tax cuts and energy support package had made the Bank of England’s battle against inflation more difficult.The IMF used its prestigious world economic outlook (WEO) to criticise the scale of the stimulus provided by the chancellor and the blanket nature of the price cap on gas and electricity bills. Continue reading...

Jobless level lowest since 1974 but pay growth still failing to keep pace with soaring inflationThe number of working-age adults in Britain who are not in the jobs market because they are long-term sick has increased to a record high, official figures show, amid concerns over shortages of workers in the UK economy.The Office for National Statistics said unemployment in the UK fell to 3.5% in the three months to August from a previous level of 3.8%, dropping to the lowest level since February 1974. Continue reading...

Veteran official gets permanent secretary role instead of reformer as fiscal plan is brought forward by three weeksLiz Truss has overruled Kwasi Kwarteng’s top appointment at the Treasury and handed the role to a veteran Treasury official, one of a series of moves designed to calm markets and backbenchers.It was also announced that the chancellor will set out plans to shore up the public finances three weeks earlier than planned and publish long-awaited forecasts by the Office for Budget Responsibility at the same time. Continue reading...

Analysis of budgets finds rich nations, including UK, ‘exacerbated explosion of economic inequality’Many of the world’s poorest countries have cut health spending during the last two years, sometimes to make debt repayments to rich creditors, according to a report by Oxfam that shows inequality between rich and poor nations worsening during the coronavirus pandemic.Analysis of national budgets across 161 nations found that despite the biggest global health emergency in a century, half of low- and lower-middle-income countries cut health spending, while almost half cut their welfare budgets and almost three-quarters cut education spending. Continue reading...

IFS says Kwasi Kwarteng’s mini-budget will leave ministers making serious reductions in public servicesKwasi Kwarteng will need to find £60bn of savings by 2026 to fill the gap left by unfunded tax cuts and the costs of extra borrowing triggered by a panicked reaction on international money markets to the chancellor’s “mini-budget”, according to the Institute for Fiscal Studies.The UK will also struggle to hit the chancellor’s 2.5% growth target, with economic forecasts by the investment bank Citigroup that the IFS uses to underpin its analysis showing the UK will struggle to grow at more than 0.8% on average over the next five years. Continue reading...

Jamie Dimon said the Federal Reserve ‘waited too long and did too little’ as inflation has surged in the past 18 monthsThe US and global economy is facing a “very, very serious” mix of headwinds that is likely to cause a recession by the middle of next year, warned Jamie Dimon, chief executive of JP Morgan Chase, the largest US investment bank, on Monday.Dimon pointed to the effects of runaway inflation, sharp interest rate rises and Russia’s war in Ukraine, as factors that informed his thinking. But he added that the US is “actually still doing well” and consumers were likely to be in better shape compared with the global financial crisis in 2008. Continue reading...

The former chair of the US Federal Reserve Ben Bernanke has been awarded this year’s Nobel prize in economics alongside two other leading economists for their work on financial crises. The former head of the world’s most powerful central bank – who was at the helm during the 2008 financial crisis and helped oversee the global response – said he was ‘incredibly honoured’ to share the prize with the economists Douglas Diamond and Philip Dybvig

Head of US central bank from 2006 to 2014 awarded prize alongside economists Douglas Diamond and Philip DybvigThe former chair of the US Federal Reserve Ben Bernanke has been awarded this year’s Nobel prize in economics alongside two other leading economists for their work on financial crises.The former head of the world’s most powerful central bank, who was at the helm during the 2008 financial crisis and helped oversee the global response, shared the prize with the economists Douglas Diamond and Philip Dybvig. Continue reading...

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Yield on 10-year government bonds rises above 4.5% despite Bank of England trying to quell jittersUK government borrowing costs have risen to the highest levels since the financial market chaos triggered by Kwasi Kwarteng’s mini-budget in September, despite renewed efforts by the Bank of England to smooth over the turmoil.The yield – or interest rate – on 10-year UK government bonds rose above 4.5% in afternoon trading on Monday, returning to the levels last seen two weeks ago, before the central bank intervened after the chancellor’s poorly received tax and spending statement. Continue reading...

The prime minister is calling for greed, not growth, says Dr David Scott. Plus letters from Rob Basto, Catherine Dornan and Mike HineLast week, Liz Truss bemoaned the “anti-growth coalition” and called for “growth, growth, growth”. This nonexistent broad-based coalition seems to include nearly everyone who does not agree with her dangerously irresponsible promotion of profits and capitalist accumulation, no matter what the human and environmental costs.Truss seems to care nothing for the wellbeing of ordinary people. In fact, she is not calling for growth, but for greed. I would be happy to join any anti-greed coalition – one that calls for the growth of human wellbeing and life expectancy; the growth of understanding of the catastrophic crisis that the world is facing through ecocide and of interventions that can prevent it; and growth in capacity of welfare services, such as the NHS, that meet human need. Continue reading...

Incomes have stalled while the rich get richer. It’s clear the obsession with GDP has to changeLiz Truss was clear what she wanted. “I have three priorities for our economy,” the prime minister told the Conservative party conference last week: “Growth, growth and growth.” But her problem is that this is not actually clear at all.The definition of economic growth is an expansion of national income, as measured by GDP (gross domestic product). Since the 1950s it has been the objective of more or less all governments to have GDP growing every year.Michael Jacobs is professor of political economy at the University of Sheffield

Kwasi Kwarteng brings forward release of debt-cutting plan, as Bank of England announces new measures to support pensions sector through crisisDespite the Bank’s announcement, long-dated UK bond prices have opened a little lower.The yield on 30-year UK government bonds have inched up to 4.45%, from 4.38% on Friday night.The UK index of financial stress (which takes into account the rise in UK interest rate spreads as well as their volatility) remains as high as when the BoE started its intervention in late September.Equally important, and as I explain for The Conversation, persistently high financial stress can have a depressing impact on UK GDP for as many as 20 months. So we are not out of the woods yet… Continue reading...

Fall of 0.2% recorded in week starting 2 October, with biggest dip in shopping centres and retail parksThe number of visitors to shopping destinations dropped back last week in one of the first indications of a slowdown in spending amid rising energy bills.In the week beginning 2 October, footfall slipped by 0.2% on the previous week across all UK retail destinations, with the biggest drop in shopping centres and retail parks, according to figures from the monitoring group Springboard. Continue reading...

Phoenix’s economy appears to be booming – but wages are failing to keep up, and prices are spiralling. How do voters see it?In her back pocket, Ana Diaz carries a smooth grey pebble she calls her “knock-knocker”. She uses it to get a loud rap on the front doors of the South Phoenix neighborhood where she is canvassing for the Democrats ahead of November’s crucial midterm elections.It’s 110F (43C) in the early afternoon sun, and Diaz is aiming to knock on 80 doors in this largely Latino neighborhood and speak to at least 20 people, encouraging them to vote. Diaz, a Los Angeles-based bartender and Unite Here union member, is a familiar face to many in this working-class area. In her T-shirt that reads “Worker power” she has been knocking on these doors since 2018. Continue reading...

UK’s biggest tenpin bowling operator says its low-cost entertainment will appeal to cash-strapped familiesHollywood Bowl, the UK’s biggest tenpin bowling operator, has increased annual revenues and profits to well above pre-pandemic levels and believes its value entertainment will continue to appeal to families cutting back on household spending.The company, which claims to be cheaper than its rivals, said the ability of a family of four to play for less than £22 would continue to make it attractive during the cost of living crisis. Continue reading...

Chancellor will also bring forward publication of OBR forecasts after pressure from MPs• Live coverage: UK to publish fiscal plan on 31 OctoberKwasi Kwarteng has brought forward the date of his debt-cutting plan to 31 October after pressure from MPs over the unfunded tax and spending promises announced in last month’s mini-budget.The chancellor told the Commons Treasury committee that he would use the new date to announce his “medium-term fiscal plan”, alongside the release of fresh forecasts for the economy and public finances from the Office for Budget Responsibility (OBR). Continue reading...

We asked Guardian readers what they would do with all that money

Janet Yellen’s comments come as figures show business activity declining across most UK regionsThe world’s biggest oil-producing nations cutting production at a time of soaring energy costs is “unhelpful and unwise” for global economic growth, the US Treasury secretary has warned, amid intense pressure from sky-high inflation.Ahead of meetings hosted by the International Monetary Fund in Washington this week, Janet Yellen said the move by Opec+ – the oil production cartel led by Saudi Arabia, plus Russia – risked undermining the world economy. Continue reading...

Online media company, which has seen its share price slump, blames economy for job lossesLadBible, one of the UK’s biggest online media success stories, is sacking 10% of its staff following a slump in its share price and a warning about tough trading conditions.The Manchester-based company blamed the state of the economy, which it variously attributed to the war in Ukraine, the hangover from Covid lockdowns and growing price inflation caused by “political instability”. Continue reading...

Measures too similar to tried, tested and failed tactics of past decadeSomewhere on the roads into north London, the suburbs turn into streets lined with the townhouses of the anti-growth coalition. As Liz Truss told the Conservative party conference last week, here live the “enemies of enterprise” who would hold Britain back.Forget that financial markets were thrown into a tailspin by her plans for the economy, pushing up mortgage costs to eye-watering levels. Forget that Britain under the Conservatives is on the brink of a prolonged recession with the highest rates of inflation for 40 years. Here was the real culprit: the pundits talking Britain down. Continue reading...

This gonzo economic theory continues to live on, notwithstanding its repeated failuresWithin weeks of taking office, Britain’s new prime minister, Liz Truss, and her chancellor of the exchequer, Kwasi Kwarteng, proposed a radical new set of economic measures that echoed the trickle-down policies of Margaret Thatcher and Ronald Reagan – heavy on tax cuts for the rich and deregulation.Last Monday, after a backlash from investors, economists and members of his own party, Mr Kwarteng reversed one of the proposals, deciding against abolishing the tax rate of 45% on the highest earners. But proposals for other tax cuts worth tens of billions of pounds remain intact, as the government insists it is on the right path.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...

I know we are in volatile financial times but let’s at least have a bit of linguistic variationYou would have thought that City types were hard-boiled, armour-plated folk, well used to all the financial vicissitudes that life could throw at them, but no. Just consider these headlines from past week: Bank of England quells market chaos after UK government spooks investors; Core inflation spooks markets; Joules tanks as insolvency talk spooks market. And that’s just a small selection. Quite clearly, City types are a bunch of poltroons. My point, though, is the ubiquity of “spook the market”. I know how hard it is to write punchy headlines, but I’m getting rather bored with this one and would heartily welcome a new variant. Thinking caps on please, fellow hacks.Wandering around my home town last week, I was struck by a couple of notices. The first, in the window of Holland & Barrett, was advertising for positions as “store colleagues”. Further light was shed on these mysterious entities on its website: “Our stores are the place where we can engage face-to-face with our customers and our skilled, trusted store colleagues are a vital part of our success. Wellness begins with you, start your journey today.” I’m sure they used to be known as shop assistants, but there you go. Job titles today, eh? Still, I’m glad they are going on a journey. Continue reading...

The PM and chancellor will try to stop panic spreading through the party after their high-risk economic plan threatens a ‘death spiral’The prime minister, Liz Truss, and the chancellor, Kwasi Kwarteng, will face the wrath of Tory MPs at a succession of crisis meetings in parliament this week as their high-risk economic policies hit their poll ratings and spread panic in all wings of the party.After a turbulent first five weeks at No 10 and an ill-disciplined, chaotic annual conference in Birmingham last week, Truss is expected to address the 1922 Committee of Tory backbenchers on Wednesday evening after taking on Keir Starmer at prime minister’s questions. Continue reading...

The chancellor is bound for Washington for talks with the organisation that blasted his mini-budget“Whenever there is change, there is disruption,” Liz Truss told the Conservative party conference last week. “And not everyone will be in favour.” This week, her chancellor, Kwasi Kwarteng, will fly out to Washington to meet at least one prominent critic.The main focus of the International Monetary Fund annual meetings in the US capital will undoubtedly be the way the world responds to a succession of shocks: the Covid pandemic, Russia’s war in Ukraine and global heating. Global economic growth is faltering amid sky-high inflation and more natural disasters are sweeping the planet, while there are serious divisions between leading nations. Continue reading...

Liz Truss’s strategy for getting the economy going is not a pretty sight• You can order your own copy of this cartoon Continue reading...

How can the government build, build, build and hit net zero? Or, come to that, keep both the Bank and the OBR on its side?Are you against growth, Liz Truss asks in her speech to the Tory party conference. What about your credentials as a disruptor? Can you say, with a steady hand on your trusty sword, that you have cut through anything more than a pat of butter in the past few years, let alone weeks?Growth in all its guises should be positive for the economy. Growth promotes new jobs and incomes, says Truss. Disruption likewise. But when a government says it wants to build, build, build and at the same time achieve net zero carbon emissions, there are obvious contradictions. Continue reading...

In Britain’s darkening economic climate, the expensive high speed rail project looks like an obvious target for further cutsAt first glance, the scarred earth in central Birmingham where HS2’s future Midlands terminus will stand has not changed greatly since 2018. Back then, before another Tory party conference, transport secretary Chris Grayling donned a hard hat to affirm that work was up and running, in front of bulldozers specially hauled in for a Sunday shift.Now, with the government set on fresh spending cuts, the vast outlay on the high-speed rail line has been called into question again as inflation bites. Facts on the ground will matter once more – and while the sweeping viaduct and new station at Birmingham’s Curzon Street exist only in CGI form above ground, foundations have been laid beneath. Continue reading...

High oil and gas revenues notwithstanding, Putin’s ability to fight is being eaten away as the months go byFears that Russia is navigating its way around sanctions are unfounded, according to experts who say Moscow is suffering a bigger hit than institutions such as the World Bank have been predicting.Some analysts have interpreted the strength of the rouble, the size of the warchest of cash available to Vladimir Putin and the Kremlin’s ability to redirect exports destined for Europe to willing southern neighbours as a signal that the arsenal of sanctions deployed against Moscow is failing to bite. Continue reading...