Hunt is reportedly poised to also delay a cut to income tax, where the basic rate would be cut from 20 per cent to 19 per cent from April 2023. In a series of interviews, Hunt declared that he would slow down Truss’s tax cuts and “some taxes will go up”.
UK government borrowing costs reached a 20-year high last week, with 20 and 30-year gilt yields hitting their highest since 2002 at 5.195 per cent and 5.1 per cent respectively.
Bank of England governor Andrew Bailey.Credit:Bloomberg
Bailey said the bank would not take any action on interest rates until after the new fiscal plan is announced, describing it as “the correct sequence” of action, adding: “we will know the full scope of the fiscal policy by then”.
But he said officials would “not hesitate to raise interest rates to meet the inflation target” of 2 per cent. The warning came just weeks after the bank hiked interest rates by 0.5 percentage points to 2.25 per cent on September 22.
Prior to Bailey’s comments, the markets were expecting a rise of between 0.75 per cent and 1 per cent when the Bank’s Monetary Policy Committee makes its next rates decision in November.
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Bailey said government fiscal policy had been followed by some “some violent moves in the last few weeks” in UK markets, which had triggered the decision to unleash a dramatic £65-billion bond-buying scheme amid a “material risk” to UK stability and pension markets.
Kwarteng, who was summoned back to London from an International Monetary Fund annual meeting in Washington on Thursday to be sacked, reportedly has told colleagues Truss’s actions have only bought her “a few more weeks”. He held the office for just 38 days, making him the second-shortest serving chancellor in British history.
The Times reported a source saying: “His view is that the wagons are still going to circle”, with senior officials Downing Street believing it is a matter of time before she is forced out of office.
“Senior civil servants are now openly talking about her going,” one Whitehall source told the paper. “They think she’s had it.”
Supporters of Truss’s leadership rival in the summer’s ballot, Rishi Sunak, believe their man could be in Downing Street within months if a sufficient mass of Tory MPs can persuade the 1922 Committee to tell the prime minister that her time is up.
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