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Kwarteng sidesteps questions on mini-budget U-turn

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Published14 minutes agocommentsCommentsSharecloseShare pageCopy linkAbout sharingThis video can not be playedTo play this video you need to enable JavaScript in your browser.By Becky Morton and Chris Mason BBC PoliticsChancellor Kwasi Kwarteng has sidestepped questions about whether he will U-turn on his mini-budget. Asked about speculation he is preparing to scrap major parts of his tax-cutting growth plan, Mr Kwarteng said: “Our position hasn’t changed.”Asked if he and PM Liz Truss would still be in their jobs this time next month, he said: “Absolutely, 100%.”He said he was “not going anywhere”, despite market turbulence he admitted was caused in part by his policies.Ms Truss is facing growing calls from within her party to rethink part or all of the government’s tax-cutting package to reassure financial markets. Rees-Mogg says market turmoil not due to mini-budgetWhat will the tax changes mean for you?The pitfalls lying ahead for an embattled PMDiscussions are under way between the prime minister and backbenchers about what her party can accept.The mood among Tory MPs is angry and fatalistic. “It’s checkmate, we’re screwed,” one told the BBC. “There is no question in my mind, they’ll have to junk loads of this stuff and U-turn,” another said. Some think the government’s tax-cutting plans should be reversed, while others think the help with energy bills should be more targeted. Other scenarios being discussed by Tory MPs include the chancellor resigning or the prime minister being ousted.However, there is little agreement on what should happen next or who should replace Ms Truss if she is removed. The government has already U-turned on its plan to scrap the top rate of income tax, but this only made up £2bn of the tax cuts announced by the chancellor last month.He is under pressure to spell out how the remaining £43bn will be paid for, and how he will get the UK’s national debt falling.Mr Kwarteng is due to deliver a statement on 31 October, along with independent economic forecasts.Pressed on whether there could be further U-turns on his mini-budget, Mr Kwarteng, who is in Washington for an IMF meeting, said there would be more detail on 31 October. Asked about the possibility corporation tax could rise, Mr Kwarteng said he was “totally focused” on delivering his mini-budget. Ms Truss has pledged to scrap a planned rise to the tax, which was set to increase from 19% to 25% in 2023.On Wednesday, she said it would be “wrong” to raise corporation tax “when we are trying to attract investment into our country at a time of global economic slowdown”. The pound rose against the dollar as rumours emerged about a possible government U-turn. However, it later fell back after stronger-than-expected inflation data from the US drove up the value of the dollar. The chancellor’s mini-budget on 23 September has caused turmoil in the financial markets and prompted the Bank of England to intervene to protect pension funds.Mr Kwarteng acknowledged there was “some turbulence” after his mini-budget but said there was “a very dicey situation globally”, with inflation, potential interest rate rises and energy price spikes affecting everybody. More on this storyChanging PM would be disastrous, minister says4 hours agoTruss under pressure from Tory MPs to rethink tax cuts9 hours agoTruss insists no plans to cut public spending22 hours agoRees-Mogg says market turmoil not due to mini-budget23 hours agoThe pitfalls lying ahead for an embattled PM1 day agoWhat will the tax changes mean for you?4 October

Welsh Ambulance Service: GMB to hold industrial action ballot

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Published25 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, Getty ImagesThe Welsh Ambulance Service faces a strike vote as one union representing them launches a formal industrial action ballot.Paramedics and ambulance staff were angry over the government’s imposed 4% pay award.GMB Union is calling on the UK and Welsh governments to uplift the pay for “hard pressed” staff. The Welsh government said without extra funding from Westminster there were limits in how far it could go.Ballot dates will be announced in the coming days. ‘Sticking plaster’The vote comes following a consultative ballot which saw 90% of GMB’s almost 1,500 Welsh Ambulance Service members voted in favour of a walk out. GMB organiser, Kelly Andrews, said: “Unfortunately, 4% is like a sticking plaster on an open wound – it’s not going to help.”Ambulance staff are at the forefront of our emergency services, and already underpaid and undervalued for the work they do.”The UK and Welsh governments need to come back to the table with something that recognises their hard work, plain and simple.” The Welsh government said it has accepted the independent pay review body’s recommendations in full, but without additional funding from the UK government, there were “inevitably limits” to how far we can go in Wales. “We continue to press the UK government to pass on the necessary funding for full and fair pay rises for public sector workers,” said a spokesperson.”We have committed to continue to explore a range of other issues raised as part of our discussions with trade unions.”More on this storyAmbulance workers face strike ballot over pay3 days agoAmbulance workers to vote on strike action6 days agoNursing staff levels creating ‘unacceptable risk’6 days agoNurses urged to strike for first time over pay7 days agoAmbulance staff in strike ballot over pay rise30 SeptemberAttacks on 999 workers in Wales up again to 3,00030 MayParamedics describe job as soul destroying25 March

Neath Labour MP Christina Rees suspended from party

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Published11 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, House of CommonsNeath MP Christina Rees has been suspended from Labour following reported allegations of bullying.The politician, who has represented the constituency since 2015, has lost the party whip pending an investigation.It means the former shadow Welsh secretary will sit in the Commons as an independent. The Guardian said Ms Rees faces allegations of bullying staff.Ms Rees told the newspaper she was cooperating fully with the investigation.The party has declined to comment.The MP took her seat in 2015 after Peter Hain stood down at that year’s general election.Profile: Shadow Welsh Secretary ReesRees appointed shadow Welsh secretaryShe is the 14th MP to be sitting in parliament as an independent, joining others who have lost the whip from their parties.Born in the village of Kenfig Hill in south Wales, the qualified barrister has represented Wales in squash more than 100 times.She was a member of the Great Britain Youth Team to the Munich Olympics.Ms Rees was married to former Welsh Secretary Ron Davies until they divorced in 1999.She told the Guardian: “There has been a complaint made against me to the Labour Party, which is under investigation and I am therefore under an administrative suspension until the process is concluded. I’m not aware of the details of the complaint but I am fully cooperating with the investigation.”More on this storyLabour not blocking Brexit, says Rees29 January 2019Profile: Shadow Welsh Secretary Rees10 February 2017Rees appointed shadow Welsh secretary9 February 2017

Two Huawei 5G kit-removal deadlines put back

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Published39 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, Getty ImagesThe government has extended two deadlines for the removal of Huawei equipment from the UK’s 5G networks.The requirement to remove the Chinese company’s products from the network core has been pushed back 11 months, to 31 December 2023.And a limit on the amount of Huawei kit in fibre-broadband infrastructure must now be achieved by the end of October,l rather than July, next year.It follows advice from the National Cyber Security Centre.The NCSC decided the security of Huawei’s products could no longer be managed, in 2020, following a US decision to place the company under sanctions, and the UK government said all its equipment had to be stripped out of the UK by the end of 2027.This and eight other interim deadlines remain unchanged.’Network outages’The US authorities fear Huawei’s 5G equipment makes countries vulnerable to their data being accessed by the Chinese state or having critically important services switched off.Huawei has denied being controlled by the Chinese government or posing a security threat.The new deadline extensions follow consultations with Huawei and UK telecoms providers.The government said a small number of operators had indicated – because of the pandemic and global supply-chain issues – the original deadlines risked network outages and disruption for customers.Providers should meet the original targets wherever possible, it said, and it expected most of them would do so.’Security risk’The direction to remove Huawei equipment is also being put on a legal footing through the handing of notices called designated-vendor directions to all 35 UK telecoms network operators, under the Telecoms Security Act, which came into force in November 2021.Digital Secretary Michelle Donelan said it allowed the government to “drive up the security of telecoms infrastructure and control the use of high-risk equipment”.”We must have confidence in the security of our phone and internet networks, which underpin so much about our economy and everyday lives,” she added.NCSC technical director Dr Ian Levy said: “The Telecoms Security Act ensures we can be confident in the resilience of the everyday services on which we rely and the legal requirements in this designated-vendor direction are a key part of the security journey.”Huawei has been issued a separate document – a designation notice – which categorises the company as a high-risk vendor of 5G network equipment and services and sets out all of the reasons the government considers it a national security risk, including the impact of the US sanctions.More on this storyBiden tightens restrictions on Huawei and ZTE12 November 2021Huawei 5G decision ‘will cost up to £2bn’14 July 2020How will the Huawei 5G deal affect me?28 January 2020

Housing slowdown warning after mortgage rates rise

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Published32 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, Getty ImagesThere have been fresh warnings of a housing slowdown after the number of people struggling to pay mortgages was forecast to hit a 15-year high.House sales in September hit their lowest levels since the height of the pandemic, the Royal Institute of Chartered Surveyors (Rics) said.Rising mortgage rates will drive house prices down this year, it warned.On Wednesday, the Bank of England said the number struggling to pay mortgages would rise sharply next year.New house buyer inquiries fell in September, marking the fifth month in a row they had fallen, according to Rics.It said there continued to be fewer properties for sale which had helped push up housing prices by a small amount, but it warned this was likely to end.Rics chief economist Simon Rubinsohn said although house prices were still rising, “storm clouds” were gathering over both pricing and sales. “It is difficult not to envisage further pressure on the housing sector as the economy adjusts to higher interest rates and the tight labour market begins to reverse,” he said. “For now, mortgage arrears and possessions remain at historic lows but they are inevitably going to move upwards over the next year, as pressure on homeowners grows,” he added. Disabled man tells of winter food cost fearsHouse prices to feel ‘pressure’ from rate rises Rental housing market ‘completely unsustainable'”However, as lenders have been a lot more cautious through this cycle, with high loan-to-value mortgages accounting for a much smaller share of the lending book than in the past, this should help to limit the adverse impact on the market.”Mortgage rates, which had been rising since the Bank of England started to increase interest in December, shot up sharply after the government’s mini-budget in September sparked alarm among investors.The promise of huge, unfunded tax cuts led to expectations that the Bank will have to raise interest rates more aggressively than previously thought, and mortgage providers are pricing their loans accordingly. On Thursday the average two-year fixed mortgage rate was 6.46%, according to researcher Moneyfacts, the highest since 2008. The average five-year fixed deal was 6.28%, also close to a 14-year high.’Increasing pressure’The Bank of England said many households would struggle if interest rates rose as high as the market expected them to, with it hitting both mortgage holders and renters. Currently it says around 1.7% of UK households – or 475,000 – are in a position where they are more likely to experience repayment difficulties. It defines that as having to spend more than 70% of their take-home pay on mortgage or rent and essentials.But it believes that percentage will rise to 2.8% – or around 800,000 households – by the end of next year. “Rises in the cost of living and interest rates will increase pressure on UK household finances and make households more vulnerable to shocks,” the Bank’s Financial Policy Committee said in a report on Wednesday. “Some may find it harder to repay debts,” it added, unless they can make significant spending cuts. However, it also said households were better placed to deal with financial stress than in the past, having less debt relative to their incomes. The share of people with high loan-to-value mortgages is also much lower. “This reduces the risk of them defaulting on debt and banks are now required to be flexible in their response,” the Bank said. It forecasts that about 1.7 million of the country’s 11 million mortgage holders will have to refinance their loans in the coming year, moving onto much higher rates. More on this storyDisabled man tells of winter food cost fears2 days agoHouse prices to feel ‘pressure’ from rate rises5 days agoRental housing market ‘completely unsustainable’4 October

Cost of living: Queen’s University Belfast to spend £8m on support

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Published14 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, haoliang/Getty ImagesBy Robbie MeredithBBC News NI Education CorrespondentQueen’s University Belfast is to spend about £8m making extra cost-of-living payments to students and most staff.Most of the university’s 25,000 students will receive £150, although about 3,600 students from lower-income families will get a higher payment of £400.About 3,000 staff – all staff apart from senior managers – will receive between £500 and £750. But the payments will not be made until January 2023.Inflation is increasing at nearly its fastest rate in 40 years, driven largely by the rising cost of food and fuel. The university recently declared a “critical incident” due to rises in the cost of living and said it would bring forward measures to help staff and students.Some of those measures have now been agreed by senate, the university’s governing body.’Greatest need after Christmas’The university’s vice-chancellor Prof Ian Greer told BBC News NI he was “very concerned” about the cost-of-living pressures on students and staff.”There’s no doubt that fuel in particular has been a problem across the board, not just for our student population but our staff also,” he said.”In addition the cost of food is also increasing and that causes general hardship for students who are on a very modest income in any event.”Prof Greer was asked by BBC News NI why it would take until January for students to get the payments.”Students have largely just received their student loan support funding, and we felt the time of greatest need would be just after the Christmas period,” he replied.Students will also not have to pay any fees to graduate – normally £47 – in 2022/23.All library fines will also be waived and any student discipline fines halved.University declares cost-of-living critical incidentShould students have to pay for graduation?The 3,600 students who will receive the higher £400 payment are those whose family household income is below £25,000 a year.Staff will also receive their cost-of-living payment in January.”The pressures for the cost of living crisis that I’ve outlined for students – things like fuel, cost of housing, cost of food – are real pressures for our staff,” Prof Greer said.BreakfastsThe university will spend about £5.5m on the cost-of-living payments for students and around £2.5m on the payments for staff.Prof Greer said the university was also considering further measures, including providing breakfasts for staff and students, and decisions would be made on those in the coming weeks.He also told BBC News NI the university was facing an increase of “several million pounds” in its energy bills.Separately, a number of schools in Northern Ireland had previously decided to offer more pupils free meals in response to rises in the cost of living.Queen’s University had previously spent about £4.5m in July 2022 on payments of between £1,000 and £150 to staff for their work during the Covid pandemic.Ulster University also paid most of its staff an extra cost-of-living payment of up to £1,000 in June 2022.More on this storyUniversity declares cost-of-living critical incident5 days agoCost-of-living payment for Ulster University staff7 June

Bondi Rescue: Hatfield boy who saved toddler surprised by TV hero

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Published2 hours agoSharecloseShare pageCopy linkAbout sharingImage source, Christine AdamsBy Charlie JonesBBC News, EastAn Australian TV star surprised a boy who saved a drowning toddler by turning up at a pub to congratulate him.Bruce Hopkins, a lifeguard who stars in the reality show Bondi Rescue, wanted to meet 10-year-old Cooper Adams after hearing about his heroics.Cooper, from Hatfield, Hertfordshire, saved a drowning child in August and told the BBC he was inspired by his favourite TV show.Mr Hopkins, known as Hoppo, saw the BBC article and arranged the surprise.This video can not be playedTo play this video you need to enable JavaScript in your browser.”I’ve come all the way over to England to chat to Cooper because he is amazing. He spotted a three-year-old in trouble and alerted his father who rescued him,” he said.”Cooper, it was great to meet you and what a great job you’ve done.”Image source, ShutterstockCooper was on holiday in Mudeford, Dorset, when he spotted the child flailing around in the water. He said he recognised the signs of drowning from studying the show and his favourite lifeguard, Hoppo.Image source, Christine AdamsCooper said he would never forget meeting his hero.”I couldn’t believe it when Hoppo walked in. My mum had kept it a secret and it was an amazing surprise. “I love watching Bondi Rescue, so it felt like a dream meeting Hoppo in real life,” he said.Image source, Christine AdamsBondi Rescue follows the lives of the Waverley Council professional lifeguards who patrol Bondi beach in Sydney. As head lifeguard, Hoppo has appeared in 16 seasons of the hit television show, which has been shown in 100 countries.Cooper watches the show with his father Ben, who is Australian. The family are visiting the country next year, when they plan to reunite with Hoppo, who has invited them to meet the other lifeguards who star in the show.”We’re going to Australia in February and I really can’t wait to see Hoppo again,” Cooper added.Find BBC News: East of England on Facebook, Instagram and Twitter. If you have a story suggestion please email [email protected] on this storyBoy who saved drowning toddler warns of water risk19 AugustRelated Internet LinksRNLI: Beach safetyThe BBC is not responsible for the content of external sites.

Channel migrants: Smugglers claim boat shortages affecting crossings

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Published17 minutes agoSharecloseShare pageCopy linkAbout sharingThis video can not be playedTo play this video you need to enable JavaScript in your browser.By Colin Campbell and Michael KeohanSpecial correspondent, BBC South East and Political Reporter, BBC Radio KentPeople smuggling gangs in France claim there is a growing shortage of small boats to make the crossings, a BBC investigation has discovered.An undercover reporter was told it would cost up to £2,800 per person to reach the UK.Migrants were also filmed using a free local bus service to get to beaches in France.The Home Office said it would “use every tool” at its disposal to deter illegal migration.So far this year more than 35,000 people have made the crossing, compared to just over 28,000 for the whole of 2021.Posing as a migrant with a pregnant wife and two year-old daughter, our reporter was told by a smuggler the price to reach the UK was £2,800 per person, “otherwise I won’t make any profit. I can’t do less.”Another smuggler warned prices would increase.”There are not enough boats,” he told our reporter, “some problem in Germany.”We get them from Turkey and bring them via Germany.”Home Secretary considers law change to stop Channel migrants”People smuggling more lucrative than drugs”After catching the bus to beaches near Dunkirk the migrants are walked to sand dunes by members of smuggling gangs and told to hide until the boats are ready.Garnyan travelled to France from Iraq with his pregnant wife and two-year-old son, and said he wanted to come to the UK because he feared they would be treated harshly in other European countries.”We know that French police and English police will help us,” he said.Dover MP Natalie Elphicke said it was “truly shocking, both the blatant criminality and the ease with which people are travelling from the migrant camps to the departure zones”.”This is something I will be taking up with the Home Secretary,” Ms Elphicke said, “and asking that she takes up urgently with her French counterparts.”It beggars belief there’s a bus service from the migrant camps to the departure places, it clearly needs addressing urgently.”A Home Office spokesman said: “We will go further and faster to tackle those gaming the system, using every tool at our disposal to deter illegal migration, disrupt the business model of people smugglers and relocate to Rwanda, those with no right to be in the UK.”Despite the lies they have been sold by the people smugglers, migrants who travel through safe countries to illegally enter the UK will not be allowed to start a new life here.”The BBC has approached the two people smugglers for comment.Follow BBC South East on Facebook, on Twitter, and on Instagram. Send your story ideas to [email protected] More on this storyMore than 1,000 migrants cross Channel in a day2 days agoHow many migrants cross the Channel in small boats?3 days agoMigrant centre ‘like pressure cooker’ amid influx6 days agoMore than 30,000 migrants cross Channel this year22 SeptemberChannel migrant numbers trebled in 20214 January

Channel migrants: 116 children missing from UK hotels

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Published32 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, PA MediaBy Sima KotechaUK Editor, BBC NewsnightMore than 100 unaccompanied child migrants remain missing after disappearing from UK hotels over a 14-month period, data reveals.BBC News has discovered that 116 children disappeared between July 2021 and August 2022, after temporarily being put in hotels by the Home Office. Charities fear the children, some as young as 11, risk being exploited.The Home Office said it had “no alternative” but to use hotels while long-term accommodation was found. The government has been placing children who arrive in the UK in approved hotels since July last year, after local councils said there was not enough capacity to house them in suitable accommodation. Some 1,606 children who arrived alone between July 2021 and June 2022 were placed in hotel accommodation by the Home Office, according to its own figures.BBC Two’s Newsnight discovered that 181 children – aged 18 or less – subsequently went missing in the 14-month period covered by the data, which was released by the Home Office following Freedom of Information requests. But 65 were later found.How many migrants cross the Channel in small boats?Children among migrants crossing English Channel The charity ECPAT UK said the number of missing children was “shocking” and called on the government to stop placing them in hotels.”They could be working away in a cannabis farm, in a factory, domestic servitude. There’s a whole range of exploitative situations that these young people could be in,” said its chief executive, Patricia Durr. “They could be being criminally exploited or sexually exploited behind closed doors.”Rishan Tsega, who was arrived in the UK from Sudan on the back of a lorry aged 17 and has since been granted asylum., says she fears some of those missing children could end up in the hands of the traffickers who brought them into the country.”They [traffickers] like to manipulate young people and make them do things when they get here. I wouldn’t doubt that. This is nothing new,” she said.”They might say if you go to this place you have to pay us back, otherwise I will kill your mum, or your family. How are you going to respond?” she added.Image source, PA MediaThe Home Office said it was seeing an “unprecedented rise in dangerous Channel crossings”.It said: “On average, unaccompanied children seeking asylum are moved to long-term care within 15 days of arriving in a hotel, but we know more needs to be done. “That is why we are working closely with local authorities to increase the number of placements available and offer councils £6,000 for every child they can provide accommodation for.”Any child going missing is extremely serious, and we work around the clock with the police and local authorities to urgently locate them and ensure they are safe.”The Local Government Association, which represents councils, says it is “working tirelessly to find suitable placements for unaccompanied children, with 597 placements made in the past six months”.While it said placements were increasing, it also called on the Home Office to stop using hotels. “Councils have expressed concerns to the government around the impacts on children, including the risks around children going missing,” it added.In July, the Home Affairs Select Committee reported that the disappearance of separated migrant children from hotels was “extremely concerning”.It said the government must “immediately and clearly confirm where responsibility lies for every aspect of safeguarding children housed in accommodation”.

Royal Mail workers walk out in first of 19 days of strikes

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Published26 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, Getty ImagesRoyal Mail workers are holding the first of 19 strikes in a long-running dispute over pay and conditions.The Communication Workers Union (CWU) said 115,000 members across the UK would walk out in a 24-hour strike on Thursday, starting at 04:00 BST. General Secretary Dave Ward said workers faced the “biggest ever assault” on jobs, terms and conditions “in the history of Royal Mail”.Royal Mail said further strikes would “weaken” its financial position.The planned 19 days of industrial action include Black Friday week and Cyber Monday, as well as 13, 20, and 25 October, and 28 November.Letters will not be delivered and some parcels will be delayed, the Royal Mail has warned. This is the sixth strike for postal workers, and comes after a summer of unrest which saw rail workers and criminal barristers walk out amid disputes with their employers.The CWU has accused Royal Mail of planning structural change. This would effectively see employees in secure, well-paid jobs turned into a “casualised, financially-precarious workforce overnight”, said the union. It said plans by the postal service include cutting workers’ sick pay, delaying arrival of post by three hours and inferior terms for new employees. General Secretary Mr Ward said the changes could lead to the “destruction of the special relationship that postal workers and the public have in every community in the UK”. He described the plans as an “asset-stripping business plan” that will lead to the break-up of the company. Image source, PA MediaRoyal Mail said it would do what it could to keep services running, but the strike was likely to cause disruption. No letters will be delivered during strike days, said Royal Mail, but as many special delivery and Tracked24 parcels as possible would be delivered.It also said it would prioritise the delivery of Covid-19 test kits and medical prescriptions.A Royal Mail spokesperson said: “Royal Mail is losing £1m a day and must change faster in response to changing customer demands.”Industrial action will threaten the job security of postal workers, said Royal Mail, calling on the leaders of CWU to cancel the walk-out and accept invitations for talks. Royal Mail apologised for any delays to customers, adding: “We are doing all we can to minimise any delays and keep people, businesses and the country connected.” More on this storyRoyal Mail workers to hold 19 days of strike action28 SeptemberRoyal Mail workers vote for further strikes17 AugustThousands of Royal Mail workers go on strike26 August

Did the mini-budget cause market turmoil?

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Published1 hour agoSharecloseShare pageCopy linkAbout sharingImage source, PA MediaBy Reality Check teamBBC NewsThe government has been defending its mini-budget, following days of turmoil on the markets, a fall in the value of the pound and rises in the cost of UK government borrowing and mortgage rates.At Prime Minister’s Questions, Liz Truss was asked what she would say to first-time homebuyers who had had their mortgage offers withdrawn because of rising interest rates, following the mini-budget of 23 September. The prime minister said: “We are seeing interest rates rising globally – in the face of Putin’s appalling war in Ukraine.” Earlier, Business Secretary Jacob Rees-Mogg was asked on the BBC’s Today programme why there had been “a shock to investor confidence” after the mini-budget (which included £45bn of unfunded tax cuts). Mr Rees-Mogg said: “It’s much more to do with interest rates… than it is to do with a minor part of fiscal policy.” So, what has been going on? Global interest ratesIt is true that interest rates have been rising around the world as central banks, including the Bank of England (BoE), tried to control inflation, made worse by Russia’s invasion of Ukraine and the energy price shock which followed.On 22 September, the BoE announced it was increasing the UK’s base rate by 0.5 percentage points, to 2.25%. This is the interest rate on which commercial banks base the amount you pay for borrowing money, and what banks pay you for saving money with them. The day before, the US central bank had raised its interest rates by more – 0.75 percentage points to between 3% and 3.25%.Following the BoE’s decision, the UK government’s long-term borrowing costs – the interest rate the government has to pay to borrow money on the international markets – rose immediately. By the BoE’s own analysis, long-term gilt yields were 0.2 percentage points higher at the end of the day as compared with the start.Government’s mini-budgetThe next day – 23 September – Chancellor Kwasi Kwarteng delivered his mini-budget starting at 09:35 BST.This included the government’s support scheme for energy bills – which had already been announced. The Treasury estimates it will cost £60bn over the next six months. It will last for two years for households and six months for businesses.The mini-budget also included a cut in National Insurance and the reversal of a planned rise in Corporation Tax. These tax changes had already been pledged by Liz Truss during her leadership campaign and were widely expected to happen.But Mr Kwarteng went further, announcing he would cut the basic rate of income tax a year earlier than expected and get rid of the top rate altogether. He subsequently reversed his decision to scrap the top rate.Chancellor U-turns on plans to scrap top tax rateThe package of tax cuts announced in the mini-budget totalled £45bn and were unfunded in that the government did not set out what savings it might make. The mini-budget was not accompanied by an assessment of its plans by the government’s official spending watchdog – the Office for Budget Responsibility (OBR) – as happens at every budget. Following the chancellor’s statement, the UK government’s cost of long-term borrowing rose sharply. According to the BoE, long-term gilt yields rose 0.3 percentage points over the course of the day. The markets were closed over the weekend, but in a BBC interview on Sunday 25 September, Mr Kwarteng indicated there were more tax cuts to come. On Monday 26 September, the pound fell to record lows against the dollar in early trading in Asia. There was also a sharp rise in the cost of long-term government borrowing. Long-term gilt yields had gone up 0.5 percentage points by the end of the day, according to the BoE.Comparing the cost of government borrowing – on this measure – across the G7 group of advanced economies, it is clear that there was a sharp spike in UK long-term borrowing costs following the mini-budget – which wasn’t seen in the other countries. This fed through into rising mortgage rates with hundreds of products withdrawn from the mortgage market. It also had an impact on UK pension funds – which trade in government debt (30-year gilts).The BoE had to step in to safeguard this sector with a support scheme – worth a potential £65bn.This intervention by the Bank led to a fall in the cost of government borrowing, but it has risen again as investors’ concerns grow about how long the BoE’s support will last. It is due to end on 14 October. Bank’s £65bn move driven by pension fund panicLiz Truss’s claims on the economy fact-checkedWhat are the experts saying?Speaking on 29 September, BoE Chief Economist Huw Pill said the turmoil on the markets in part “reflects broader global developments… but there is undoubtedly a UK-specific component”.In a letter on 5 October dealing with the decision to intervene in the gilt market after the mini-budget, BoE Deputy Governor John Cunliffe explained that there had been a risk of a “spiral”, as increases in the effective cost of government borrowing hit pension funds. He said: “A large quantity of gilts… was likely to be sold on the market, driving a potentially self-reinforcing spiral and threatening severe disruption of core funding markets and consequent widespread financial instability.”On 12 October, Sanjay Raya, chief economist at Deutsche Bank, told a committee of MPs that Russia’s invasion of Ukraine as well as high inflation were causing global instability and volatility in the markets. But he added that there was “absolutely a UK component here”. Mr Raya said: “You throw on the 23 September event, you’ve got a sidelined fiscal watchdog, lack of a medium-term fiscal plan, one of the largest unfunded tax cuts that we’ve seen… since the early 1970s and it’s sort of the straw that broke the camel’s back.”Gerard Lyons, an economist who advised Liz Truss and Kwasi Kwarteng during the leadership contest, speaking on the BBC’s World at One programme admitted that the mini-budget “misread” the country’s financial situation.However, he argued that everything that has happened was not “solely due to the mini-budget” but also down to parts of the financial system that were vulnerable to interest rates going up.We will be adding further charts and information to this piece.What claims do you want BBC Reality Check to investigate? Get in touchRead more from Reality Check

Did the mini-budget cause market turmoil?

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Published37 minutes agoSharecloseShare pageCopy linkAbout sharingImage source, PA MediaBy Reality Check teamBBC NewsThe government has been defending its mini-budget, following days of turmoil on the markets, a fall in the value of the pound and rises in the cost of UK government borrowing and mortgage rates.At Prime Minister’s Questions, Liz Truss was asked what she would say to first-time homebuyers who had had their mortgage offers withdrawn because of rising interest rates, following the mini-budget of 23 September. The prime minister said: “We are seeing interest rates rising globally – in the face of Putin’s appalling war in Ukraine.” Earlier, Business Secretary Jacob Rees-Mogg was asked on the BBC’s Today programme why there had been “a shock to investor confidence” after the mini-budget (which included £45bn of unfunded tax cuts). Mr Rees-Mogg said: “It’s much more to do with interest rates… than it is to do with a minor part of fiscal policy.” So, what has been going on? Global interest ratesIt is true that interest rates have been rising around the world as central banks, including the Bank of England (BoE), tried to control inflation, made worse by Russia’s invasion of Ukraine and the energy price shock which followed.On 22 September, the BoE announced it was increasing the UK’s base rate by 0.5 percentage points, to 2.25%. This is the interest rate on which commercial banks base the amount you pay for borrowing money, and what banks pay you for saving money with them. The day before, the US central bank had raised its interest rates by more – 0.75 percentage points to between 3% and 3.25%.Following the BoE’s decision, the UK government’s long-term borrowing costs – the interest rate the government has to pay to borrow money on the international markets – rose immediately. By the BoE’s own analysis, long-term gilt yields were 0.2 percentage points higher at the end of the day as compared with the start.Government’s mini-budgetThe next day – 23 September – Chancellor Kwasi Kwarteng delivered his mini-budget starting at 09:35 BST.This included the government’s support scheme for energy bills – which had already been announced. The Treasury estimates it will cost £60bn over the next six months. It will last for two years for households and six months for businesses.The mini-budget also included a cut in National Insurance and the reversal of a planned rise in Corporation Tax. These tax changes had already been pledged by Liz Truss during her leadership campaign and were widely expected to happen.But Mr Kwarteng went further, announcing he would cut the basic rate of income tax a year earlier than expected and get rid of the top rate altogether. He subsequently reversed his decision to scrap the top rate.Chancellor U-turns on plans to scrap top tax rateThe package of tax cuts announced in the mini-budget totalled £45bn and were unfunded in that the government did not set out what savings it might make. The mini-budget was not accompanied by an assessment of its plans by the government’s official spending watchdog – the Office for Budget Responsibility (OBR) – as happens at every budget. Following the chancellor’s statement, the UK government’s cost of long-term borrowing rose sharply. According to the BoE, long-term gilt yields rose 0.3 percentage points over the course of the day. The markets were closed over the weekend, but in a BBC interview on Sunday 25 September, Mr Kwarteng indicated there were more tax cuts to come. On Monday 26 September, the pound fell to record lows against the dollar in early trading in Asia. There was also a sharp rise in the cost of long-term government borrowing. Long-term gilt yields had gone up 0.5 percentage points by the end of the day, according to the BoE.Comparing the cost of government borrowing – on this measure – across the G7 group of advanced economies, it is clear that there was a sharp spike in UK long-term borrowing costs following the mini-budget – which wasn’t seen in the other countries. This fed through into rising mortgage rates with hundreds of products withdrawn from the mortgage market. It also had an impact on UK pension funds – which trade in government debt (30-year gilts).The BoE had to step in to safeguard this sector with a support scheme – worth a potential £65bn.This intervention by the Bank led to a fall in the cost of government borrowing, but it has risen again as investors’ concerns grow about how long the BoE’s support will last. It is due to end on 14 October. Bank’s £65bn move driven by pension fund panicLiz Truss’s claims on the economy fact-checkedWhat are the experts saying?Speaking on 29 September, BoE Chief Economist Huw Pill said the turmoil on the markets in part “reflects broader global developments… but there is undoubtedly a UK-specific component”.In a letter on 5 October dealing with the decision to intervene in the gilt market after the mini-budget, BoE Deputy Governor John Cunliffe explained that there had been a risk of a “spiral”, as increases in the effective cost of government borrowing hit pension funds. He said: “A large quantity of gilts… was likely to be sold on the market, driving a potentially self-reinforcing spiral and threatening severe disruption of core funding markets and consequent widespread financial instability.”On 12 October, Sanjay Raya, chief economist at Deutsche Bank, told a committee of MPs that Russia’s invasion of Ukraine as well as high inflation were causing global instability and volatility in the markets. But he added that there was “absolutely a UK component here”. Mr Raya said: “You throw on the 23 September event, you’ve got a sidelined fiscal watchdog, lack of a medium-term fiscal plan, one of the largest unfunded tax cuts that we’ve seen… since the early 1970s and it’s sort of the straw that broke the camel’s back.”Gerard Lyons, an economist who advised Liz Truss and Kwasi Kwarteng during the leadership contest, speaking on the BBC’s World at One programme admitted that the mini-budget “misread” the country’s financial situation.However, he argued that everything that has happened was not “solely due to the mini-budget” but also down to parts of the financial system that were vulnerable to interest rates going up.We will be adding further charts and information to this piece.What claims do you want BBC Reality Check to investigate? Get in touchRead more from Reality Check

December 2022
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