Jeremy Hunt’s emergency statement boosts markets: Pound surges to $1.12, FTSE jumps and yields on government bonds drop with Chancellor set to rip up MORE of Liz Truss’s economic plan
- Pound has spiked upwards and the FTSE 100 and FTSE 250 are on the rise as Trussonomics is reversed
- Jeremy Hunt is to announce tax and spending measures in the Commons today after speech on TV at 11am
- The Chancellor is bringing forward the Medium-Term Fiscal Plan by two weeks to try to calm jittery markets
- Mr Hunt expected to axe much of the mini-budget that has seen the pound plummet and mortgage rates rise
Jeremy Hunt’s upcoming bonfire of Liz Truss’ economic policies has pleased traders today with the FTSE 100 rising, the pound up against the dollar and euro and the cost of Government borrowing down.
Global markets have backed the new Chancellor’s decision to axe many of the Prime Minister’s tax cuts and spending plans as she fights for her political life.
In an extraordinary 6am statement, the Treasury said Mr Hunt will announce an overhaul of the disastrous mini-Budget within hours rather than waiting until Halloween – with a live TV address at 11am and then statement in the Commons at 3pm.
Immediately the yields on UK government bonds have dropped sharply ahead of new Chancellor Hunt’s emergency fiscal statement due to be announced later on Monday to stabilise financial markets. The yield on 30 year bond has fallen to 4.5% – but it was at 3.7% before the Truss and Kwarteng mini-budget three weeks ago.
It means the cost of government borrowing dropped today – but the Bank of England’s governor Andrew Bailey said yesterday that UK interest rates will have to rise more than expected. Falling gilt yields will come as a relief to the Government, as it was the sell-off in this market that threatened to trigger a mini financial crisis in the UK in October.
The pound immediately jumped higher. Sterling leapt to 1.129 US dollars 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. Sterling was also up to 1.1554 euros – an increase of around a quarter of a euro cent.
The blue-chip FTSE 100 index gained 0.3% when markets opened in London this morning, while the domestically focussed FTSE 250 index climbed 0.7%.
The Treasury’s announcement of an emergency fiscal statement came before markets opened for the first time since the Bank of England ended its government bond-buying scheme, with all eyes on the reaction in gilt trading.
The Bank stuck to its guns by ending its emergency gilt-buying programme on Friday despite fears it would see a return to volatile market conditions which sparked a damaging sell-off in gilts that left some pension funds on the verge of collapse.
Mr Hunt’s move also comes as speculation swirls over Liz Truss’s future as Prime Minister.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: ‘New Chancellor Jeremy Hunt has the air of a troubleshooting teacher brought in to turn around a failing school and faces his first big presentation test today with an emergency budget plan wheeled out to try and calm financial markets.
‘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 is up against both the dollar and the euro as Jeremy Hunt hinted that he would take a wrecking ball to Trussonomics
Liz Truss (pictured today) has only been PM for 40 days, but rebels are already plotting her removal and are keen for her to go this week, sources say, as her new Chancellor prepares to axe much of her mini-budget today
New Chancellor Jeremy Hunt is set to make a statement on the Government’s tax and spending plans today – first on live TV at 11am and then in the Commons at 3.30pm
Jeremy Hunt will take a wrecking ball to ‘lame duck’ Liz Truss’s economic policies today in a desperate bid to calm the markets – as Tories warn she must be gone in days.
He is expected to ditch plans to knock 1p off the basic rate of tax, one of the PM’s flagship measures, but there is speculation he will go much further. Some believe he will reverse stamp duty reductions, with only the cut to national insurance looking safe – as legislation has all-but cleared Parliament.
The dramatic intervention – which sent the Pound spiking – comes as ministers scramble to fill a £72billion hole in the public finances, after Kwasi Kwarteng’s fiscal package sparked a complete meltdown.
But despite jettisoning her closest ally Ms Truss is still looking in deep trouble. Despite Work and Pensions Secretary Chloe Smith having been slated to do broadcast interviews this morning, no Cabinet minister came out to shore up her position.
Mr Hunt is being openly described as the ‘de facto PM’ while around 100 MPs are said to have written to 1922 chief Graham Brady – who returns from holiday today – urging him to change party rules so the premier can be outsted.
Mr Hunt, who yesterday insisted the PM was still ‘in charge’ despite forcing her to scrap her tax-cutting agenda, is expected to speak on live TV at around 11am setting out his plans in the hope that markets will settle down and prevent the further collapse in the value of UK bonds – known as gilts.
He will then make a speech to the House of Commons at 3.30pm, in which he is expected to announce U-turns in cuts to the basic rate of income tax and corporation tax.
With more backtracking now expected, the pound rose sharply against the dollar and the euro this morning with all eyes on how the gilts market moves when the markets open in London at 8am.
On another pressure-cooker day at Westminster:
- Tory MPs are openly saying that party members made the ‘wrong choice’ and urging a return of Rishi Sunak to the Cabinet;
- Ms Truss is expected to hold a reception for her Cabinet tonight as she desperately attempts to hold on to power;
- The Pound surged by around 1 per cent against the US dollar in the wake of the Treasury move, while interest rates on government debt subsided;
- A poll has shown the Tories on track for a 1997-style election wipeout with a swathe of Cabinet ministers losing their seats.
It comes as Tory MPs will try to oust Liz Truss this week – making her the shorted serving PM in history – despite Downing Street warning that it could trigger a general election. There are claims that Rishi Sunak and Penny Mordaunt could be put into No 10 and No 11 as part of a ‘coronation’ by MPs. Others think Jeremy Hunt may use his position to force himself into Ms Truss’ jobs.
Some MPs have suggested that Defence Secretary Ben Wallace would be a better unity candidate and Theresa May has also been touted to return as leader.
‘We cannot go on like this’: Andrew Bridgen and Jamie Wallis are latest Tory MPs to break ranks and urge Liz Truss to resign after Crispin Blunt
Three Tory MPs have broken rank and publicly urged under-fire Prime Minister Liz Truss to resign – less than two months into her premiership.
Andrew Bridgen and Jamie Wallis today became the latest Conservative backbenchers to go public with their calls for the embattled Tory leader to go.
It comes after ex-minister Crispin Blunt today told Channel 4’s Andrew Neil Show that he does not think the Prime Minister can survive the current crisis.
Mr Bridgen, the MP for North West Leicester, who supported Rishi Sunak’s leadership campaign, also made clear his stance today.
After savaging Ms Truss in a blog post, he told The Daily Telegraph: ‘We cannot carry on like this. Our country, its people and our party deserve better.’
And in a further blow to Ms Truss’s leadership, Jamie Wallis took to Twitter to share a letter sent to the Prime Minister.
Posting the letter, the Bridgend MP wrote: ‘In recent weeks, I have watched as the Government has undermined Britain’s economic credibility and fractured our Party irreparably.
‘Enough is enough. I have written to the Prime Minister to ask her to stand down as she no longer holds the confidence of this country.’
While many Tories have said that the PM is on her way out behind the scene, the three MPs are the first to publicly say her days are numbered – despite Ms Truss axing chancellor Kwasi Kwarteng in a bit to keep hold of power.
It comes amid reports that as many as 100 Conservative backbenchers may have written no-confidence letters demanding a vote on whether to depose Ms Truss.
Supporters believe the Prime Minister cannot be challenged due to party rules which mean there cannot be another leadership vote for another 12 months.
But in a further blow, the treasurer of the powerful 1922 Committee of Tory backbenchers suggested a vote could still be held, if the committee’s top table believed there was an overwhelming demand for one.
He told the BBC: ‘Of course we have the power to change the rules.’
The under-fire Prime Minister is set to meet with moderate Tory MPs this week in a bid to stave off a leadership coup, amid claims Conservative rebels are preparing to oust her as early as this week.
On Friday she drafted in Mr Hunt after she sacked previous Chancellor Mr Kwarteng only weeks after the announcement her Government intended to bring in £45billion of unfunded tax cuts in last month’s -mini-budget’.
That announcement spooked the markets, prompting the pound to plunge to its lowest ever level, mortgage rates to rise and a spike in how much it costs for the Government to borrow money.
After announcing a U-turn in her flagship cut to the 45p rate of income tax, Ms Truss has come under pressure to reverse a number of other measures in the plans.
Over the weekend it was reported that plans to ditch a rise in corporation tax from 19% to 25% would be scrapped, with the decision thought to have been made by the Prime Minister before she told Mr Kwarteng he was being sacked.
Mr Kwarteng had originally planned to announce further details of spending and tax proposals in November, before bringing that forward to October 31 in a bid to quell unrest within the Tory party and in the markets.
However, following his sacking by Ms Truss on Friday, Mr Hunt has taken over as the man responsible for the Government’s finances.
In an announcement this morning the Treasury said: ‘The Chancellor will make a statement later today, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability.
‘He will also make a statement in the House of Commons this afternoon.
‘This follows the Prime Minister’s statement on Friday, and further conversations between the Prime Minister and the Chancellor over the weekend, to ensure sustainable public finances underpin economic growth.
‘The Chancellor will then deliver the full Medium-Term Fiscal Plan to be published alongside a forecast from the independent Office for Budget Responsibility on 31 October.
‘The Chancellor met with the Governor of the Bank of England and the Head of the Debt Management Office last night to brief them on these plans.’
Mutinous backbench MPs are pressing Tory shop steward Sir Graham Brady to tell the Prime Minister her time is up, or change party rules to allow an immediate vote of confidence in her leadership.
As the Tories descended into yet another civil war, three MPs broke ranks to publicly call on Miss Truss to resign just six weeks into her premiership.
Former minister Crispin Blunt said: ‘The game is up and it’s now a question as to how the succession is managed.’
Sir Graham, chairman of the 1922 Committee, is said to be resisting an immediate putsch, arguing that the PM and Chancellor Jeremy Hunt deserve the chance to set out their economic strategy in a Budget on October 31.
But sources say that more than 100 MPs are ready to submit letters of no confidence in Miss Truss in a bid to force Sir Graham’s hand.
Some junior ministers are also discussing a wave of co-ordinated resignations of the kind that eventually forced out Boris Johnson. Rebels have even discussed holding a public vote of censure if Sir Graham refuses to act.
One MP involved in discussions about removing the PM said: ‘She has lost the confidence of the markets and she is haemorrhaging support. We need to cauterise the wound, and fast.
‘There is an overwhelming desire among colleagues for it to be over – people want it done this week.’
Jeremy Hunt (left) has replaced Kwasi Kwarteng (right) as Chancellor of the Exchequer after the government was forced into two u-turns over its £45billion of unfunded tax cuts
The briefing against the PM burst into the public arena yesterday, when Mr Blunt became the first Tory MP to call for her to go.
He said Miss Truss was ‘fatally damaged’ following last week’s decision to ditch her economic strategy and sack Kwasi Kwarteng as chancellor in a bid to restore market confidence in the Government’s plans.
Ben Wallace is among those that Conservative MPs are tipping to become the next Prime Minister
‘She has to go now as she cannot win nor sustain the confidence of her colleagues, far less the public and a relentless media,’ he said.
‘Her leadership campaign was clear and her policy proposition brave and bold. We have all seen how they have collided with today’s tough economic reality and not survived the impact.’
Fellow Tory Andrew Bridgen also called for the PM to go. Mr Bridgen, an inveterate plotter, told The Daily Telegraph: ‘We cannot carry on like this. Our country, its people and our party deserve better.’
Bridgend MP Jamie Wallis added: ‘Enough is enough.’ In a letter to the PM, he said her botched economic plan had caused ‘clear and obvious harm to the British economy’.
One senior MP who backed Miss Truss said that support was evaporating among her natural allies following the dizzying series of U-turns.
‘She has lost her nerve and she has lost her mandate,’ the former minister said.
‘Raising taxes, turning our back on economic growth is a huge mistake and she has no mandate for it whatsoever – it is the exact opposite of the agenda she won on. She is in pure survival mode now.’
But an ally of the PM hit back, warning that attempts at a ‘coronation’, in which warring Tories set aside their differences to agree a new leader, were doomed to fail –and would likely collapse the Government to trigger an election, which the party stands to lose heavily.
Mr Sunak, Penny Mordaunt, Mr Wallace and Mr Hunt are seen as the most likely unity candidates, but rebel MPs are divided over who should lead, while some want Mr Johnson to return.
The ally of the PM warned that attempting to oust her could spark renewed turmoil on the financial markets. And he suggested the plan was deeply undemocratic, likening it to the People’s Vote campaign to overturn the result of the Brexit referendum.
‘The whole Conservative Party owes it to the British people to focus entirely on them and their needs,’ the source said.
Under Tory party rules, a new leader cannot face a formal leadership challenge for a year, regardless of how many MPs submit letters of no confidence.
Committee treasurer Sir Geoffrey Clifton-Brown told Sky News that the rules could be changed, but only ‘if it is clear that an overwhelming majority of the party wish us to do so’ – something he said was ‘a long way off’.
Sir Graham arrived back in the UK last night after a week in Greece and is expected to spend today taking soundings on Miss Truss’s future.
Meanwhile, Miss Truss will address the 100-strong One Nation caucus this evening in an effort to win round MPs, according to The Times. According to the paper, many of the group, chaired by Damian Green, feel excluded from a Government packed with her supporters.
Former chief whip Andrew Mitchell, who backed Mr Hunt in the leadership contest, told the BBC: ‘The Conservative Parliamentary Party has always shown itself clear, and indeed ruthless, in making changes if required.
‘If the Prime Minister proves unable to govern effectively, she will have to stand down, and the parliamentary party will make that clear. But we should all be trying to help her to succeed and to get it right.’
Some Truss loyalists last night urged the rebels to calm down. Tory MP Michael Fabricant said: ‘The electorate do not vote for turbulent and divided political parties.
‘If some of my colleagues don’t calm down, stop plotting, and respect the will of the party members, we will lose the next general election.’
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