THE First Minister of Scotland has demanded action from the Tory government, warning that the UK is in the “grip of a rapidly deteriorating economic crisis”.
Nicola Sturgeon spoke out in the wake of emergency action from the Bank of England to mitigate the impact of Liz Truss’s tax cuts for the highest earners, funded by increased government borrowing.
The announcement of the tax cuts, from Chancellor Kwasi Kwarteng in a “mini-budget” on Friday, led the pound to crash to its lowest ever value against the US dollar.
The economic crisis has led to a slew of interventions from the International Monetary Fund, the Bank of England, and Moody’s, which threatened to downgrade the UK’s credit rating amid the market turmoil.
The First Minister said that parliament should be “immediately recalled” to deal with the issues – echoing calls from the SNP’s Westminster leader Ian Blackford – and called for the abolition of the top rate of tax to be scrapped.
UK in grip of rapidly deteriorating economic crisis. Emergency intervention by @bankofengland to reduce damage of UK gov own policies extraordinary. Commons should be immediately recalled (where even is PM?) & as at least an initial symbol of sense, top tax rate abolition dumped
— Nicola Sturgeon (@NicolaSturgeon) September 28, 2022
She wrote on Twitter: “UK in grip of rapidly deteriorating economic crisis.
“Emergency intervention by @bankofengland to reduce damage of UK gov own policies extraordinary.
“Commons should be immediately recalled (where even is PM?) & as at least an initial symbol of sense, top tax rate abolition dumped.”
The SNP's depute leader, Keith Brown, added: "As the pound continues to plummet, Britain’s hopeless Prime Minister seems to have disappeared without trace.
“It is astounding that Liz Truss has not made a single public appearance or statement since last Friday. It is time for her to come out of hiding and at least make the pretence of leading the country through this self-inflicted crisis."
Plaid Cymru echoed the First Minister's calls. The Welsh party's Westminster leader, Liz Saville Roberts, said: “This is what happens when right-wing economic fantasists grasp the means to hatch out their monstrous policies, and let them loose in the real world. Terrifying. Parliament must urgently be recalled so that UK Government shelve their disastrous plans.”
The UK’s developing financial crisis comes ahead of the Tory party conference, which will take place in Birmingham from October 2 to October 5. Parliament is currently in recess until October 11 to allow time for party conferences.
The Tory event is likely to be dominated by in-fighting, with rebellious anonymous MPs and ministers already briefing the media against their own leaders’ policies, less than one month after Truss (below) entered No 10.
Rishi Sunak, the former chancellor who warned against Truss's tax policy during the Tory leadership race, will not be attending the conference.
One Conservative minister told ITV’s Robert Peston: “Kwasi is toast.”
An MP told Sky News’s Sam Coates: “It is actually incredible that the UK central bank has had to step in to protect the UK from the actions of the UK's own government! I mean, just think of that for a moment!”
A third Tory MP told the same broadcaster’s Agnes Chambre: “Kwasi and Liz will have to go. They have to, they are actually crashing the economy.”
When asked how long he would give them, the MP replied: "Weeks.”
On Wednesday, the Bank of England said that if the current “dysfunction in this market [were] to continue or worsen, there would be a material risk to UK financial stability”.
It announced it would launch a temporary UK Government bond-buying programme as an emergency move.
In a statement, the central bank went on: “In line with its financial stability objective, the Bank of England stands ready to restore market functioning and reduce any risks from contagion to credit conditions for UK households and businesses.
“To achieve this, the bank will carry out temporary purchases of long-dated UK government bonds from September 28. The purpose of these purchases will be to restore orderly market conditions. The purchases will be carried out on whatever scale is necessary to effect this outcome. The operation will be fully indemnified by HM Treasury.”
A Treasury spokesperson said: “The Bank of England, in line with its financial stability objective, carefully monitors financial markets and any potential risk to the flow of credit to the real economy, and subsequent effects on UK households and businesses.
“Global financial markets have seen significant volatility in recent days. The Bank has identified a risk from recent dysfunction in gilt markets, so the Bank will temporarily carry out purchases of long-dated UK government bonds from today in order to restore orderly market conditions.
“These purchases will be strictly time-limited, and completed in the next two weeks. To enable the Bank to conduct this financial stability intervention, this operation has been fully indemnified by HM Treasury.
“The Chancellor is committed to the Bank of England’s independence. The Government will continue to work closely with the Bank in support of its financial stability and inflation objectives.”
