PRIME Minister Liz Truss has resigned after just six weeks in post.
Truss, who yesterday declared she was ‘a fighter, not a quitter’, has, well, quit after just 45 days in the job.
Her resignation statement was equally short:
I came into office at a time of great economic and international instability.
Families and businesses were worried about how to pay their bills.
Putin’s illegal war in Ukraine threatens the security of our whole continent.
And our country had been held back for too long by low economic growth.
I was elected by the Conservative Party with a mandate to change this.
We delivered on energy bills and on cutting national insurance.
And we set out a vision for a low tax, high growth economy – that would take advantage of the freedoms of Brexit.
I recognise though, given the situation, I cannot deliver the mandate on which I was elected by the Conservative Party.
I have therefore spoken to His Majesty The King to notify him that I am resigning as Leader of the Conservative Party.
This morning I met the Chair of the 1922 Committee Sir Graham Brady.
We have agreed there will be a leadership election to be completed in the next week.
This will ensure we remain on a path to deliver our fiscal plans and maintain our country’s economic stability and national security.
I will remain as Prime Minister until a successor has been chosen.
Thank you.
Scotland’s First Minister Nicola Sturgeon tweeted:”There are no words to describe this utter shambles adequately. It’s beyond hyperbole – & parody. Reality tho(ugh) is that ordinary people are paying the price.
“The interests of the Tory party should concern no-one right now. A General Election is now a democratic imperative.”
Labour leader Sir Keir Starmer said: “After 12 years of Tory failure, the British people deserve so much better than this revolving door of chaos. We need a general election, now.”
His full statement:
Truss will remain as PM until her successor is elected – not by the people of Great Britain, but by Tory MPs.
THIS week the government replaced one catastrophic plan with another (writes TUC’s GEOFF TILY). A new course to placate financial markets is traded off against likely massive hits to household budgets and fears about the future.
Support for energy bills was cut, public services already stretched beyond breaking point will be hit again, little was offered on soaring borrowing and mortgage costs, and nothing about already deeply inadequate benefits and universal credit falling further behind inflation.
There is another way to deliver an economy that works for working people, but the government couldn’t be further from it,
Dealing with failure
The Truss government were right about one thing, the economic policies of the past decade and more have been a disastrous failure. As Kwasi Kwarteng admitted, growth has been ‘anaemic’. In the ONS words: the UK is the only G7 economy yet to recover above its pre-coronavirus pandemic level in Quarter 4 2019. The UK has the lowest investment as a share of GDP (see our ‘companies for the people report’, Figure 7) In Spring OECD figures showed UK real wages would fall furthest of all G7 economies.
Mini budget catastrophe
But the mini budget was catastrophically wrongheaded. Truss and Kwarteng took the fundamental problem of an economy serving wealth not work and turned it into the solution. The flip side of support for energy bills, was lavish tax breaks for those least in need – under the spurious and long discredited fallacy of ‘trickle down’.
On top of this their intention was to borrow to fund this extreme project. They did so the day after the Bank of England had confirmed that they would be reducing support for government borrowing, and implementing a £80billon programme of ‘quantitative tightening’ [i.e. selling back government bonds to financial markets] from the start of October. (Regardless of anything else this revealed staggering lack of coordination on the part of both institutions – the excellent Daniella Gabor called this ‘uncoordinated class war on the British public’.)
Financial markets took fright and instead of buying started to dump government debt, but this was also intimately connected to a third factor. The complex financial strategies – so-called liability driven investments (LDI) – that pension funds have been deploying (unnoticed by most) for the past 20 years began to unravel in the face of these rate rises.
The Bank of England was obliged to step in to halt a vicious cycle – or doom loop – of bond sales leading to higher interest rates and so more bond sales. The spike in the chart below of interest rates on UK 30-year bonds shows how the episode was at least momentarily brought under control.
And in the meantime the government came under sustained assault for ‘fiscal irresponsibility’.
U-turn to a worse economy
After two U-turns (on the 45p top rate and corporation tax reductions), yesterday they U- turned on pretty much the whole thing.
But reversing a wrong doesn’t make a right, far from it.
We are now on the brink of a deep and damaging recession that threatens millions of jobs. But the latest Conservative chancellor has now announced the same basic approach that got us into this mess.
He warned of “more difficult decisions” on tax and spending to come. And immediately that “Some areas of spending will need to be cut”.
The Chancellor not only announced austerity. He not only sought once more – as did his George Osborne – to make a political virtue about imposing misery. He even invited George Osborne’s favourite adviser Rupert Harrison (now at Blackrock, one of three key institutions in LDI strategies) back to the Treasury to head a new panel of ‘economic advisers’ to deliver this reborn monstrosity.
Yesterday morning Rupert gave his City-oriented perspective on austerity
But this is a seriously misleading statement. The Osborne government did not repair the public finances. Over 2010-2019 the public debt ratio increased by 22 percentage point of GDP – the worse performance over a decade of economic recovery for a century (here).
For workers, this meant the worst pay crisis for 200 years. As Frances O’Grady spells out today, now expected (and this was before yesterday) to last at least two decades.
But the context for policy today is even more worrying than in 2010. Central banks, led by the Federal Reserve in the United States, are engaged in a forceful (their word) tightening of monetary policy.
This amounts to ending a strategy that has been in place since the start of the global financial crisis. In the wake of the last increase to 3.0 to 3.25 per cent, a Fed committee member has pointed to rates at up to 4.5 to 5 per cent. Fear of the impact of these rate rises on mortgage rates is likely common to all countries – for example in the US rates on a 30-year mortgage are up from 2.7 per cent at the start of 2021 to 6.9 per cent now.
And while in the UK the spike was brought under control, government interest rates are still seriously elevated and will carry on feeding through to mortgages.
In the UK money expert Martin Lewis has offered a grim rule of thumb: “For each 1 percentage point your mortgage rate increases, expect to pay roughly £50 more a month (£600/year) per £100,000 of mortgage debt.” The Resolution Foundation reckoned five million families would see annual payments rising by an average of £5,000 between now and the end of 2024.
Standing further back, the Financial Stability Board (Dietrich Domanski on the Today programme, 6 Oct.) have warned of the challenges of raising interest rates to deal with inflation under the conditions of the high global indebtedness that prevail today.
Likewise the IMF last week warned of “hidden leverage”, “waves of deleveraging”, and in particular the risk to ‘non-bank financial institutions’ – the latter including pension funds.
In terms of countries, first in the firing line are emerging market economies – with 20 countries “in default or trading at distressed levels”.
While the immediate trigger for central bank policies is the inflation set in motion by the end of lockdowns and Putin’s brutal invasion of Ukraine, the scale of the dislocation reflects a wider failure to set the economy right since the global financial crisis of 2008-09 exposed deep underlying failings. Summing up, the IMF offered the chilling: “the level of risk we are flagging at the moment is the highest outside acute crisis”
As the Biden administration has argued, for 40 years the interests of wealth have been prioritised over those of workers. The economy crashed in the first place because these financial interests proved wildly at odds with the interests of the population as a whole. An economy of speculation and debt crowded out production and decent pay and work.
The chancellor’s new advisory panel puts these interests back front and centre of policymaking at the Treasury. The other members so far announced are also from the City of London, not least securing J.P. Morgan a seat at the table.
Yesterday the Financial Times reported that the Bank of England’s programme of quantitative tighten has been put on hold, likely to protect the casino capitalism around pension funds.
Ahead of the mini budget the TUC issued a plan for a budget ‘on the side of working people’. We desperately need a government that will put first our interests not those of wealth. But instead once more the interests of the city of London are put ahead of those of workers and the country.
Responding to the latest figures showing the Royal Infirmary of Edinburgh sees only 40.6% of A&E patients within 4 hours, Foysol Choudhury MSP said:“The figures for patients being seen at A&E within 4 hours in Edinburgh remain alarmingly low, even before the anticipated winter crisis hits.
“The Cabinet Secretary for Health has said that ‘recovery from Covid will not happen overnight’, but we are yet to see any evidence of recovery at all. The 4-hour figures for NHS Lothian last averaged above 90% in March 2021, while the figures for Edinburgh Royal last averaged above 90% in October 2020. The trend has been downwards since then.
“Hard-working NHS staff are doing their best for patients in very difficult circumstances, but they are being let down by long-running structural failures which remain unresolved by this SNP-Green government.
“The Scottish Government needs to take urgent action now to arrest two years of decline in our health service, or risk putting patient safety in jeopardy over winter.”
The Scottish Conservatives said: “This week, A&E waiting time figures showed 1506 patients waiting more than half a day in emergency departments.
“Hardworking NHS staff are being pushed beyond their limits and patients are suffering needlessly as a result of SNP inaction.”
Mr Yousaf said: “A&E departments are working under significant pressure and, in common with other healthcare systems across the UK and globally, the pandemic continues to impact performance.
“Recovery from Covid will not happen overnight, which is why we are continuing to work with boards on a number of measures to reduce pressure this winter.”
Statement from Chancellor of the Exchequer, Jeremy Hunt:
Chancellor of the Exchequer, Jeremy Hunt said:“My focus is on growth underpinned by stability. The drive on growing the economy is right – it means more people can get good jobs, new businesses can thrive and we can secure world class public services. But we went too far, too fast.
“We have to be honest with people and we are going to have to take some very difficult decisions both on spending and on tax to get debt falling but the top of our minds when making these decisions will be how to protect and help struggling families, businesses and people.
“I will set out clear and robust plans to make sure government spending is as efficient as possible, ensure taxpayer money is well spent and that we have rigorous control over our public finances.”
CHANCELLOR Kwasi Kwarteng has been sacked, carrying the can for the ill-judged ‘mini-budget’ which has caused economic turmoil since it was announced three weeks ago today.
‘I’m going nowhere’ Kwarteng, Prime Minister Liz Truss’s choice as Chancellor, was recalled from an IMF meeting in Washington DC this morning to be told the news.
Prime Minister Liz Truss will desperately hope that the departure of close ally Kwarteng will appease the markets. She made the following brief statement confirming a humiliating U-turn this afternoon:
Good afternoon,
My conviction that this country needs to go for growth is rooted in my personal experience.
I know what it’s like to grow up somewhere that isn’t feeling the benefits of growth.
I saw what that meant and I am not prepared to accept that for our country.
I want a country where people can get good jobs, new businesses can set up and families can afford an even better life.
That’s why from day one I’ve been ambitious for growth.
Since the 2008 financial crisis, the potential of this great country has been held back by persistently weak growth.
I want to deliver a low tax, high wage, high growth economy.
It’s what I was elected by my party to do.
That mission remains.
People across this country rightly want stability.
That is why we acted to support businesses and households with their energy costs this winter.
It’s also the case that global economic conditions are worsening due to the continuation of Putin’s appalling war in Ukraine.
And on top of this, debt was amassed helping people through the Covid pandemic.
But it is clear that parts of our mini budget went further and faster than markets were expecting. So the way we are delivering our mission right now has to change.
We need to act now to reassure the markets of our fiscal discipline.
I have therefore decided to keep the increase in corporation tax that was planned by the previous government. This will raise £18 billion per year.
It will act as a down-payment on our full Medium-Term Fiscal Plan which will be accompanied by a forecast from the independent OBR.
We will do whatever is necessary to ensure debt is falling as a share of the economy in the medium term.
We will control the size of the state to ensure that taxpayers’ money is always well spent.
Our public sector will become more efficient to deliver world-class services for the British people.
And spending will grow less rapidly than previously planned.
I met the former Chancellor earlier today. I was incredibly sorry to lose him. He is a great friend and he shares my vision to set this country on the path to growth.
Today I have asked Jeremy Hunt to become the new Chancellor.
He is one of the most experienced and widely respected government ministers and parliamentarians.
And he shares my convictions and ambitions for our country.
He will deliver the Medium-Term Fiscal Plan at the end of this month.
He will see through the support we are providing to help families and businesses including our Energy Price Guarantee that’s protecting people from higher energy bills this winter.
And he will drive our mission to go for growth, including taking forward the supply side reforms that our country needs.
We owe it to the next generation to improve our economic performance to deliver higher wages, new jobs and better public services, and to ease the burden of debt.
I have acted decisively today because my priority is ensuring our country’s economic stability.
As Prime Minister, I will always act in the national interest.
This is always my first consideration.
I want to be honest, this is difficult. But we will get through this storm.
And we will deliver the strong and sustained growth that can transform the prosperity of our country for generations to come.
Kwarteng’s replacement – and the UK’s fourth Chancellor in a tumultuous 2022 – is none other than veteran former health secretary Jeremy Hunt.
Hunt supported Rishi Sunak – who’s predictions on the economy have been proved painfully accurate – in the recent Tory leadership election.
Hunt himself was an early casualty in the recent Tory leadership election and was also once voted as the most unpopular front-line politician of all time!
Clearly another popular choice … what could possibly go wrong?
HM Treasury issued the following statement this evening:
Government update on Corporation Tax
The Prime Minister has set out that the way the government is delivering on its mission to achieve a low tax, high wage, high growth economy is to change.
The legislated increase in the Corporation Tax rate from April 2023 will go ahead, with most small businesses benefitting from the new small profits rate.
Chancellor Jeremy Hunt will deliver the Medium-Term Fiscal Plan on 31 October, detailing action to get debt falling as a percentage of GDP over the medium term.
The government has today [Friday 14 October] announced that Corporation Tax will increase to 25% from April 2023 as already legislated for, raising around £18 billion a year and acting as a down payment on its full Medium-Term Fiscal Plan.
The decision has been taken in recognition of the need to ensure the UK’s economic stability and reassure markets of its commitment to fiscal discipline, after elements of September’s Growth Plan went further and faster than markets were expecting.
The Prime Minister has set out that the government is prepared to do whatever is necessary to ensure debt is falling as a share of the economy in the medium term and to ensure that taxpayers’ money is well spent, putting public finances on a sustainable footing.
The previously announced small profits rate of Corporation Tax will be maintained. Smaller or less profitable businesses will not pay the full 25% rate, and companies with less than £50,000 of profit – the large majority – will not see any increase at all, continuing to pay Corporation Tax at 19%.
The UK’s corporate tax regime will remain competitive and supportive of growth at the 25% rate, continuing to be the lowest rate in the G7. As part of the forthcoming tax review, the government will look at how the tax system can go further to promote growth and investment.
The government is committed to growing the economy and taking forward supply-side reforms that will ignite strong and sustained growth that delivers prosperity for the UK.
Chancellor of the Exchequer Jeremy Hunt will set out the government’s Medium-Term Fiscal Plan on 31 October, alongside a full forecast from the independent Office for Budget Responsibility.
Lorna Slater, the Scottish Greens MSP for Lothian has welcomed the Scottish Parliament’s vote to introduce a national rent freeze and new protections from evictions.
The measures in the Bill, which was introduced by a Scottish Green Minister, Patrick Harvie MSP, was overwhelmingly passed last week. It will provide vital protections for tenants over Winter and last until at least March 2023.
These changes will help tenants across Lothian where the average monthly rent is £942, which is an increase of 41.7% since 2010.
Lorna Slater, the Scottish Green MSP for Lothian said: “I am delighted that this Bill has been passed. These are vital changes that will make a huge difference at what is a desperate time for tenants all across Scotland.
“The measures in the Bill will provide stability and support for households and families across Lothian and beyond at a time when many are being hit by soaring costs and bills.
“These are the most progressive set of tenants’ rights anywhere in the UK. The legislation, which will last until at least the end of March 2023, puts Scotland at the forefront of tenants rights in the UK and sets a crucial precedent for other governments to follow.
“With Greens in the Scottish Government, we are leading the change and building a fairer, greener and better future for our communities.”
Prime Minister Liz Truss will join a virtual gathering of G7 leaders and President Zelenskyy today (Tuesday 11 October).
Meeting comes in the wake of Putin’s illegal annexation of four Ukrainian territories and a brutal assault on Ukrainian civilians in Kyiv and elsewhere.
The Prime Minister will ask countries to maintain biting sanctions and call for a full meeting of NATO leaders in the coming days.
G7 leaders will meet today (Tuesday 11 October) to reiterate the unity of opposition to Putin’s continued brutality in Ukraine.
In the last 24 hours Russia has stepped up its attacks on Ukrainian cities like Kyiv, killing civilians and cutting off electricity and communications. This follows Putin’s orchestration of sham referendums in an attempt to annex four Ukrainian regions.
Today’s video call, which will also be attended by President Zelenskyy, is the first gathering of all G7 leaders since Ukraine’s counter-offensive started to take hold in Ukraine.
The Prime Minister will use the call to urge fellow leaders to stay the course. She will point out that Ukraine’s military advances have been made possible thanks to the international support they are receiving – not just in terms of military aid, but also humanitarian assistance and the impact of western sanctions against Russia.
The Prime Minister is also calling for an urgent meeting of NATO leaders, ensuring allies remain united and resolute in their opposition to Putin’s behaviour.
Addressing fellow G7 leaders, the Prime Minister is expected to say: “The overwhelming international support for Ukraine’s struggle stands in stark opposition to the isolation of Russia on the international stage.
‘Their bravery in the face of the most brutal acts of violence has earned the people of Ukraine global admiration.
‘Nobody wants peace more than Ukraine. And for our part, we must not waver one iota in our resolve to help them win it.’
Yesterday the Prime Minister spoke to President Zelenskyy to condemn the recent attacks on Kyiv and the annexation of Ukrainian territories, and to reiterate the UK’s support.
This year the UK has committed £2.3 billion in military support to Ukraine, which has enabled the provision of Multiple Launch Rocket Systems, hundreds of rockets, thousands of rounds of ammunition, crucial defence vehicles and five air defence systems including Starstreak.
As the Ukrainian Armed Forces face a difficult winter, the UK is also providing critical cold weather gear and other forms of non-lethal support to bolster their resilience.
Later this week, all UN members will vote on Russia’s breach of the UN Charter with its annexation of Donetsk, Luhansk, Kherson and Zaporizhzhia. 141 UN member states voted to condemn Putin’s full-scale invasion of Ukraine in March, and earlier this month the majority of UN Security Council members voted against the recent annexations.
In their call today, G7 leaders are also expected to discuss the global energy crisis precipitated by Putin’s actions. The group is currently working to finalise and implement an international cap on the price of Russian oil, which will further damage Putin’s revenue stream.
The Prime Minister will point to this action as evidence of what the G7 can do both to constrain Putin and act as an economic NATO, defending our countries’ interests.
The Prime Minister is working with fellow leaders to increase our energy independence and end the global reliance on malign states, such as Russia, in our critical resources.
First Minister announces doubling of December Bridging Payment to £260
Families of an estimated 145,000 children will benefit from extra support this winter to help with cost of living pressures – backed by Scottish Government investment of £18.9 million.
Bridging Payments were introduced in 2021 ahead of the extension of the Scottish Child Payment to 6-15 year olds. The final quarterly Bridging Payment, due in December, will now be doubled to £260, meaning families will receive up to £650 per eligible child this year.
All children registered to receive free school meals on the basis of family low income are eligible and will receive this payment automatically.
Total Scottish Government funding for the Bridging Payments will increase to an estimated £169 million across 2021 and 2022.
This is in addition to the Scottish Child Payment which will be extended to all eligible under-16s from 14 November and will rise to £25 per child per week on the same date – a 150% increase in the benefit within eight months.
First Minister Nicola Sturgeon said: “I am proud of the work the Scottish Government is doing to tackle child poverty. The Scottish Child Payment is paid to eligible families and is unique in the United Kingdom.
“It started for under-6s at £10 per week per eligible child. In April we doubled it to £20. Five weeks from today we will increase it again, to £25 and will also extend it to families with children up to age 16.
“That is vital financial help for well over 100,000 children, delivered in time for Christmas. That is the sign of a government with the right priorities.
“But we need to do more because we know this winter is going to be really tough. Rather than looking forward to Christmas, too many families will be dreading it because they don’t know if they can afford to heat their homes or even pay for food.
“As part of our help to the poorest families over last year and this, ahead of rolling out the Scottish Child Payment to under 16s, we have made quarterly bridging payments of £130 to children and young people in receipt of free school meals.
“I am delighted that the Scottish Government will double the December Payment from £130 to £260.
“That will help put food on the Christmas table for families of 145,000 children and young people. I don’t pretend it will make all of their worries go away – no government with our limited powers can ever do that. But I hope this investment of almost £20 million will bring a bit of Christmas cheer to those who need it most.”
Bridging Payments were introduced in 2021 ahead of the roll out of the Scottish Child Payment to under 16s. The £130 payments are paid quarterly by councils on behalf of the Scottish Government. Families received up to £520 per eligible child in 2021 and will receive up to £650 in 2022. Bridging Payments support around 145,000 school age children.
Povery campaigners have welcomed the announcement.
The Poverty Alliance tweeted: ‘We welcome @NicolaSturgeon announcement today that the @scotgov will double the final Scottish Child Payment bridging payment, up from £130 to £260.
‘This will put cash in the pockets of those who need it most. This is how we #ChallengePoverty‘
INDEPENDENCE THE ONLY ROUTE TO ESCAPE TORY CUTS FOR GOOD
SNP MSP Gordon Macdonald has backed calls for Chancellor of the Exchequer Kwasi Kwarteng to resign or be sacked following his shambolic handling of the UK’s finances.
It comes as the independent Office for Budget Responsibility confirmed they offered to provide a forecast to the Chancellor to go alongside his fiscal statement, but that it was not commissioned by the UK Government.
This was despite the OBR confirming it WAS able to produce an updated forecast that satisfied the legal requirements of the Charter for Budget Responsibility.
And the calls to quit have intensified after Prime Minister Liz Truss refused to rule out her Government slashing benefits and cutting £18billion from public services – which threatens Scotland’s budget and our NHS – to pay for Kwarteng’s staggering incompetence in mishandling the economy.
SNP MSP Gordon Macdonald said: “The fallout from the new Truss administration’s ‘mini-budget’ has been huge, taking a wrecking ball to the UK’s finances, endangering the pension funds of millions, causing banks to withdraw mortgages and leaving millions of families in Edinburgh deep distress.
“We now learn that despite the OBR publishing their forecast to the UK Government, the Treasury will delay the publication until November 23. This is simply unacceptable.
“It’s been a disastrous first few weeks of the Truss premiership but if the rhetoric from the Conservatives is to be believed, much worse is yet to come.
“Within days of taking office, we have once again seen the devastating consequences of Scotland being shackled to this outdated, corrupt Westminster system. Mortgages, pensions and savings of the people of Edinburgh are all being badly hit – and there is no plan to fix it.
“Instead of trying to dodge accountability or, as we now know, drinking champagne with hedge fund managers on the night of his budget, the Chancellor must do the honourable thing and resign or be sacked.
“And Truss’s plan to impose a new wave of Tory austerity cuts is utterly obscene. After 12 years of Tory mismanagement and Brexit damage, the UK already had the worst levels of poverty and inequality in north west Europe.
“The UK government should be reversing the damage it has caused, not doubling down on cuts and pushing more people into poverty.
“These actions underline the need for Scotland to become an independent country – so we can escape Westminster control and get rid of the Tories for good.”
Responding to Scottish Labour Leader Anas Sarwar raising his late constituent Anne Sinclair’s case at First Minister’s Questions this week, Foysol Choudhury MSP said:“I am grateful to Anas Sarwar for raising the case of Anne Sinclair with the First Minister.
“I raised the case with the First Minister in February and was told that the seven months of delays she had faced in her cancer diagnosis were ‘not at all acceptable’. I agreed with that assessment.
“Unfortunately Anne passed away this summer. Throughout her journey with cancer she was determined that I raise her story in the Parliament, find answers for the delays she faced, and fight so that nobody else was left in the same position. Her sons, who were in the gallery of the Scottish Parliament for FMQs today, have kindly given me permission to continue that fight on their mother’s behalf.
“Anne’s case starkly demonstrates the real people behind the numbers we hear every week in the Scottish Parliament. There are faces behind all the waiting lists, the people waiting in ambulances, and the people who cannot get the care they need. These are not just statistics, they are human beings who deserve dignity in their healthcare.
“Unfortunately Anne was let down, and her sons deserve answers and an apology for the delays in their mother’s diagnosis.
“I want to thank my office staff for pursuing what has often been an emotional case. We all want to see that Anne’s family can be assured that lessons are learned and nobody else will be left in the same position.”
The family of Anne Sinclair, 64 from Edinburgh, said:“We are happy that Foysol Choudhury MSP and Scottish Labour have continued to raise our late mother’s case at the Scottish Parliament.
“We do not wish for any other families to go through what our mum and our family have gone through. Our mum was a fighter and she would want her questions about her late diagnosis to be answered.”
