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The Bank of England has launched a temporary bond-buying programme as it takes emergency action to prevent “material risk” to UK financial stability.

It revealed that it would buy as many long-dated government bonds as needed between now and 14 October in a bid to stabilise financial markets in the wake of the mayhem that followed the government’s mini-budget last Friday.

In addition to the plunge in the value of the pound, it has also seen investors demand a greater rate of return for UK government bonds – essentially IOUs.

That is because the level of borrowing required to fund the government giveaway, including tax cuts and energy aid for households and businesses, shocked the market which immediately questioned the sustainability of the public finances.

Pension funds would have collapsed today without BoE intervention – economy latest

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Govt sticking to ‘mini budget’ despite turmoil

The International Monetary Fund has since added its voice to criticism of the growth plan.

What the Bank’s action is aimed at doing is tackling consequences of rising bond yields, in this instance a liquidity crunch facing pension funds.

The pound fell back in response but bond yields did ease back from multi-year highs.

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WHY THE BANK OF ENGLAND HAS ACTED


 Ian King

Ian King

Business presenter

@iankingsky

There are some very, very specific reasons why the Bank of England is intervening in this particular asset class in long-dated gilts – that’s gilts of a 20 to 30 year duration.

It affects traditional pension funds where a retiree is guaranteed a certain payout at their retirement based on their final salary when they retire.

Now, a lot of these funds use long-dated gilts as part of their investments and what has been happening over recent days is a lot of the investment funds have been asking pension funds to post more collateral – to put up cash.

It has been reported in The Times that actually these cash calls have been running into tens of billions of pounds since the beginning of the week because of this spike in long-dated gilt yields.

That is why the Bank of England is specifically targeting that with this gilt intervention.

It is aimed at seeing off a crisis that’s potentially starting to emerge in pension funds.

The Bank said in a statement: “Were dysfunction in this (long-dated bond) market to continue or worsen, there would be a material risk to UK financial stability.

“This would lead to an unwarranted tightening of financing conditions and a reduction of the flow of credit to the real economy.”

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Senior Tory blames mini-budget for turmoil

City minister Andrew Griffith denied that the government should take responsibiity for the crisis.

“We are seeing the same impact of Putin’s war in Ukraine cascading through things like the cost of energy, some of the supply side implications of that, and that’s impacting every major economy and just to save every major economy, you’re seeing interest rates going up as well.

“Every major economy is dealing with exactly the same issues,” he told Sky’s economics editor Ed Conway.

“They [the bank] have made a targeted and timely intervention in the market. That’s their decision, but they’ve done so working very closely with the chancellor,” he added.

The programme marked the Bank’s first policy intervention as it battles to bring down inflation and ease the cost of living crisis. Its chief economist signalled on Tuesday that a “significant” rise in Bank rate was also likely ahead.

The government’s growth plan is only seen as adding inflationary pressure to the economy, leaving it at loggerheads with the Bank’s mandate.

The Bank said the bond purchases, which would be fully covered by the Treasury in the event of any losses, would be sold back once market conditions had stabilised.

The announcement certainly had an immediate effect on the market.

Data showed that 30-year bond yields fell back to 4.3%, having risen to levels above 5% not seen since 2002 earlier in the day. There were similar falls for 20-year yields.

Those for 10-year bonds also fell back below 4% from 4.6%.

Stock markets, which had endured widespread falls Europe-wide amid recession fears, erased some of their losses.

The FTSE 100 had been almost 2% down but was just 0.8% lower on the day just before 1pm.

The pound, however, was a cent and a half down versus the dollar shortly after the announcement, to stand at $1.0578, and a cent lower against the euro. It later moved back towards $1.07 as market surprise at the intervention eased.

The single European currency was also suffering against a resurgent US currency.

In addition to its bond-buying action, the Bank said it would postpone the start of its efforts to unwind the sale of bonds it acquired through financial crisis and COVID crisis era quantitative easing.

The Bank had planned to reduce its £838bn of gilt holdings by £80bn over the next year.

Neil Wilson, chief markets analyst at Markets.com, said the Bank’s move followed evidence of “severe liquidity stress”.

This would have been particularly evident for pension funds who have faced demands for additional cash to cover off rising yields.

“The question is whether (this Bank action) acts to stabilise longer-term or if the market retests the Bank’s resolve,” he wrote.

“We’re now seeing the Bank go toe-to-toe with the market and this might not lead to any decrease in volatility.”

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Deported migrant sex offender given £500 to leave country

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Deported migrant sex offender given £500 to leave country

Migrant sex offender Hadush Kebatu was given £500 to be deported to Ethiopia following his mistaken release from prison, Sky News understands.

The government, who confirmed he was escorted on to a plane at Heathrow Airport on Tuesday night, said he has no right to return to the UK.

But Sky News understands Kebatu was handed a discretionary payment of £500 as part of efforts to avoid a lengthy legal challenge after he made threats to disrupt his removal.

Home Secretary Shabana Mahmood said she “pulled every lever” to deport Kebatu, although it is thought the decision about the payment was made by removal teams, not ministers.

“I am pleased to confirm this vile child sex offender has been deported. Our streets are safer because of it,” she said.

Hadush Kebatu seen on the plane during his deportation flight
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Hadush Kebatu seen on the plane during his deportation flight

Kebatu was found and arrested by the Metropolitan Police in the Finsbury Park area of north London at around 8.30am on Sunday following a manhunt.

Last month, he was found guilty of sexually assaulting a schoolgirl and a woman in Epping, Essex, just over a week after arriving in the UK on a small boat.

Hadush Kebatu was arrested on Sunday after his mistaken release
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Hadush Kebatu was arrested on Sunday after his mistaken release

He was expected to be deported, but instead of being handed over to immigration officials, he was released in error from HMP Chelmsford on Friday.

He spent just under 48 hours at large before he was apprehended.

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Prisoner releases: ‘A problem on the rise’

The accidental release sparked widespread alarm and questions over how a man whose crimes sparked protests in Epping over the use of asylum hotels was able to be freed.

Ms Mahmood said: “Last week’s blunder should never have happened – and I share the public’s anger that it did.”

Anti-asylum demonstrators in Epping, Essex. Pic: PA
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Anti-asylum demonstrators in Epping, Essex. Pic: PA

Read more from Sky News:
Military barracks to be used to house asylum seekers
Lammy blames ‘human error’ for release of migrant sex offender

On Sunday, Justice Secretary David Lammy said an exclusive Sky News interview will be used as part of an independent inquiry into the mistaken release.

Speaking to Sky’s national correspondent Tom Parmenter, a delivery driver who spoke to Kebatu at HMP Chelmsford described him as being “confused” as he was being guided to the railway station by prison staff.

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Local council reads family statement: ‘My family feels massively let down’

The migrant is said to have returned to the prison reception four or five times before leaving the area on a train heading to London.

Mr Lammy, who put Kebatu’s release down to human error, said he has ordered an “urgent review” into the checks that take place when an offender is released from prison, and new safeguards have been added that amount to the “strongest release checks that have ever been in place”.

From Monday, new checks include five pages of instructions and demands that more senior prison staff sign off on a release, according to documents obtained by Sky News.

“I have been clear from the outset that a mistake of this nature is unacceptable, and we must get to the bottom of what happened,” said Mr Lammy.

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Budget 2025: Reeves vows to ‘defy’ gloomy forecasts – but faces income tax warning

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Budget 2025: Reeves vows to 'defy' gloomy forecasts - but faces income tax warning

Rachel Reeves has said she is determined to “defy” forecasts that suggest she will face a multibillion-pound black hole in next month’s budget, but has indicated there are some tough choices on the way.

Writing in The Guardian, the chancellor argued the “foundations of Britain’s economy remain strong” – and rejected claims the country is in a permanent state of decline.

Reports have suggested the Office for Budget Responsibility is expected to downgrade its productivity growth forecast by about 0.3 percentage points.

Rachel Reeves. PA file pic
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Rachel Reeves. PA file pic

That means the Treasury will take in less tax than expected over the coming years – and this could leave a gap of up to £40bn in the country’s finances.

Ms Reeves wrote she would not “pre-empt” these forecasts, and her job “is not to relitigate the past or let past mistakes determine our future”.

“I am determined that we don’t simply accept the forecasts, but we defy them, as we already have this year. To do so means taking necessary choices today, including at the budget next month,” the chancellor added.

She also pointed to five interest rate cuts, three trade deals with major economies and wages outpacing inflation as evidence Labour has made progress since the election.

Speculation is growing that Ms Reeves may break a key manifesto pledge by raising income tax or national insurance during the budget on 26 November.

Read more from Sky News:
What tax rises could Reeves announce?
Start-ups warn chancellor over budget bombshell

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Chancellor faces tough budget choices

Budget decisions ‘don’t come for free’

Although her article didn’t address this, she admitted “our country and our economy continue to face challenges”.

Her opinion piece said: “The decisions I will take at the budget don’t come for free, and they are not easy – but they are the right, fair and necessary choices.”

Yesterday, Sky’s deputy political editor Sam Coates reported that Ms Reeves is unlikely to raise the basic rates of income tax or national insurance, to avoid breaking a promise to protect “working people” in the budget.

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Tax hikes possible, Reeves tells Sky News

Sky News has also obtained an internal definition of “working people” used by the Treasury, which relates to Britons who earn less than £45,000 a year.

This, in theory, means those on higher salaries could be the ones to face a squeeze in the budget – with the Treasury stating that it does not comment on tax measures.

In other developments, some top economists have warned Ms Reeves that increasing income tax or reducing public spending is her only option for balancing the books.

Experts from the Institute for Fiscal Studies have cautioned the chancellor against opting to hike alternative taxes instead, telling The Independent this would “cause unnecessary amounts of economic damage”.

Although such an approach would help the chancellor avoid breaking Labour’s manifesto pledge, it is feared a series of smaller changes would make the tax system “ever more complicated and less efficient”.

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Academic who sued Steve Coogan over Richard III film says he hasn’t received an apology

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Academic who sued Steve Coogan over Richard III film says he hasn't received an apology

A university academic who is receiving “substantial damages” for how he was portrayed in a film has told Sky News he hasn’t received an apology from star Steve Coogan – nor the two companies involved in its production.

Richard Taylor said he was “shell-shocked” after seeing The Lost King for the first time, a film about how Richard III’s skeleton was discovered below a car park in Leicester.

He told The UK Tonight with Sarah-Jane Mee: “I wasn’t consulted or even knew I was in the film. The first I hear is I get a phone call while I’m on holiday – and eventually, after press previews, I persuade the producers to let me see a preview.”

Richard III
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Richard III

Last year, a judge ruled that Mr Taylor was depicted as “smug, unduly dismissive and patronising” – with the plot suggesting he “knowingly” misled the public.

“I’m portrayed by someone on screen who looks like me, who sounds like me, who dresses like me – but behaves in a way that falls so far short of the standards I set for myself and what others might reasonably expect of me,” the academic explained.

Mr Taylor revealed he received emails at work telling him to “rot in hell”, while others described him as a “disgrace”.

He added: “Something that was a collaborative effort that showcased the best of British universities in my view was turned into this farce – where I was the villain and portrayed in a way that was completely inconsistent with the reality and the truth.”

Now chief operating officer at Loughborough University, Mr Taylor said “none of the facts” in the 2022 film were ever checked – and the Alan Partridge star, his company Baby Cow and Pathe Productions did not reach out to him before its release.

“The producers just went ahead, filmed it, produced it, stuck it out there and left me to deal with all the flack and all the fallout from it. Grossly unfair and I feel vindicated from the result we’ve achieved,” he told Sky News.

Steve Coogan and two production companies have agreed to pay 'substantial damages'. Pic: PA
Image:
Steve Coogan and two production companies have agreed to pay ‘substantial damages’. Pic: PA

‘The film’s going to look pretty silly’

As part of the settlement, an on-screen clarification will now be added to the start of the film, but no scenes will be removed.

When asked whether he was satisfied with this outcome, Mr Taylor replied: “I’d have liked them to re-edit the film, but one’s got to be realistic about what one can achieve.

“The insertion of the card will say that the person on screen is a fictitious portrayal – and the real Richard Taylor didn’t behave like that … so the film’s going to look pretty silly.”

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The statue of Richard III outside Leicester Cathedral. Pic: Shropshire Matt/PA
Image:
The statue of Richard III outside Leicester Cathedral. Pic: Shropshire Matt/PA

The case was due to proceed to trial, but a High Court hearing on Monday heard that the parties had settled the claim.

In a statement afterwards, Coogan had said: “If it wasn’t for Philippa Langley, Richard III would still be lying under a car park in Leicester. It is her name that will be remembered in relation to the discovery of the lost king, long after Richard Taylor has faded into obscurity.”

He went on to add: “That is the story I wanted to tell, and I am happy I did.”

Reacting to the statement, Mr Taylor argued “it’s a pretty strange definition of happy when you’ve had to settle a defamation claim for seven figures in costs”.

He said: “Steve is never anything other than certain in himself and of his own position, but I think he’s got it wrong – basic facts were not checked.”

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