Rishi Sunak’s supporters ‘massacred’ says commentator
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The financial markets would “love it” if Rishi Sunak returned to his role as Chancellor, Express.co.uk has been told, as Kwasi Kwarteng’s new budget sees the pound plummeting stemmed only by an emergency intervention from the Bank of England. Mr Sunak had correctly predicted much of the financial backlash to Liz Truss’ economic strategy during the conservative leadership contest, including describing her plans as a “fairy tale”.
Mr Kwarteng’s mini-budget last week saw backlash of unprecedented severity, with the pound touching an all-time low against the dollar, gilt yields surging as investors sold in their droves, and banks scrambling to pull mortgage products – culminating in a brutal take-down of the Chancellor’s plans by the International Monetary Fund and an emergency intervention by the Bank of England.
Speaking to Express.co.uk, currency expert Patrick Reid said one thing that could help ease the emerging financial crisis would be a cruel “twist” – for Mr Sunak, Ms Truss’ former leadership competitor, to return to his role as Chancellor.
Mr Reid said: “There are calls for Rishi to come back, because he predicted this. That’s the twist, right? He actually did. If Liz Truss went now, that would just make things worse. That would be a complete loss of confidence. But if Rishi came in, the markets would love it. They would love his stability.”
On August 21 Mr Sunak’s campaign team put out a statement warning that Truss’s economic policy could cause an “inflationary spiral”.
Mr Sunak’s spokesperson said: “The reality is that Truss cannot deliver a support package as well as come good on £50bn worth of unfunded, permanent tax cuts in one go.
“To do so would mean increasing borrowing to historic and dangerous levels, putting the public finances in serious jeopardy and plunging the economy into an inflation spiral. It’s no wonder they want to avoid independent scrutiny of the Office for Budget Responsibility (OBR) in their emergency budget – they know you can’t do both and it’s time they came clean about that now.”
The Treasury refused to allow the OBR to publish a forecast of the UK’s economic outlook alongside last Friday’s mini-budget, despite the Treasury Select Committee insisting it would be “vital”.
A spokesperson for the Treasury said: “Given the exceptional circumstances our country faces, we have moved at immense speed to provide significant energy bill support for households and businesses, and are acting swiftly to set out further plans to kickstart economic growth later this week. We remain committed to maintaining the usual two forecasts in this fiscal year, as is required.”
During leadership debates, Mr Sunak had criticised Ms Truss’ plans as “promising the earth to everybody”, adding that her plan “risks making everything worse”.
In an apparent snub to Ms Truss, Mr Sunak is understood to be dodging the upcoming Conservative party conference, alongside high-profile Tories David Davis, former Brexit secretary, former health secretary, home secretary and chancellor Sajid Javid, and Mel Stride, the former leader of the Commons who now chairs the Treasury select committee.
A Conservative MP has rejected the calls for Mr Sunak to return, telling Express.co.uk: “He didn’t win the contest, Liz Truss won the contest. Ultimately, the measures that the Prime Minister and the Chancellor set out last Friday need time to bed in and see if they work – and I suspect they probably will.
“[Rishi returning] might be what the markets want, but we’ve also got to think about what the country needs in the medium to long term.”
The MP restated their support for last week’s mini-budget, adding: “There are aspects of it that, with the benefit of hindsight, could have been handled a bit differently, but I do think the fundamentals are the fundamentals, and they are, in my view, the right thing to do – ie, cutting taxes, encouraging growth.”
The Bank of England said on Monday that it would “not hesitate” to hike already high-interest rates, after the pound hit record lows.
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As Mr Kwarteng’s announced the biggest tax cuts in the UK for 50 years last week, he remarked: “Markets will react as they will”.
The Chancellor said on Tuesday that the government is “confident in our long-term strategy to drive economic growth through tax cuts” and “supply-side reform ” that is, through cutting taxes, deregulation and free trade.
He said: “Cabinet ministers will set out more supply side measures over coming weeks to make meaningful change. Right across the government, departments have to be focused on this. As I said on Friday, every department will be a growth department.”
He said the medium-term fiscal plan in November will come alongside an OBR forecast, adding: “That will be a credible plan to get the debt to GDP falling. I’m confident… our approach will work.”
William Hill places Kwasi Kwarteng odds at 4/1 to leave by next Friday, with the betting agency’s spokesperson commenting: “Much, if not all of the UK’s political heat is on Kwasi Kwarteng at the moment, and the calls for him to step down as Chancellor are only getting louder.”
Offering a solution other than the reinstatement of Mr Sunak, Mr Reid said: “There is a better is a silver bullet to cure all of this, which is not a very nice one, and that is to reverse Friday and say: ‘we made a mistake.’”
Express.co.uk has contacted Mr Sunak and the Treasury for comment.
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