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The Bank of England’s governor has ruled out extending its bond-buying support for pension funds beyond Friday’s deadline, prompting a dramatic fall in the value of the pound.

Andrew Bailey told an event in Washington that funds had “three days left… to get this done” after a series of interventions to support the “dysfunctional” market in the wake of the wider meltdown over the government’s mini-budget.

The latest action, on Tuesday, saw the Bank snap up index-linked gilts, government bonds with interest payments in line with inflation.

They are heavily used by pension funds.

The Bank had already been buying up long-dated gilts – a type of government bond that make up a large proportion of pension pots – to steady market jitters.

They saw yields – the rate demanded to hold government debt – shoot up as pension schemes tried to raise hundreds of billions through firesales of government and corporate bonds to meet cash calls – the latest coming from providers of so-called liability-driven investment strategies.

They are demanding funds put up more money to support new and older hedging positions.

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Mr Bailey told an event organised by the Institute of International Finance that the intervention must be temporary.

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“We have announced that we will be out by the end of this week. We think the rebalancing must be done.

“And my message to the funds involved and all the firms involved managing those funds: You’ve got three days left now. You’ve got to get this done.”

Industry body the Pensions and Lifetime Savings Association had earlier urged the Bank to extend the bond-buying programme until 31 October – the new date for the publication of the government’s debt plan – at least.

Mr Bailey’s clear stance on the issue saw the pound, which had been trading higher on the day versus the dollar earlier, sink by more than one and a half cents to below $1.10.

What on earth is happening in UK markets?


Ed Conway - Economics editor

Ed Conway

Economics & data editor

@EdConwaySky

This is starting to look a little… unnerving.

The government bond market is – in the UK and elsewhere – best thought of as the bedrock of the financial system.

The government borrows lots of money each year at very long durations and these bonds are bought by all sorts of investors to secure a low but (usually) reliable income over a long period of time.

Compared to other sorts of assets – such as the shares issued by companies or for that matter cryptocurrencies – government bonds are boring. Or at least, they’re supposed to be boring.

They don’t move all that much each day and the yield they offer – the interest rate implied by their prices – is typically much lower than most other asset classes.

But recently the UK bond market (we call them gilts as a matter of tradition, short for gilt-edged securities, because in their earliest embodiment they were pieces of paper with golden edges) has been anything but boring.

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On Monday the Bank announced a potential doubling of the amount it was willing to spend every day on long-dated gilts.

Gilt yields, the interest rate payable on government bonds, rose on Monday, near the 5% highs of 27 September, the day before the Bank made its first intervention.

They fell when news of the latest operation was announced but long-dated yields later rose higher again.

That took place when the Bank revealed it had bought £1.947bn of index-linked bonds on Tuesday, adding that it had rejected £466.9m of offers to sell to the central bank.

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It also bought up £1.363bn in long-dated bonds – also well below the £5bn possible.

The yield on 30-year bonds rose back to 4.8% for a short time, having been down at 4.4% around lunchtime.

The benchmark 10-year yield remained around the 4.4% level.

“Things seemed calmer again today,” Mr Bailey told the event.

“We will see,” he added.

The Bank announced on 28 September a temporary and emergency buying programme of long-dated gilts that are to be repaid in 20 to 30 years time, in the wake of chancellor Kwasi Kwarteng’s mini-budget announcement.

Read more:
What are bonds, how are they different to gilts and where do they fit in the mini-budget crisis?

Bond buying period due to end on Friday

Market turmoil that stemmed from the mini-budget led to the unprecedented intervention from the regulator to prevent part of the pension market collapsing as the cost of interest on gilts surged.

Russ Mould, investment director at AJ Bell, said of the scheme’s expansion before Mr Bailey’s remarks: “The Bank of England hopes to avoid a crisis in the market by being a willing buyer of bonds from pension funds who are under pressure.

“These pension funds will welcome today’s move, but whether the broader market shares the same enthusiasm remains to be seen.

“The key sticking point is that the support measures are only scheduled to last until Friday.

“Will that be long enough, or will the Bank of England extend the support scheme? Extending it could go one of two ways – the market either applauds the move and breathes a sigh of relief or it gets even more worried, thinking that the extra time suggests the crisis is more severe than originally thought.”

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Labour MPs fear wipe out at next local election – as chancellor’s career is ‘toast’

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Labour MPs fear wipe out at next local election - as chancellor's career is 'toast'

Many Labour MPs have been left shellshocked after the chaotic political self-sabotage of the past week.

Bafflement, anger, disappointment, and sheer frustration are all on relatively open display at the circular firing squad which seems to have surrounded the prime minister.

The botched effort to flush out backroom plotters and force Wes Streeting to declare his loyalty ahead of the budget has instead led even previously loyal Starmerites to predict the PM could be forced out of office before the local elections in May.

“We have so many councillors coming up for election across the country,” one says, “and at the moment it looks like they’re going to be wiped out. That’s our base – we just can’t afford to lose them. I like Keir [Starmer] but there’s only a limited window left to turn things around. There’s a real question of urgency.”

Another criticised a “boys club” at No 10 who they claimed have “undermined” the prime minister and “forgotten they’re meant to be serving the British people.”

There’s clearly widespread muttering about what to do next – and even a degree of enviousness at the lack of a regicidal 1922 committee mechanism, as enjoyed by the Tories.

“Leadership speculation is destabilising,” one said. “But there’s really no obvious strategy. Andy Burnham isn’t even an MP. You’d need a stalking horse candidate and we don’t have one. There’s no 1922. It’s very messy.”

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Starmer’s faithfuls are ‘losing faith’

Others are gunning for the chancellor after months of careful pitch-rolling for manifesto-breaching tax rises in the budget were ripped up overnight.

“Her career is toast,” one told me. “Rachel has just lost all credibility. She screwed up on the manifesto. She screwed up on the last two fiscal events, costing the party huge amounts of support and leaving the economy stagnating.

“Having now walked everyone up the mountain of tax rises and made us vote to support them on the opposition day debate two days ago, she’s now worried her job is at risk and has bottled it.

“Talk to any major business or investor and they are holding off investing in the UK until it is clear what the UK’s tax policy is going to be, putting us in a situation where the chancellor is going to have to go through this all over again in six months – which just means no real economic growth for another six months.”

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Why is the economy flatlining?

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After less than 18 months in office, the government is stuck in a political morass largely of its own making.

Treasury sources have belatedly argued that the chancellor’s pre-budget change of heart on income tax is down to better-than-expected economic forecasts from the Office for Budget Responsibility.

That should be a cause of celebration. The question is whether she and the PM are now too damaged to make that case to the country – and rescue their benighted prospects.

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Shabana Mahmood is the new hard woman of British politics – and potential successor to Starmer

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Shabana Mahmood is the new hard woman of British politics - and potential successor to Starmer

We’re told that Shabana Mahmood, the still new home secretary, is “a woman in a hurry”.

She’s been in the job for 73 days – and is now announcing “the most sweeping reforms to tackle illegal migration in modern times” – effectively since the Second World War.

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Her language is not just tough – it’s radical. Not what you’d have expected to hear from a Labour home secretary even just a few months ago.

“Illegal migration”, she believes, “is tearing our country apart. The crisis at our borders is out of control”.

Her team argues that those never-ending images of people crossing the Channel in small boats have led to a complete loss of faith in the government’s ability to take any action at all – let alone deliver on its promises.

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‘Illegal migration is creating division across our country’.

The political reality is that successive failures of Tory and Labour ministers have fuelled the inexorable rise of Reform.

More on Migrant Crisis

But speaking to Sir Trevor Phillips on Sky News, Ms Mahmood firmly hit back at suggestions today’s announcements are pandering to a racist narrative from the far right.

“It’s not right-wing talking points or fake news or misinformation that is suggesting that we’ve got a problem,” she said.

“I know, because I have now seen this system inside out. It is a broken system. We have a genuine problem to fix. People are angry about something that is real.

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Trevor’s takeaway

“It is my job, therefore, to think of a proper solution to this very real problem, to do so in line with my values as a Labour politician, but also as a British citizen, and to have solutions that work so that I can unite a divided country.”

There are many striking elements to this.

While she’s not been in the job for all that long, her government has been in power for 16 months. Her own press release highlights that over the past full calendar year asylum claims here have gone up by 18% – compared with a drop of 13% elsewhere in the EU.

The UK, she argues, has become a “golden ticket” for asylum seekers due to “far more generous terms” than other countries in Europe.

While she politely insists that her predecessor’s policies – the one in one out deal with France, closer partnership with law enforcement across Europe – are beginning to take effect, the message is clear. No one in office before Shabana has had the stomach to grasp the nettle.

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Inside Europe’s people smuggling industry

The Home Office is determined to present their boss as the new hard woman of British politics.

In a bleak warning to those in her party who will be deeply uncomfortable with this unflinching approach, we’re told she believes this is “the last chance for decent, moderate politics”.

“If these moderate forces fail, something darker will follow…. if you don’t like this, you won’t like what follows me.”

That’s a clear reference to the anti-asylum policies of Reform and the Conservatives, who are pledging to leave the European Convention on Human Rights and deport all illegal arrivals.

Both parties have responded by effectively claiming they don’t trust Labour to deliver on this, given they believe the government has lost control of our borders and overseen a surge in asylum claims.

That much Ms Mahmood herself has already acknowledged.

It’s unusual to hear a Conservative shadow minister like Chris Philp responding to a government announcement by claiming they will support the “sensible steps” the Home Office is making.

Unsurprisingly, he went on to belittle her ideas as “very small steps” combined with “gimmicks” – but the main thrust of his critique was that Labour lacks the authority to push these kinds of measures through parliament, given the likely opposition from their own left wingers.

It’s a fair point – but the lack of fundamental disagreement highlights the threat these plans pose to her opponents.

If the government looks like it might actually succeed in bringing down the numbers – and of course that’s a colossal if – Ms Mahmood will effectively have outflanked and neutralised much of the threat from both the Tories and Reform.

That’s why she’s so keen to mention her Danish inspiration – a centre-left government which managed to see off the threat from right-wing parties through its tough approach to migration, without having to leave the ECHR.

Read more:
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The Home Office is planning further announcements on new safe and legal routes.

But refugee charities have described the new measures as harsh, claiming they will scapegoat genuine refugees, fail to integrate them into society, and fail to function as a deterrent either.

There will surely be an almighty internal row among Labour MPs about the principle of ripping up the post-war settlement for refugees.

For a government floundering after the political chaos of the last few weeks and months, Ms Mahmood is a voice of certainty and confidence.

At a moment of such intense backroom debate over the party’s future direction, it’s hard to avoid seeing her performance this weekend as a starting pitch for the leadership.

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Kidlington fly-tipping: Drone footage shows scale of ‘revolting’ 60m-long mountain of waste next to river

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Kidlington fly-tipping: Drone footage shows scale of 'revolting' 60m-long mountain of waste next to river

Drone footage has shown hundreds of tonnes of “revolting” illegal waste, fly-tipped in a field next to the River Cherwell near Kidlington in Oxfordshire.

The Sky News video shows the mass of rubbish, which is at least 60m long, 15m wide and stacked 10m high, and weighs hundreds of tonnes.

Calum Miller, Liberal Democrat MP for Bicester and Woodstock, told Sky News it was the first time he had seen anything on this scale, questioning whether the Environmental Agency had the resources to deal with it.

The cost of removing the waste is estimated to be more than the entire annual budget of the local council, which is around £25m.

Calum Miller, Liberal Democrat MP for Bicester and Woodstock
Image:
Calum Miller, Liberal Democrat MP for Bicester and Woodstock

The cost of removing the waste is estimated to be more than the entire annual budget of the local council, which is around £25m.

With the site on a floodplain, Mr Miller listed what he saw as the three major environmental risks – waste being washed into the waterways, rain seeping through the waste and carrying toxins into the water and the danger of decomposing chemicals presenting a fire risk.

Pic: Sky News
Image:
Pic: Sky News

He said the police had used a helicopter with a heat-seeking camera, and could see that some of the waste was indeed starting to decompose.

The site is adjacent to the A34, a busy road running through cities including Oxford and Birmingham.

Mr Miller said he believed the Environment Agency was first made aware of the issue back in July.

He said he believed it was the work of “organised criminal gangs” and raised a “bigger systemic problem around the country”, with “dumps are cropping up in more and more places”.

He went on: “My concern is the Environmental Agency lacks the resources to deal with criminal activity on this scale. I’m calling on the government to take action and ensure those who are dealing with such incidents have the powers they need to tackle it at source.”

Friends of the Thames’s chief executive officer, Laura Reineke, told Sky News she became aware of the dumping site around 10 days ago, calling it “the biggest ecological disaster that’s happened on an inland waterway in this country”.

The head of the charity dedicated to protecting, restoring and celebrating the River Thames, said the fact that the area had been prepared with large earth-moving vehicles and that the rubbish was “pre-shredded”, then dumped so neatly showed the operation had been “very well organised”.

Chief executive officer of Friends of the Thames Laura Reineke
Image:
Chief executive officer of Friends of the Thames Laura Reineke

The culprits are yet to be caught.

Ms Reineke went on: “What is most horrifying is that the Environment Agency have known about this since 10 September, and they have done nothing about it.”

Pic: Sky News
Image:
Pic: Sky News

She also questioned the Environmental Agency’s management of the situation, calling it “a story of total incompetence”.

Ms Reineke called the delay “a death sentence for the River Cherwell and the wider Thames catchment”, labelling it “ecocide on an epic scale”.

She added: “This dump isn’t only a catastrophe for the freshwater species in our waterways, it’s also a public health issue. We don’t know what these chemicals are, they should have been tested.”

Pic: Sky News
Image:
Pic: Sky News

The Environment Agency told Sky News it has obtained a court order to close the site to all public access for at least six months.

A spokesperson said: “Specialist officers are investigating waste dumped near the A34 at Kidlington. Their role will be to find who left the waste there and take appropriate action.

“We share the public’s anger about incidents like this, which is why we take action against those responsible for waste crime,” asking anyone with information to call their 24-hour incident hotline.

This summer, Sky News produced an exclusive report on the growing problem of waste crime, followed up in October by a report into an illegal dump in Wigan.

In a report released last month, the Lords Environment and Climate Change Committee warned that organised crime gangs are illegally dumping millions of tonnes of waste across the countryside every year.

The committee identified incompetence at the Environment Agency as a factor in the growing crisis.

Philip Duffy, the agency’s chief executive, hit back, saying: “I think it’s very unfair on my hardworking staff to be accused of incompetence.”

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