This week we saw the lady is for turning after all. Growing opposition on the Conservative backbenches, international criticism and extremely hostile financial markets forced Liz Truss to sack Kwasi Kwarteng as chancellor and rethink plans to cut taxes. The government has been in damage limitation mode all week as it tried to reassure its critics that a bit of economic orthodoxy is not too bad after all. News that Kwarteng had to rush back to London for a crisis meeting on the fate of his mini-budget saw sterling rise and brought some calm to the gilt markets.
The reputation of the Bank of England also took a hammering this week, as it appeared to be briefing against its own governor at one point. Andrew Bailey gave pension schemes until the end of the week before the bank withdrew its support for the gilt market but this appeared to have little effect. Instead it was speculation about a government U-turn that was the catalyst for the end of this week’s gilt sell off. A new chancellor (Jeremy Hunt) and revision of the planned tax cuts may have calmed markets but the severe damage to Liz Truss’s credibility will be harder to reverse.
For the following stories, please click on this link*
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