Treasury rejects U-turn on mini-budget despite turmoil

[Eugene]

Source: BBC

Treasury rejects U-turn on mini-budget despite turmoil

28 September 2022

The government will not abandon its mini-budget despite the Bank of England having to step in amid market turmoil, a Treasury minister has said.

Labour called for the tax-cutting measures to be ditched after they sparked a fall in the pound and a surge in borrowing costs.

Government departments are also being asked to find spending cuts.

Treasury minister Andrew Griffith said the government's proposals were the "right plans" to grow the UK economy.

He claimed "every major economy is dealing with exactly the same issues" and said the impact of "Putin's war in Ukraine is cascading through things like the cost of energy, some of the supply side implications of that".

-snip-

Read more: https://www.bbc.com/news/uk-politics-63067163

[muriel_volestrangler]

1. "Investors regard the Tories as a doomsday cult"; and the "moron risk premium"

Paul Donovan, chief economist of UBS Global Wealth Management, delivered a blistering assessment of the Tory UK Government's fiscal plans as the pound plummeted to a record low on Monday morning.
...
"Modern monetary theory has been taken into a corner by the bond markets and beaten up.

"Advanced economy bond yields are not supposed to soar the way UK gilt yields rose. This also reminds investors that modern politics produces parties that are more extreme than either the voter or the investor consensus.

"Investors seem inclined to regard the UK Conservative Party as a doomsday cult."

https://uk.finance.yahoo.com/news/tory-party-likened-doomsday-cult-121323283.html

"The problem isn't that the UK budget was inflationary, its that it was moronic. And a small open economy that seems to be run by morons gets a wider risk premium on its assets - currency down, yields up "

"But at a guess, the moron risk premium has now been priced in."

That's Paul Krugman, Nobel Laureate and NYT columnist, replying to Dario Perkins, ex-Treasury economist and now economic forecaster, specialist in central bank policy.

Link to tweet

[LeftishBrit]

2. Kwarteng is scary; he would make George Osborne look reasonable