Chancellor and PM to hold crisis talks as markets price in a mini-budget U-Turn

The Chancellor of the Exchequer, Kwarsi Kwarteng, will hold urgent talks with the prime minister today about the future of the government’s recent mini budget.

Mr Kwarteng  last night cancelled meetings that were scheduled for today at the IMF in New York to board a late night flight back to London.

The timing of talks between the prime minister & the chancellor coincides well with the Bank of England holding its last bond auction between 2.15 – 3.45m this afternoon.

It has been suggested that the fact that chancellor and the prime are now in talks will stave off any volatility in the 45 minute window between the end of today’s bond auction and the closure of the markets for the weekend at 4.30pm this afternoon.


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With the pension market remaining under continuing strain, the fact that the governor of the Bank of England, Andrew Bailey, has said that the Bank will not buy bonds after 3.45pm this afternoon has led some to suggest that Mr Bailey has embarked on a game of ‘chicken’ with the government.

Comparing Mr Kwarteng’s sudden return to London to the troubles faced by prime minister James Callaghan back in January 1979, the Conservative MP Simon Hoare this morning wrote on Twitter, “‘Crisis? What crisis’ springs to mind”.

Mr Hoare’s comments reflect an increasing febrile attitude within the parliamentary conservative party with a number of leading MPs now in open revolt around the recent mini budget.

Writing on Twitter, the Conservative MP, Johnny Mercer said, “I want you to know that I get it, that most of us get it, and that we will do all we can to change it.  Heartbreaking. Unconscionable.  Politically unsurvivable”

Speaking on the BBC Radio 4 ‘Today’ programme this morning, the Chair of the Commons Treasury Select Committee, Mel Stride said, “I think we have reached a point now, where we need this very powerful and significant signal into the markets that fiscal credibility is now firmly back on the table. I believe that this means doing something immediately, not waiting for the end of each month.  I think it means doing something very significant too, and right at the heart of that will be unwinding the position on corporation tax”

Continuing Mr Stride said, “The danger here of course is that the argument in the room lands in a place where they decide they are going to nibble at the edges of this.  I am afraid that I don’t think that will cut it, and you will end up in that situation in the worst of all worlds, where you U-Turn, but it actually doesn’t settle the markets”.

In recent days, the pound has risen by 2% against the dollar. This is primarily due to the expectation that the government will change its spending and tax plans.

According to a YouGov poll, Labour leads in opinion polls by 28% (51% to 23%) as of yesterday. This raises questions about whether prime minister and chancellor are able to politically survive the U-Turn financial markets require.

This morning it has been suggested that the government’s difficulties are also related to the extent to which Liz Truss purged her political opponents from office upon becoming prime minister.

Speaking on the BBC Radio 4 ‘Today’ programme this morning, the former Conservative leader, William Hague said, “It was an extraordinary thing that cabinet ministers, all cabinet ministers, who supported Rishi Sunak were removed from the cabinet.  This only encourages more rebellions in future.  It creates more discontent that makes it harder to unify the party”

His comments follow those of the former Conservative Chancellor Kenneth Clarke who last night told BBC 2’s Newsnight, “Ever since this started, I have been left with the feeling I don’t remember any government of my lifetime starting its first few weeks with such chaos as the Truss administration has got itself into.”

Warning the prime minister against sacking the Chancellor, Lord Clarke said, “I wouldn’t sack Kwasi Kwarteng, because it’s not even clear it’s his budget actually. Sacking Kwasi will not solve anything. The political reaction would be ‘oh he’s just been made a scapegoat’. She’d be in terrible trouble if she sacked him. She’d be in trouble if he just resigned. What they need to do is a proper U-turn”.

However, some Conservative MPs are still less keen to see a large-scale U-Turn.  This morning, the former Conservative Cabinet minister, John Redwood warned, “Raising taxes to make business less competitive and to put off investment could result in a bigger deficit and more borrowing.  The combination of higher interest rates and sky high energy prices will slow the economy quite enough to curb inflation”.