London Daily

Focus on the big picture.
Saturday, Feb 22, 2025

Treasury rejects U-turn on mini-budget despite turmoil

Treasury rejects U-turn on mini-budget despite turmoil

The government will not abandon its mini-budget despite the Bank of England having to step in amid market turmoil, a Treasury minister has said.

Labour called for the tax-cutting measures to be ditched after they sparked a fall in the pound and a surge in borrowing costs.

Government departments are also being asked to find spending cuts.

Treasury minister Andrew Griffith said the government's proposals were the "right plans" to grow the UK economy.

He claimed "every major economy is dealing with exactly the same issues" and said the impact of "Putin's war in Ukraine is cascading through things like the cost of energy, some of the supply side implications of that".

The value of the pound dropped to $1.05 on Wednesday, after the Bank of England stepped in to stabilise the economy, before later rallying to about $1.08.

On Wednesday, the Bank announced it would buy government bonds on a temporary basis to help "restore orderly market conditions".

Some pension funds hold a lot of government bonds, because they are normally a stable investment, but as their value dropped there were concerns over the solvency of some funds, the BBC has been told.

The Bank's moves on Wednesday followed a highly-critical intervention from the International Monetary Fund (IMF), which warned the measures were likely to fuel the cost-of-living crisis.

Chris Philp is to write to all secretaries of state calling for "efficiency savings" to be found


Meanwhile, Chief Secretary to the Treasury, Chris Philp, has confirmed he is asking government departments to find savings.

Speaking on ITV's Peston, Mr Philp said government departments are being asked to "look for efficiencies wherever they can find them".

These efficiencies will "stick to the targets" of the 2021 Comprehensive Spending Review "that set out three year spending plan", Mr Philp said.

Any savings will "enable us to target spending on things that target growth," he added.


'Failing' financial markets


Gerard Lyons, an economist who has spoken in support of the mini-budget, criticised the Chancellor Kwasi Kwarteng for "failing" to warn financial markets about the plans.

"Ahead of the budget, it was necessary for the chancellor to keep financial markets on-side," Mr Lyons told BBC Two's Newsnight.

"The chancellor appealed to domestic population and appealed to a domestic business community, but one key group he failed to keep on-side was the finical market."

Conservative MP Mel Stride has criticised the government for not publishing a forecast of the UK's economic outlook from the Office for Budget Responsibility (OBR) - saying it needs to do so "as soon as possible".

Forecasts from the independent OBR give an indication of the health of the nation's finances. The BBC understands the government was given a draft before announcing the tax cuts, but it has not been published.

"The OBR should have been brought in earlier," said Mr Stride, the chairman of the Treasury select committee. He said the OBR forecast could have then be used to reassure the markets.

"It is urgently important that the government and the Treasury comes forward at the earliest possible time now with that OBR forecast, with what their fiscal target is going to be, so they can turn and face the markets and say this is this is all fiscally credible."

But Mr Philp said an OBR report will not be published until 23 November, when Mr Kwarteng plans to set out a "Medium-Term Fiscal Plan".

This will allow the OBR forecasts to be done "in a way that's organised and thoughtful," Mr Philp said.

Downing Street rejected calls for Parliament to be recalled after calls from Labour leader Sir Keir Starmer to do so MPs can overturn last week's mini-budget.

Parliament is currently suspended while the two main parties hold their annual conferences. It is due to come back on 11 October.

The £45bn package of tax cuts announced last week would repair "underlying problems in the economy," Mr Griffith said.

He added the Bank of England had "done their job" by announcing it would buy government debt to stabilise the economy.

Mr Kwarteng, who unveiled the tax-cutting package last Friday, is yet to speak publicly on the growing impact of the package on markets.

The Treasury said the plans would be funded by £72bn of borrowing and there is an expectation this will surge as interest rates rise.

The pound slumped following his statement and later fell to a record low against the dollar after Mr Kwarteng hinted there were more tax cuts to come.


Strong balance sheet


Julian Smith became the first former cabinet minister to call for the government to "make changes".

The former Northern Ireland Secretary, who backed Rishi Sunak to become prime minister, tweeted: "It is critical that the government is honest about the current situation and plays its part in stabilising markets.

"It can keep a growth plan but needs to make changes. Not doing so will only continue further stress and strain on UK citizens."

Speaking to broadcasters, Mr Griffith, the Financial Secretary to the Treasury, insisted the UK had a "very strong balance sheet" and one of the lowest debt to GDP ratios of major economies.

Asked whether the government had any plans to change Friday's measures, he replied: "We think they're the right plans, because those plans make our economy competitive".

"At the end of the day, that's ultimately what we've got to do," he said, saying ministers were focused on "getting on and delivering" its plans to work.


Andrew Griffith said plans in the mini-budge "make our economy competitive".


Newsletter

Related Articles

0:00
0:00
Close
UK Prison Officer Sentenced for Inappropriate Conduct with Inmate
Good News: Senate Confirms Kash Patel as FBI Director
Officials from the U.S. and Hungary Engage in Talks on Economic Collaboration and Sanctions Strategy
James Bond Franchise Transitions to Amazon MGM Studios
Technology Giants Ramp Up Lobbying Initiatives Against Strict EU Regulations
Alibaba Exceeds Quarterly Projections Fueled by Growth in Cloud and AI
Tequila Sector Faces Surplus Crisis as Agave Prices Dive Sharply
Residents of Flintshire Mobile Home Park Grapple with Maintenance Issues and Uncertain Future
Ronan Keating Criticizes Irish Justice System Following Fatal Crash Involving His Brother
Gordon Ramsay's Lucky Cat Restaurant Faces Unprecedented Theft
Israeli Family Mourns Loss of Peace Advocate Oded Lifschitz as Body Returned from Gaza
Former UK Defense Chief Calls for Enhanced European Support for Ukraine
Pope Francis Admitted to Hospital in Rome Amid Rising Succession Speculation
Senate Republican Leader Mitch McConnell, at the age of 83, Declares His Retirement.
Whistleblower Reveals Whitehall’s Focus on Kabul Animal Airlift Amid Crisis
Politicians Who Deliberately Lie Could Face Removal from Office in Wales
Scottish Labour Faces Challenges Ahead of 2026 Holyrood Elections
Leftwing Activists Less Likely to Work with Political Rivals, Study Finds
Boris Johnson to Host 'An Evening with Boris Johnson' at Edinburgh's Usher Hall
Planned Change in British Citizenship Rules Faces First Legal Challenge
Northumberland Postal Worker Sentenced for Sexual Assaults During Deliveries
British Journalist Missing in Brazil for 11 Days
Tesco Fixes Website Glitch That Disrupted Online Grocery Orders
Amnesty International Critiques UK's Predictive Policing Practices
Burglar Jailed After Falling into Home-Made Trap in Blyth
Sellafield Nuclear Site Exits Special Measures for Physical Security Amid Ongoing Cybersecurity Concerns
Avian Influenza Impact on Seals in Norfolk: Four Deaths Confirmed
First Arrest Under Scotland's Abortion Clinic Buffer Zone Law Amidst International Controversy
Meghan Markle Rebrands Lifestyle Venture as 'As Ever' Ahead of Netflix Series Launch
Inter-Island Ferry Services Between Guernsey and Jersey Set to Expand
Significant Proportion of Cancer Patients in England and Wales Not Receiving Recommended Treatments
Final Consultation Launched for Vyrnwy Frankton Power Line Project
Drug Misuse Deaths in Scotland Rise by 12% in 2023
Failed £100 Million Cocaine Smuggling Operation in the Scottish Highlands
Central Cee Equals MOBO Awards Record; Bashy and Ayra Starr Among Top Honorees
EastEnders: Four Decades of Challenging Social Norms
Jonathan Bailey Channels 'Succession' in Bold Richard II Performance
Northern Ireland's First Astronaut Engages in Rigorous Spacewalk Training
Former Postman Sentenced for Series of Sexual Offences in Northumberland
Record Surge in Anti-Muslim Hate Crimes Across the UK in 2024
Omagh Bombing Inquiry Concludes Commemorative Hearings with Survivor Testimonies
UK Government Introduces 'Ronan's Law' to Combat Online Knife Sales to Minors
Metal Detectorists Unearth 15th-Century Coin Hoard in Scottish Borders
Woman Charged in 1978 Death of Five-Year-Old Girl in South London
Expanding Sinkhole in Godstone, Surrey, Forces Evacuations and Road Closures
Bangor University Announces Plans to Cut 200 Jobs Amid £15 Million Savings Target
British Journalist Charlotte Peet Reported Missing in Brazil
UK Inflation Rises to 3% in January Amid Higher Food Prices and School Fees
Starmer Defends Zelensky Amidst Trump's 'Dictator' Allegation
Zelensky Calls on World Leaders to Back Peace Efforts in Light of Strains with Trump
×