Kwasi Kwarteng was accused of “Corbynism by another name” as he flew home early from Washington for crisis talks with Liz Truss over his mini Budget which sparked economic mayhem.
As the turmoil engulfing No10 and No11 grew, the Prime Minister and Chancellor were also warned that they would struggle to govern if voters, MPs and the financial markets were “all three against you”.
Mr Kwarteng was flying home early from a financial summit in Washington amid reports that Downing Street officials are taking the scalpel to his mini budget on September 23 which triggered chaos in the Government bond markets, pushed up mortgage rates, and led to an emergency intervention by the Bank of England to protect Britain’s financial stability.
Russ Mould, investment director at AJ Bell, told BBC Radio 4’s Today programme, believes the Government probably thought with the fiscal statement that “we can get away with” extra tens of billions of pounds of borrowing given it would only be a fraction of Britain’s £2.4 trillion debt mountain.
“But the mood music has changed in interest rates going up, because of inflation, and the way in which the numbers were presented, unfunded, fairly cavalier fashion, the day after the Bank of England had only moved by half a percentage point not the three quarters that people were expecting, I think that is probably what has gone down particularly badly,” he explained.
“To some degree it was Corbynism by another name.
“Mr Corbyn was going to spend money without necessarily giving us clear guidance how the money would get back and here we have got a Government saying we are going to cut taxes and no clear plan as to necessarily how it would come back.
“Something the market did not want to see, just in a different format.”
With the Tories now trailing Labour by around 25 points in the polls, Former Tory leader Lord Hague also stressed: “The reaction of voters, the opinion of Members of Parliament, in matters like this the reaction of financial markets, you don’t have to please all of those people all of the time, but you can’t have all three of those against you.”
Financial markets are now expecting another major U-turn on the mini-budget, with speculation rife that Mr Kwarteng will now increase corporation tax having ruled out doing so, and having already climbed down on his plan to axe the 45p top rate of income tax.
However, Trade minister Greg Hands brushed aside suggestions that Mr Kwarteng would have to resign, insisting his position was “totally” tenable.
He told Sky News: “Kwasi Kwarteng himself said yesterday he was 100 per cent sure he will still be in position.
“I know the Prime Minister has got total confidence in Kwasi Kwarteng.”
Despite growing calls from Tory MPs for large sections of the mini budget to be junked, Mr Hands added: “The Prime Minister and the Chancellor are absolutely resolute, determined, the growth plan the centrepiece but we will have to see some of the detail, including a full forecast from the Office for Budget Responsibility on October 31.”
On whether Mr Kwarteng’s plan on corporation tax would now be torn up, he insisted: “The Chancellor, the Prime Minister, are absolutely determined to stick to their plans but let’s wait for how this will all pan out in the wider scheme in the medium-term fiscal plan before the end of the month.”
The Bank of England’s emergency support for the gilts markets, to protect pension funds, comes to an end on Friday, amid worries of further turbulence to come.
