Austerity Returns As Whitehall Departments Told To Find Savings To Help Rescue Markets

Austerity is to be revived to tackle the economic crisis critics says was caused by a splurge on tax cuts in the government’s mini-budget.

HuffPost UK understands Chris Philp, chancellor Kwasi Kwarteng’s deputy in the Treasury, will write to Cabinet ministers to urge them to make efficiency savings in their departments’ existing budgets to help balance the public finances.

It marks a significant change in direction since, in 2018, then prime minister Theresa May declared the government’s programme of austerity – started by her predecessor David Cameron eight years earlier – was “over”.

It also signals Liz Truss’s government will not row back from a massive £45 billion tax cut funded by government borrowing.

It came as the Bank of England has launched an emergency UK government bond-buying programme to prevent borrowing costs from spiralling out of control.

It was the latest shock move after the pound briefly slumped to an all-time low, triggering fears of sharp interest rate rises to save the currency.

The Bank’s extraordinary intervention, responding directly to the government’s tax-cutting strategy, will pile further pressure on Truss and Kwarteng to defend a vision for the economy that has spooked markets and shocked most mainstream economists.

While the pound hit an all-time record low of 1.03 against the US dollar on Monday, the yield on 10-year gilts – which is a proxy for the effective interest rate on public borrowing – has also soared by the most in a five-day period since 1976, according to experts.

Truss and Kwarteng have stayed publicly silent since the weekend, with only financial secretary to the Treasury Andrew Griffith sent out to the media on Wednesday.

He insisted the government was sticking to the plan set out by Kwarteng in the Commons on Friday.

“What the chancellor and I are focused on is delivering that economic growth plan,” he said in a pooled clip for broadcasters.

“We think they are the right plans because those plans make our economy competitive.”

Share Button

Is Government To Blame For Market Turmoil? No, Says Minister Sent To Bat For Truss And Kwarteng

A Treasury minister has denied the government’s mini-budget has caused an economic meltdown, as a senior figure in government finally spoke publicly about the market turmoil.

With prime minister Liz Truss and chancellor Kwasi Kwarteng silent on the tumbling pound and interest rate fears in recent days, financial secretary Andrew Griffith was presented to the media to answer questions on their behalf.

It came as the Bank of England has launched an emergency UK government bond-buying programme to prevent borrowing costs from spiralling out of control, and followed the International Monetary Fund urging the UK to reverse a massive £45 billion tax cut funded by government borrowing.

On Wednesday, Griffith was asked by Ed Conway of Sky News if the government took responsibility for “the storm in the financial markets” since last Friday’s “fiscal event”.

In response, Griffith said: “No, we both know we’re seeing the same impact of Putin’s war cascading through things like the cost of energy, some of the supply side implications of that. And that’s impacting every major economy. Every major economy you are seeing interest rates going up as well. Every major economy is dealing with exactly these same issues.”

Griffith welcomed the “timely” intervention by the Bank of England in the markets, adding: “What the chancellor and I are focused on is delivering that economic growth plan.”

While the Tories are denying a self-inflicted wound, some are happy to blame others.

Tory peer Daniel Hannan was mocked after he blamed the economic on the prospect of Keir Starmer becoming prime minister.

He said a Labour victory at the next election would lead to “higher taxes, higher spending, and a weaker economy”.

Meanwhile Andrew Lilico, a right-wing economist supportive of the tax cuts, hit out at the IMF as a “left-wing body” after its rare criticism of a developed country as the lender of last resort highlighted the negative impact of the tax cuts.

The scale of the crisis in the markets has led to unease in some quarters of the Tory party, while Labour has joined calls for parliament, currently on a conference recess, to be recalled.

“The government has clearly lost control of the economy,” Keir Starmer told reporters in Liverpool.

Share Button

Where Is Liz Truss? Calls To Recall Parliament As Bank Of England Steps In

Members of the public demanded to hear from Liz Truss today after the Bank of England announced an emergency intervention.

Leaders of the main opposition parties also called for parliament to be recalled amid the “rapidly deteriorating economic crisis”.

The Bank stepped in on Wednesday to calm the markets after chancellor Kwasi Kwarteng’s tax-cutting mini-budget caused the pound to slide.

The major intervention in Britain’s financial markets is designed to head off a “material risk to UK financial stability”.

It is a highly unusual move that will see the Bank buying long-term government debt to tackle a surge in the cost of borrowing, which it said risked “contagion” to households and businesses.

The announcement has prompted calls for the prime minister to address the public about her decisions.

Truss has not spoken publicly in the six days since her government announced the biggest tax cuts for 50 years.

One Twitter user said: “Genuinely where the hell is Liz Truss? You’d of thought at least a written statement would of gone out by now to someone in the press to calm things down at least surely?”

GB News presenter Isabel Webster Tweeted: “Where is Liz Truss?”

“What the government needs to do now is recall parliament and abandon this budget.”

– Labour leader Keir Starmer

Comedian David Baddiel added: “Where *is* Liz Truss? We appear to be in a crisis. Normally, in that situation, a country’s leader says…*something*. Even if it’s keep calm and carry on.”

Former Blue Peter presenter Simon Thomas added: “Whilst the economy burns like a skip fire, has anyone seen or heard from Liz Truss? She was highly visible during her leadership tour; but now she is leader, where the hell is she?!

“Where is her leadership? Cooling off in Boris’s fridge? To remain quiet is a dereliction of duty.”

It comes as Labour, the Lib Dems and SNP all called for parliament to be recalled amid the “rapidly deteriorating economic crisis”.

Labour leader Keir Starmer told Sky News: “The government has clearly lost control of the economy.

“What the government needs to do now is recall parliament and abandon this budget.”

Lib Dem leader Ed Davey said Truss had 24 hours to fix the “economic disaster” and added: “Every hour the prime minister and chancellor hide from this economic nightmare increases the chances of interest rates spiralling out of control and people losing their homes.”

There are mounting concerns about a mortgage crisis as the Bank prepares to hike interest rates.

Lenders have withdrawn dozens of products as they struggle to adjust to the expectations of higher costs.

The Labour Party has also called on the chancellor to make an “urgent statement” on how he is going to fix the “crisis that he has made”.

Last night the International Monetary Fund [IMF] launched a stinging attack on the UK’s tax-cutting plans

In an unusually blunt statement, the Washington-based fund said Kwarteng’s £45bn proposal is risky and will “likely increase inequality”.

Kwarteng has strongly defended the tax cuts and was due to meet with investment banks on Wednesday.

Share Button

Tory Peer Lord Frost Doesn’t Think ‘Anything Has Gone Wrong’ As Pound Touches Record Low

A Conservative peer and former chief Brexit negotiator has said he doesn’t think “anything has gone wrong” after a day of turmoil on the markets which saw the pound briefly slump to an all-time low.

Lord David Frost described the dramatic events since Friday’s mini-budget as “unwarranted” and an “over-reaction” as the Bank of England moved to assure investors it “will not hesitate” to raise interest rates to prop up the value of sterling.

Chancellor Kwasi Kwarteng’s £45 billion package of tax cuts has prompted a run on the currency that has caused wider fears about the state of the economy.

But Lord Frost, speaking on BBC Radio 4’s PM programme as Kwarteng avoided a public statement, appeared relaxed about the pummelling of the pound.

He said: “Well I don’t think anything has gone wrong actually. Liz Truss promised change, a different economic approach to get us back to growth and away from stagnation and that means a number of things have got to happen.

“Yes, rates have got to go up to get inflation under control, we’re going to have to have lower taxes and fiscal support to get people through this period, we’re going to have lots of structural reform as the chancellor said today and we need to hold down spending in the medium term and that’s coming in November.

“So I think what we’ve seen in the last few days is (a) unwarranted and a over-reaction approach to some elements of that, you’ve got to look at the total package which is taking the country on a different direction to get us out of stagnation and get us back to growth.”

Such was the market turmoil on Monday there was growing speculation in financial markets that the Bank would make an emergency interest rate rise after it hiked rates only last week to 2.25% from 1.75%.

Instead, with the pound fragile and bond prices still tumbling, Kwarteng issued a statement just before the British stock market closed to say he would set out medium-term debt-cutting plans on November 23, alongside forecasts from the independent Office for Budget Responsibility of the full scale of government borrowing.

The central bank welcomed “the commitment to sustainable economic growth” from Kwarteng and the independent scrutiny that the OBR growth and borrowing forecasts would bring.

Meanwhile, banks and building societies are withdrawing some of their mortgages from sale.

Three lenders – Halifax, Virgin Money and Skipton Building Society – have so far withdrawn some of their products amid the uncertainty, according to reports.

Share Button

What Ever Happened To Rishi Sunak’s Summer NFT Launch?

The UK’s political landscape in April 2022 was a starkly different place for Rishi Sunak.

He was a chancellor who had enjoyed unusual popularity thanks to his support for workers during the pandemic only to be plunged into an unenviable position.

The country was facing the devastating economic fallout of Covid-19, Vladimir Putin had invaded Ukraine and the biggest squeeze on living standards since records began loomed large.

Tables were turning on the chancellor who was criticised for not doing enough to support the poorest in his Spring statement.

So it was little wonder that when he went all “crypto bro” on us in April, the government was accused of being “out of touch”.

While millions were struggling financially, Sunak announced measures for the notoriously unregulated cryptocurrency sector, which features incredibly volatile currencies.

“It’s my ambition to make the UK a global hub for cryptoasset technology,” he said.

The statement piece of the announcement was that Sunak had instructed the 1,136-year-old Royal Mint to issue a trendy non-fungible token by the summer.

NFTs can be anything digital such as a drawing or music but each one is a unique “one of a kind” asset – rather like a famous painting.

Damien Hirst and Bella Hadid are among the celebrities venturing into the NFT world.
Damien Hirst and Bella Hadid are among the celebrities venturing into the NFT world.

They are stored on a blockchain – the same decentralised ledger of transactions used to buy and sell cryptocurrencies such as bitcoin.

The crypto-phenomenon has proved fashionable with celebrities, most recently supermodel Bella Hadid joined the metaverse with an NFT collection called CY-B3LLA – featuring artworks based on 3D scans of her body.

Artist Damien Hirst is also dabbling in NFTs, announcing he will burn thousands of his paintings as part of his year-long NFT project, titled The Currency.

Buyers who purchased one of the 10,000 NFTs for £1,600 each have been asked to choose whether to keep it or trade it for the physical work. If the former, the painting will now be exhibited before being burned.

However, critics of NFTs say the tokens are fundamentally valueless, unregulated and that fraud and scams are a risk.

Given the huge number of computers needed to continuously run for a blockchain to function, they argue NFTs are also bad for the environment.

Since the Treasury’s announcement there has been a major crash in cryptocurrencies and Sunak walked out of the government along with other key backers.

Sunak is now locked in a battle with foreign secretary Liz Truss to become the next Tory leader and prime minister. His team have been approached for comment.

The "Bored Ape" collection of digital images is perhaps the most well-known, having been bought and traded by celebrities for tens of thousands of dollars.
The “Bored Ape” collection of digital images is perhaps the most well-known, having been bought and traded by celebrities for tens of thousands of dollars.

Noam Galai via Getty Images

The Treasury originally said the NFT would be issued this summer, but next to nothing has been said about the initiative.

Four months since it was announced, the public is none the wiser.

Details of the project remain largely unknown and the government has never specified what image or object the Royal Mint’s NFT would confer ownership of.

But there is a new Treasury team in town, led by former vaccines minister Nadhim Zahawi, so HuffPost UK sent them a slew of questions about the NFT.

We also submitted a Freedom of Information request, asking how much taxpayers’ cash was being spent on the project.

The Treasury FoI team confirmed they held the information but refused to divulge how much they were spending on the NFT.

They said the plans were still “under development” and that ministers and officials “need space” in which plans can be refined.

Meanwhile, the Treasury’s press office remained coy about the plans, insisting they were still going ahead but unable to confirm when.

A Treasury source said it was still their “intention” to issue an NFT this summer but was unable to be more specific.

Labour’s shadow economic secretary to the Treasury Tulip Siddiq accused the government of “wasting time and money on an NFT gimmick”.

She said the Conservatives should “come clean” about how much taxpayers’ money had been “thrown down the drain” and described the lack of transparency as “shocking”.

“With the value of crypto currencies in freefall, the government must ditch its lax attitude to crypto regulation and introduce a comprehensive regulatory regime for the sector,” she said.

“The Conservative’s wild west approach to crypto has put millions of people’s savings at risk and crypto-related crime in the UK – such as fraud and money laundering – is now at record levels.”

She also said that without proper regulation the UK was at risk of falling behind global competitors in FinTech such as the EU and US.

The Royal Mint remained tight-lipped saying they were “continuing” to develop their first NFT range and would share further details in “due course”.

They did not answer a question about when it would launch.

Tulip Siddiq MP: “Instead of properly regulating the crypto sector to protect consumers and crack down on criminals, this incompetent government is wasting time and money on an NFT gimmick."
Tulip Siddiq MP: “Instead of properly regulating the crypto sector to protect consumers and crack down on criminals, this incompetent government is wasting time and money on an NFT gimmick.”

House of Commons via PA Wire/PA Images

It comes after Crypto experienced one of the worst market crashes the new industry had ever witnessed – which saw popular currency bitcoin plummeting.

In a speech last month, Bank of England deputy Governor Sir Jon Cunliffe said the majority of crypto-tokens have “no intrinsic value” and are “inherently volatile, very vulnerable to sentiment and prone to collapse”.

However, the Treasury confirmed it was still “firmly committed” to its plans to create an NFT.

A Treasury spokesperson said: “We are firmly committed to putting the UK at the forefront of cryptoasset technology and innovation by capitalising on the freedoms gained by leaving the European Union.

“Our framework will support the safe adoption of crypto whilst giving regulators the agility to respond to market developments, support innovation and protect consumers.

“Our forthcoming Financial Services and Markets Bill will set up the framework for regulating stablecoins in the UK and we will be consulting on a world-leading regime for the rest of the crypto market later this year.”

Share Button

What Ever Happened To Rishi Sunak’s Summer NFT Launch?

The UK’s political landscape in April 2022 was a starkly different place for Rishi Sunak.

He was a chancellor who had enjoyed unusual popularity thanks to his support for workers during the pandemic only to be plunged into an unenviable position.

The country was facing the devastating economic fallout of Covid-19, Vladimir Putin had invaded Ukraine and the biggest squeeze on living standards since records began loomed large.

Tables were turning on the chancellor who was criticised for not doing enough to support the poorest in his Spring statement.

So it was little wonder that when he went all “crypto bro” on us in April, the government was accused of being “out of touch”.

While millions were struggling financially, Sunak announced measures for the notoriously unregulated cryptocurrency sector, which features incredibly volatile currencies.

“It’s my ambition to make the UK a global hub for cryptoasset technology,” he said.

The statement piece of the announcement was that Sunak had instructed the 1,136-year-old Royal Mint to issue a trendy non-fungible token by the summer.

NFTs can be anything digital such as a drawing or music but each one is a unique “one of a kind” asset – rather like a famous painting.

Damien Hirst and Bella Hadid are among the celebrities venturing into the NFT world.
Damien Hirst and Bella Hadid are among the celebrities venturing into the NFT world.

They are stored on a blockchain – the same decentralised ledger of transactions used to buy and sell cryptocurrencies such as bitcoin.

The crypto-phenomenon has proved fashionable with celebrities, most recently supermodel Bella Hadid joined the metaverse with an NFT collection called CY-B3LLA – featuring artworks based on 3D scans of her body.

Artist Damien Hirst is also dabbling in NFTs, announcing he will burn thousands of his paintings as part of his year-long NFT project, titled The Currency.

Buyers who purchased one of the 10,000 NFTs for £1,600 each have been asked to choose whether to keep it or trade it for the physical work. If the former, the painting will now be exhibited before being burned.

However, critics of NFTs say the tokens are fundamentally valueless, unregulated and that fraud and scams are a risk.

Given the huge number of computers needed to continuously run for a blockchain to function, they argue NFTs are also bad for the environment.

Since the Treasury’s announcement there has been a major crash in cryptocurrencies and Sunak walked out of the government along with other key backers.

Sunak is now locked in a battle with foreign secretary Liz Truss to become the next Tory leader and prime minister. His team have been approached for comment.

The "Bored Ape" collection of digital images is perhaps the most well-known, having been bought and traded by celebrities for tens of thousands of dollars.
The “Bored Ape” collection of digital images is perhaps the most well-known, having been bought and traded by celebrities for tens of thousands of dollars.

Noam Galai via Getty Images

The Treasury originally said the NFT would be issued this summer, but next to nothing has been said about the initiative.

Four months since it was announced, the public is none the wiser.

Details of the project remain largely unknown and the government has never specified what image or object the Royal Mint’s NFT would confer ownership of.

But there is a new Treasury team in town, led by former vaccines minister Nadhim Zahawi, so HuffPost UK sent them a slew of questions about the NFT.

We also submitted a Freedom of Information request, asking how much taxpayers’ cash was being spent on the project.

The Treasury FoI team confirmed they held the information but refused to divulge how much they were spending on the NFT.

They said the plans were still “under development” and that ministers and officials “need space” in which plans can be refined.

Meanwhile, the Treasury’s press office remained coy about the plans, insisting they were still going ahead but unable to confirm when.

A Treasury source said it was still their “intention” to issue an NFT this summer but was unable to be more specific.

Labour’s shadow economic secretary to the Treasury Tulip Siddiq accused the government of “wasting time and money on an NFT gimmick”.

She said the Conservatives should “come clean” about how much taxpayers’ money had been “thrown down the drain” and described the lack of transparency as “shocking”.

“With the value of crypto currencies in freefall, the government must ditch its lax attitude to crypto regulation and introduce a comprehensive regulatory regime for the sector,” she said.

“The Conservative’s wild west approach to crypto has put millions of people’s savings at risk and crypto-related crime in the UK – such as fraud and money laundering – is now at record levels.”

She also said that without proper regulation the UK was at risk of falling behind global competitors in FinTech such as the EU and US.

The Royal Mint remained tight-lipped saying they were “continuing” to develop their first NFT range and would share further details in “due course”.

They did not answer a question about when it would launch.

Tulip Siddiq MP: “Instead of properly regulating the crypto sector to protect consumers and crack down on criminals, this incompetent government is wasting time and money on an NFT gimmick."
Tulip Siddiq MP: “Instead of properly regulating the crypto sector to protect consumers and crack down on criminals, this incompetent government is wasting time and money on an NFT gimmick.”

House of Commons via PA Wire/PA Images

It comes after Crypto experienced one of the worst market crashes the new industry had ever witnessed – which saw popular currency bitcoin plummeting.

In a speech last month, Bank of England deputy Governor Sir Jon Cunliffe said the majority of crypto-tokens have “no intrinsic value” and are “inherently volatile, very vulnerable to sentiment and prone to collapse”.

However, the Treasury confirmed it was still “firmly committed” to its plans to create an NFT.

A Treasury spokesperson said: “We are firmly committed to putting the UK at the forefront of cryptoasset technology and innovation by capitalising on the freedoms gained by leaving the European Union.

“Our framework will support the safe adoption of crypto whilst giving regulators the agility to respond to market developments, support innovation and protect consumers.

“Our forthcoming Financial Services and Markets Bill will set up the framework for regulating stablecoins in the UK and we will be consulting on a world-leading regime for the rest of the crypto market later this year.”

Share Button