Politics as it happened: Liz Truss pledges not to reduce public spending in first PMQs since mini budget

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Liz Truss pledged not to reduce public spending in her first PMQs since her disastrous budget.

Sir Keir Starmer quizzed her on the mini budget and mortgage rates before asking about her pledge, during the Tory leadership campaign, that she would not reduce public spending. Responding, the Prime Minister said she “absolutely” would not

The markets were plunged into turmoil again as Bank of England governor Andrew Bailey warned there could be no further extension of the emergency market support beyond the end of the week.

“My message to the (pension) funds involved – you’ve got three days left now. You have got to get this done,” he said. “Part of the essence of a financial stability intervention is that it is clearly temporary.”

Following Mr Bailey’s remarks, sterling fell more than a cent against the dollar to its lowest rate since September 29. The pound was lower against both the dollar and euro on Wednesday morning amid continued unease among financial traders.

Follow our live blog below for the latest updates and analysis from NationalWorld reporters.

UK politics live - Bank of England to end emergency support within days

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Planned rise in corporation tax cancelled

Kwasi Kwarteng confirmed that the planned rise in corporation tax would be cancelled.

The Chancellor told the Commons: “The interests of businesses are not separate from the interest of individuals and families. In fact, it is businesses that employ most people in this country. It is businesses that invest in the products and services we rely on.”

He added: “I can therefore confirm that next year’s planned increase in corporation tax will be cancelled. The UK’s corporate tax rate will not rise to 25% – it will remain at 19%.

“We will have the lowest rate of corporation tax in the G20. This will plough almost £19 billion a year back into the economy. That’s £19 billion for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions.”

Biggest tax cuts since 1972

Economic experts have said that the Chancellor’s £45billion of tax cuts is the biggest cut since 1972.

Paul Johnson, director of IFS, said: “£45billion of tax cuts. This is biggest tax cutting event since 1972.

“Barber’s ‘dash for growth’ then ended in disaster. That Budget is now known as the worst of modern times. Genuinely, I hope this one works very much better.”

While Torsten Bell, chief executive of the Resolution Foundation, explained: “The Chancellor has announced the biggest tax cuts since the 1970s, at the price of public finances being set on an unsustainable footing. It gambles on growth, which is in Putin’s hands rather than ours in the short term.

“It’s hard not to be awed by the scale of what has been announced today:

  • Huge tax cuts
  • Totally rejecting not just Treasury orthodoxy but Boris Johnson too

“Political choice being made here is huge - hope Tory MPs have noticed:

  • Not just full throated trickle down
  • Not just throwing fiscal sustainability out window
  • But also leaving little wriggle room on public spending to make problems go away pre-election.”

Martin Lewis: I worry what happens if this doesn’t work

Consumer money expert Martin Lewis described the Government’s financial plan as “staggering” after the so-called mini-budget from Chancellor Kwasi Kwarteng was announced.

Lewis, founder of Money Saving Expert, tweeted: “That really was quite a staggering statement from a Conservative Party government.

“Huge new borrowing at the same time as cutting taxes.

“It’s all aimed at growing the economy. I really hope it works. I really worry what happens if it doesn’t.”

Labour: the Conservatives are the cost of living crisis

Shadow chancellor Rachel Reeves said “Labour believes in wealth creation” but that the Government is piling the “crushing weight” of costs on taxpayers.

“Labour believes in wealth creation,” Ms Reeves told the Commons, which was met by laughter and heckles from the Conservative benches.

She continued: “We will always support enterprise, creativity and hard work. We want British business to grow, to be successful and to contribute to our country’s prosperity, what we don’t believe – the Chancellor and Prime Minister do – is that British workers are idlers.”

She added: “This statement is more than a clash of policies, it is a clash of ideas. Two different ideas about how our country prospers.

Shadow chancellor Rachel Reeves. Picture: Kirsty O'Connor/PA Wire

“If you are a pensioner worried about the cost of living, a working family seeing your mortgage rate going up, a small business whose costs are spiralling, the Government’s announcements today do little to reassure them.

“Bigger bonuses for bankers, huge profits for energy giants, shamelessly shielded by Downing Street, and all the while ministers pile the crushing weight of all of these costs onto the backs of taxpayers.”

Closing her response in the Commons, Ms Reeves said: “The verdict is clear. When it comes to the economy, this Tory leadership do not know what they are doing.

“The Conservatives cannot solve the cost-of-living crisis. The Conservatives are the cost-of-living crisis. And the country cannot afford them any more.”

Pound falling further following mini budget

Kwasi Kwarteng’s mini budget has done nothing to arrest the slide of the pound, which has fallen further compared with the dollar after his announcement.

It has dropped below $1.11 against the dollar for the first time since 1985. Analysts are saying investors are concerned about unfunded tax cuts.

The commercial website Capital Moments said: “ The decline is partly due to dollar strength – the greenback is at 20-year highs against a basket of currencies, due to worries about the global economy and large interest rates by the US Federal Reserve. But due to concerns over the UK economy as it teeters towards recession, the pound is still falling following the mini-statement.”

Bloomberg: Truss’ economic plan sends UK markets into meltdown

I’m not sure this was the reaction that Liz Truss was hoping for. Bloomberg’s splash states that Kwasi Kwarteng’s mini budget has sent “UK markets into meltdown”.

David Goodman, Bloomberg’s UK economy reporter, says: “The pound is down 1.4%. Quite a day for markets.

“That move comes as traders are continuing to give their verdict on the speech, and it isn’t pretty reading for Truss.

“UK five-year yields are up 50 basis points, set for their biggest ever rise, and investors now think there is a 50% chance of a 1 point rate-hike from the Bank of England in November. That’s double the size of the move announced yesterday.”

Bloomberg’s reaction to Kwasi Kwarteng’s mini budget. Credit: Bloomberg

Sadiq Khan: mini budget risks ‘harming our economy for years to come'

An interesting reaction from the Mayor of London to Kwasi Kwarteng’s mini budget. Many bankers who work in the City of London will likely be delighted with the lifting of the cap on their bonuses.

The VAT cut on overseas tourists may also encourage travellers to visit the capital. However Labour mayor Mr Khan has said the economic plans risk “harming our economy for years to come”.

He said: “The measures in this Budget are not only unfair, but will put public finances on an unsustainable footing, which risks harming our economy for years to come.

“As the country grapples with the worst cost of living crisis in decades, the Chancellor has today prioritised massive unfunded tax giveaways for the wealthy, rather than helping those households that are really struggling.

“There is not enough in today’s Fiscal Statement to help those families and businesses who need support the most. Today was a missed opportunity from the Chancellor who could have made a real difference to millions of Londoners by providing free school meals to all primary school children, uplifting Universal Credit and ensuring that the most vulnerable receive a basic amount of free energy. He should also have given me the power to freeze private rents in London, which would save people £3,000 over two years.

“Instead the Government has chosen to bring in an swathe of tax cuts that they admit will disproportionately benefit the most wealthy in society. Londoners who are struggling to make ends meet will be disappointed at the lack of immediate help today.”

The mayor of London, Sadiq Khan

Bank of England backs lifting bankers’ bonus cap despite governor calling for ‘wage restraint’ for workers

A leading figure in the trade union movement has called on the governor of the Bank of England to condemn the Government’s plan to lift the cap on bankers’ bonuses, my colleague Ethan Shone reports.

Andrew Bailey, governor of the Bank of England, was criticised earlier this year after he called for workers to show “restraint” in asking for pay rises to try and stop rampant inflation.

Gary Smith, general secretary of the GMB trade union has written to Bailey asking whether he will condemn the bankers’ bonus policy “as a risk to inflation”.

A Bank of England spokesperson told NationalWorld declined to say whether it considers lifting the cap to be likely to contribute to rising inflation, saying only that it “did not support the bonus cap when it was introduced”.

Summary: what did Kwasi Kwarteng say and how will it affect me - from stamp duty to income tax cuts

My colleague Imogen Howse has put together a summary of everything Kwasi Kwarteng has announced.

The Chancellor has unveiled a mini budget which experts say includes one of the biggest tax cuts the country has seen in the last 30 years, she reports.

This is the first budget announced since Liz Truss became Prime Minister, and comes as the Government tries to limit the impact of skyrocketing energy bills on households and families.

So what exactly is in the new mini budget, what did the Chancellor of the Exchequer say, what does it all mean?

Resolution Foundation: 45% of the gains next year will go to the top 5%

Torsten Bell, of the Resolution Foundation think tank, said the “simply huge set of tax cuts” announced by the Chancellor would overwhelmingly benefit the better-off.

“The tax cuts are heavily focused on the very highest-income households. 45% of the gains next year will go to the top 5%. Somebody who earns £1 million will see a £55,000 tax cut,” he told Sky News.

Mr Bell said the impact of the changes on economic growth would be limited.

“In the medium term, the Bank of England will raise (interest) rates to squeeze out any extra growth that Government’s fiscal support offers, so I don’t think we should assume on the demand side you see any lasting effect on growth,” he said.

“In the end, you need to focus far more widely than tax if you want to see this economy growing.”

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