JACOB Rees-Mogg has criticised the BBC ’s reporting of the economic turmoil witnessed in the wake of the government’s mini-Budget, claiming that its relation to the chancellor’s statement is “speculation”.
Appearing on the BBC’s Today programme, the business secretary said the differing interest rates between the USA and the UK were a bigger contributor to the financial chaos seen over the past few weeks than Kwasi Kwarteng’s unfunded tax-cutting plans, which were set to cost £45 billion.
In the immediate aftermath of Kwarteng’s mini-Budget the value of the pound plummeted, mortgage rates increased, and the Bank of England was forced to step in to stop the pension industry from collapsing.
The International Monetary Fund has also repeatedly criticised the government’s plans, imploring other countries not to follow the UK’s example.
During the exchange on Radio 4, presenter Mishal Husain said that there is a “very serious economic and investor confidence picture that has been sparked by the mini-budget.”
However, Rees-Mogg pushed back on the implication the government’s mini-Budget was to blame.
He said: “You suggest something is causal, which is a speculation.
“What has caused the effect in pension funds, because of some quite high-risk but low-probability investment strategies, is not necessarily the mini-budget – it could just as easily be the fact that, the day before, the Bank of England did not raise interest rates as much as the Federal Reserve did.
“And I think jumping to conclusions about causality is not meeting the BBC’s requirement for impartiality, it is a commentary rather than a factual question.”
He added: “I’m saying it’s primarily caused by interest rate differentials rather than by the fiscal announcement.”
In a further interview with Kay Burley on Sky News, Rees-Mogg admitted that his own mortgage had gone up since the chancellor’s budget announcement.
“Any inflation-rate mortgages have gone up, mine has gone up,” he said.
Financial experts have hit back at Rees-Mogg’s claims that the mini-budget is not the main factor behind the economic chaos.
Nigel Peaple, director of policy and advocacy at the Pensions and Lifetime Savings Association, said: “The origin of these problems seems to have been caused mainly by the mini-budget, because of market reaction to that mini-budget, because of uncertainty about the Government’s plans.”
He suggested the markets could be calmed when the Chancellor sets out more details about how he intends to manage the public finances.
Christian Kopf, head of fixed income at German firm Union Investment, said the mini-Budget is “absolutely” to blame.
He told Today: “The problem we are facing in the United Kingdom is the excessive current account deficit that the country is running, it exports much less than it imports, it saves much less than it invests and consumes, and the country is living beyond its means.
“The mini-budget that has been announced by the UK Government is only making matters worse by increasing that fiscal deficit and by increasing the current account deficit of the United Kingdom, and it got to a point where investors are unwilling to fund that.”
Lucy Coutts, investment director at JM Finn, told the programme the Bank of England was doing its job of trying to control inflation “very well” until the mini-budget.
“This is a self-inflicted wound and that is why markets are responding in such a poor way,” she said.
“That’s why we are seeing bond yields rise because there is so much uncertainty about the fiscal policy of the Government.”
