Reaction to Liz Truss premiership bit hysterical, says top banking expert

A former Bank of England governor has said that the UK’s reaction to Liz Truss’s infamous mini-budget – which triggered a dramatic fall in the value of the pound and rising mortgage rates – was a “bit hysterical”.

Ms Truss and her chancellor at the time, Kwasi Kwartang, faced fierce backlash after announcing £45 billion of unfunded tax cuts and plunging the country’s economy into a temporary slump.

Speaking to LBC, Mervyn King said the economic consequences of Ms Truss’s fiscal decisions were “not that bad” and have now completely “disappeared”.

Read more: More mortgage misery predicted as interest rates could hit 5.75% by Christmas

He said: “I can understand to some extent why and that the government appeared to be hell bent on cutting taxes without any proper analysis or framework jettisoning the way government was being organised.

“I understand that, but I don’t think the economic consequences were that bad. And frankly, they’ve gone away, they’ve disappeared now.

“What we should boast about as a country is that we had a government that we didn’t think was doing very well, it lasted 44 days, we got rid of it, and no one got hurt.”

The Bank of England was reportedly not briefed on the mini-budget before it was announced, and was forced to react in dramatic fashion to stabilise pension funds.

Sir Jon Cunliffe, the Deputy Governor of the Bank of England for Financial Stability, said at the time the Bank could have advised the government on the possible market reaction.

The mini-budget faced criticism from outside the UK, too, with the International Monetary Fund (IMF) saying at the time that the plans would “will likely increase inequality”.

US President Joe Biden was he felt the move was “a mistake”. “I disagree with the policy, but it’s up to Britain to make that judgment, not me,” he added.

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Mr King was also asked about the current rate of inflation and said the Bank of England may be forced to take action to keep it under control.

The economist was also asked whether Rishi Sunak is right to take credit for the current fall in inflation, considering it has dropped since he came into office, to which he said the timing was “convenient”.

“If you think that the high energy and food prices of last year are going to drop out of the measure of inflation…it’s convenient – it’s something that happens,” he explained.

“But if you are confident it will happen, it’s not a bad thing to claim credit for when it’s actually got nothing to do with you at all.”

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