Having sealed her chancellor’s fate, the markets could seal the prime minister’s fate
So farewell, then, Trussonomics.
The demise of the country’s second shortest-lived chancellor also brings with it the demise of the country’s shortest-lived economic movement.
Liz Truss came into office promising to boost the country’s growth rate through a forensic combination of tax cuts, reforms to the country’s supply side (for which read: things like planning reform) and spending restraint. This was, if you squint a little bit, not dissimilar to the kinds of policies espoused by Ronald Reagan and Margaret Thatcher.
Tory MPs turn on Truss as PM scrambles to save job after sacking chancellor – latest updates
It always looked risky – especially at such a fragile point for the global economy. We are coming to the end of a 12-year period of cheap money, something which is causing a near-nervous breakdown in financial markets. Central banks are in the process of raising interest rates and trying to feed the glut of bonds they bought during the financial crisis back in the market.
As if that weren’t enough, Europe is facing one of its bleakest economic winters in modern memory, with a war raging in Ukraine and energy prices touching historic highs. It is hard to think of many less auspicious periods to attempt an untested new economic manifesto.
Yet Ms Truss and her former chancellor Kwasi Kwarteng pushed on all the same. And unlike Thatcher, whose first few budgets were grisly austerity packages which no one much enjoyed, Ms Truss and Mr Kwarteng aimed to turn Thatcherism on its head. Instead of fixing the public finances first and then cutting taxes second, they opted to spend the fruits of economic growth before that growth had even been achieved.
The mini-budget of 23 September was a small document with extraordinarily large consequences. Ironically, the more expensive the measures were, the less controversial they turned out to be. The scheme to cap household energy unit costs will potentially cost hundreds of billions of pounds, yet (and we know this because it was pre-announced long before the mini-budget) investors barely batted an eyelid. They carried on lending to this country at more or less the same or equivalent rates.
The same was not the case for the rest of the mini-budget’s policies. Shortly after they were announced – everything from the abolition of the 45p rate (actually quite cheap in fiscal terms) to the cancellation of Rishi Sunak’s corporation tax rise – markets began to lurch in what was, for Ms Truss, and most UK households, the wrong direction. The pound sank, the yields on government debt, which determine the interest rates across most of the economy, began to climb.
That was bad enough. When Mr Kwarteng announced gleefully a couple of days later on television that he had more tax cuts up his sleeve, the trot out of the country became a stampede. The pound fell, briefly, to the lowest level against the dollar in the history of, well, the dollar.
Even more worryingly, those interest rates on government bonds rose at an unprecedented rate, causing all sorts of malfunctions throughout the money markets.
The most obvious – and the one that perhaps will have the longest legacy – is the rise in mortgage rates. But the unexpected consequences were even more worrying, among them a crisis in funds used by pension schemes. That sparked a “run dynamic” which compelled the Bank of England to step in with an emergency support scheme.
Even at this point, we were into unprecedented territory. Never before had the Bank been forced to intervene quite like this. Never before had it had to do so as a result of a government’s Budget.
The intervention, however, had some success, bringing down the relevant interest rates and bringing markets back from the edge. But there was a sting in the tail: a deadline. Today, 14 October.
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Analysis: PM’s new tax U-turn
In hindsight perhaps it’s obvious that this, then, would always have been the day when the government might face another existential crisis. Investors were always going to be nervous ahead of the Bank’s withdrawal from this neck of the bond market. And that is precisely what happened: after the governor reiterated, on a panel in Washington, that he was indeed serious, all eyes then turned to the chancellor. Could he say something to reassure markets?
In the event, the answer was: no. But something else changed matters: growing rumours of a U-turn. That brings us to this morning. The chancellor, pulled back from Washington early, was dismissed. The U-turn began. The corporation tax freeze is to be abandoned. The coming medium-term fiscal plan will involve austerity and a big dose of fiscal pain. The upshot is that Trussonomics, which was hinged clearly on tax cuts like these, is dead in the water.
However, the bigger question concerns what happens next. Those markets, which Ms Truss said explicitly were the reason for her U-turn, are still pretty frantic. No one knows how they’ll fare on Monday, but, whether right or wrong, another grisly day will almost certainly be seen as a sign of the government’s failure. And, having sealed the fate of her chancellor, the markets could well seal the fate of the prime minister.
But that’s a few days away – a long time in both politics and markets.
Liz Truss appoints Jeremy Hunt as chancellor. Pic: Andrew Parsons / No 10 Downing Street
In the meantime, here is something to dwell on: an alternative version of history. In a parallel universe, Ms Truss and Mr Kwarteng did things slightly less hastily. They decided their emergency Budget would simply deal with the energy price shock coming this winter. They promised an OBR statement and hatched plans for a growth-generating budget in a few months’ time.
In that parallel universe, interest rates probably wouldn’t have risen so high. The rises would, anyway, have been blamed on the Bank of England, not the government. The government would have enjoyed some kudos for having prevented energy-related penury this winter and made merry in their honeymoon. Things could have been oh-so different.
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Now, all of this is of course imponderable. But it does rather underline an important point: none of this was inevitable. This wasn’t a crisis like 1992 – where the UK faced monetary pressures suffered by nearly every other nation in Europe. It was simply a succession of very unfortunate decisions at precisely the wrong moment.
At a time of market turmoil and war in Europe, Ms Truss and Mr Kwarteng chose to take a gamble. It did not pay off.
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The man convicted of the murder of British student Meredith Kercher has been charged with sexual assault against an ex-girlfriend.
Rudy Guede, 38, was the only person who was definitively convicted of the murder of 21-year-old Ms Kercher in Perugia, Italy, back in 2007.
He will be standing trial again in November after an ex-girlfriend filed a police report in the summer of 2023 accusing Guede of mistreatment, personal injury and sexual violence.
Guede, from the Ivory Coast, was released from prison for the murder of Leeds University student Ms Kercher in 2021, after having served about 13 years of a 16-year sentence.
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Since last year – when this investigation was still ongoing – Guede has been under a “special surveillance” regime, Sky News understands, meaning he was banned from having any contact with the woman behind the sexual assault allegations, including via social media, and had to inform police any time he left his city of residence, Viterbo, as ruled by a Rome court.
Guede has been serving a restraining order and fitted with an electronic ankle tag.
The Kercher murder case, in the university city of Perugia, was the subject of international attention.
Ms Kercher, a 21-year-old British exchange student, was found murdered in the flat she shared with her American roommate, Amanda Knox.
The Briton’s throat had been cut and she had been stabbed 47 times.
(L-R) Raffaele Sollecito, Meredith Kercher and Amanda Knox. File pic: AP
Ms Knox and her then-boyfriend, Raffaele Sollecito, were placed under suspicion.
Both were initially convicted of murder, but Italy’s highest court overturned their convictions, acquitting them in 2015.
World
IDF blames ‘technical error’ after Gaza officials say children collecting water killed in strike
The Israeli military says it missed its intended target after Gaza officials said 10 Palestinians – including six children – were killed in a strike at a water collection point.
Another 17 people were wounded in the strike on a water distribution point in Nuseirat refugee camp, said Ahmed Abu Saifan, an emergency physician at Al Awda Hospital.
The Israel Defence Forces (IDF) said it had intended to hit an Islamic Jihad militant but a “technical error with the munition” had caused the missile to fall “dozens of metres from the target”.
The IDF said the incident is under review, adding that it “works to mitigate harm to uninvolved civilians as much as possible” and “regrets any harm to uninvolved civilians”.
A wounded child is treated after the strike on the water collection point. Pic: Reuters
Officials at Al Awda Hospital said it received 10 bodies after the Israeli strike on the water collection point and six children were among the dead.
Ramadan Nassar, who lives in the area, said around 20 children and 14 adults were lined up Sunday morning to fill up water.
When the strike occurred, everyone ran and some, including those who were severely injured, fell to the ground, he said.
Blood stains are seen on containers at the water collection point. Pic: Reuters
In total, 19 people were killed in Israeli strikes in the Gaza Strip on Sunday, local health officials said.
Two women and three children were among nine killed after an Israeli strike on a home in the central town of Zawaida, officials at Al Aqsa Martyrs Hospital said.
Israel has claimed it hit more than 150 targets in the besieged enclave in the past day.
The latest strikes come after the Israel military opened fire near an aid centre in Rafah on Saturday. The Red Cross said 31 people were killed.
The IDF has said it fired “warning shots” near the aid distribution site but it was “not aware of injured individuals” as a result.
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Palestinians shot while seeking aid, says paramedic
The war in Gaza started in response to Hamas’s attack on Israel on 7 October 2023, which killed 1,200 people and saw about 250 taken hostage.
More than 58,000 Palestinians have since been killed, with more than half being women and children, according to Gaza’s health ministry, which does not distinguish between civilians and combatants in its count.
Read more:
Palestinians shot while seeking aid, says paramedic
Dozens of MPs call for UK to recognise Palestine as state
US President Donald Trump has said he is closing in on another ceasefire agreement that would see more hostages released and potentially wind down the war.
But after two days of talks this week with Israeli Prime Minister Benjamin Netanyahu, there were no signs of a breakthrough, as a new sticking point emerged over the deployment of Israeli troops during the truce.
Hamas still holds 50 hostages, with fewer than half of them believed to be alive, after most of the rest were released in ceasefire agreements or other deals.
World
‘At least 59 killed’ in Gaza after Israeli military opens fire near aid centre and carries out strikes
At least 59 Palestinians have reportedly been killed after the Israeli military opened fire near an aid centre in Gaza and carried out strikes across the territory.
The Red Cross, which operates a field hospital in Rafah, said 25 people were “declared dead upon arrival” and “six more died after admittance” following gunfire near an aid distribution centre in the southern Gazan city.
The humanitarian organisation added that it also received 132 patients “suffering from weapon-related injuries” after the incident.
The Red Cross said: “The overwhelming majority of these patients sustained gunshot wounds, and all responsive individuals reported they were attempting to access food distribution sites.”
The organisation said the number of deaths marks the hospital’s “largest influx of fatalities” since it began operations in May last year.
The IDF has said it fired “warning shots” near the aid distribution site but it was “not aware of injured individuals” as a result.
It said in a statement: “Earlier today, several suspects were identified approaching IDF troops operating in the Rafah area, posing a threat to the troops, hundreds of metres from the aid distribution site.
“IDF troops operated in order to prevent the suspects from approaching them and fired warning shots.”
Palestinians mourn a loved one following the incident near the aid centre. Pic: Reuters
Mother’s despair over shooting
Somia Alshaar told Sky News her 17-year-old son Nasir was shot dead while visiting the aid centre after she told him not to go.
She said: “He went to get us tahini so we could eat.
“He went to get flour. He told me ‘mama, we don’t have tahini. Today I’ll bring you flour. Even if it kills me, I will get you flour’.
“He left the house and didn’t return. They told me at the hospital: your son…’Oh God, oh Lord’.”
Asked where her son was shot, she replied: “In the chest. Yes, in the chest.”
Somia Alshaar, pictured with her daughter, says her son was shot dead. Pic: Reuters
‘A policy of mass murder’
Hassan Omran, a paramedic with Gaza’s ministry of health, told Sky News after the incident that humanitarian aid centres in Gaza are now “centres of mass death”.
Speaking in Khan Younis, he said: “Today, there were more than 150 injuries and more than 20 martyrs at the aid distribution centres… the Israeli occupation deliberately kills and commits genocide. The Israeli occupation is carrying out a policy of mass murder.
“They call people to come get their daily food, and then, when citizens arrive at these centres, they are killed in cold blood.
“All the victims have gunshot wounds to the head and chest, meaning the enemy is committing these crimes deliberately.”
Israel has rejected genocide accusations and denies targeting civilians.
Two boys mourn their brother at Nasser Hospital in Khan Younis. Pic: Reuters
‘Lies being peddled’
The Gaza Humanitarian Foundation (GHF), the controversial US and Israeli-backed group which operates the distribution centre near Rafah, said: “Hamas is claiming there was violence at our aid distribution sites today. False.
“Once again, there were no incidents at or in the immediate vicinity of our sites.
“But that’s not stopping some from spreading the lies being peddled by ‘officials’ at the Hamas-controlled Nasser Hospital.”
The Red Cross said its field hospital in Rafah has recorded more than 250 fatalities and treated more than 3,400 “weapon-wounded patients” since new food distribution sites were set up in Gaza on 27 May.
Read more:
‘At least 798 killed’ at Gaza aid points
’10 children killed’ waiting for Gaza health clinic to open
Israel says permanent ceasefire ‘questionable’
Palestinians inspect the wreckage after an Israeli airstrike in Deir al Balah. Pic: AP
It comes after four children and two women were among at least 13 people who died in Deir al Balah, in central Gaza, after Israeli strikes pounded the area starting late on Friday, officials in Al Aqsa Martyrs hospital in the territory said.
Fifteen others died in Israeli airstrikes in Khan Younis, in southern Gaza, according to Nasser Hospital.
The Israel Defense Forces (IDF) has not responded to a request for comment on the reported deaths.
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Israeli has been carrying out attacks in Gaza since Hamas-led militants killed some 1,200 people and took 251 hostages on 7 October 2023.
Hamas still holds 50 hostages, with fewer than half of them believed to be alive, after most of the rest were released in ceasefire agreements or other deals.
Israel’s offensive in Gaza has killed more than 57,000 Palestinians, more than half of them women and children, according to Gaza’s health ministry, which does not distinguish between civilians and combatants in its count.
US President Donald Trump has said he is closing in on another ceasefire agreement that would see more hostages released and potentially wind down the war.
But after two days of talks this week with Israeli Prime Minister Benjamin Netanyahu, there were no signs of a breakthrough.
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The latest fatalities in Gaza comes as a 20-year-old Palestinian-American man was beaten to death by settlers in the Israeli-occupied West Bank on Friday, the Palestinian Health ministry said.
Sayafollah Musallet, also known as Saif, was killed during a confrontation between Palestinians and settlers in Sinjil, north of Ramallah, the ministry said.
A second man, Hussein Al-Shalabi, 23, died after being shot in the chest.
Mr Musallet’s family, from Tampa Florida, has called on the US State Department to lead an “immediate investigation”.
A State Department spokesperson said it was aware of the incident but it had no further comment “out of respect for the privacy of the family and loved ones” of the reported victim.
The Israeli military said the confrontation broke out after Palestinians threw rocks at Israelis, lightly injuring them.
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