Mini-budget U-turn ruled out despite Bank of England’s emergency action

Published

2 years ago

September 29, 2022

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The government has ruled out a U-turn on the costly tax-cutting mini-budget and the chancellor will not resign despite mounting pressure.

It comes after a day in which the Bank of England was forced to launch a temporary bond-buying programme as it took emergency action to prevent “material risk” to UK financial stability.

Bank’s ‘nearly unthinkable’ intervention – economy latest

Sky’s political editor Beth Rigby was told that the chancellor, Kwasi Kwarteng, would not be resigning and that there would be “no reversal of policy”.

A minister told deputy political editor Sam Coates it was “bulls***t” to say that today’s market movement was related to the mini-budget announcement.

And on The Take with Sophy Ridge, chief secretary to the Treasury Chris Philp denied that the government had any responsibility and said there would be no change of course.

Politics Hub: No mini-budget reversal and chancellor will not resign

The Bank will 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.

City minister Andrew Griffith told Sky’s economics editor Ed Conway: “Every major economy is dealing with exactly the same issues.”

“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.”

The Bank’s action comes after the International Monetary Fund added its voice to criticism of the growth plan.

What the Bank’s action is aimed at doing is tackling the 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.

WHY THE BANK OF ENGLAND HAS ACTED

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.”

‘Significant’ interest rate rise likely ahead

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.

Bank going ‘toe-to-toe’ with the market

The Bank said it would also postpone its efforts to unwind the sale of bonds it acquired through quantitative easing during the financial and COVID crises.

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 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.

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

UK

Oleksandr Usyk defeats Tyson Fury to become heavyweight champion of the world

Published

9 hours ago

May 19, 2024

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Oleksandr Usyk defeats Tyson Fury to become heavyweight champion of the world

Oleksandr Usyk has become the undisputed heavyweight champion of the world after defeating Tyson Fury in boxing’s biggest fight of the century.

The Ukrainian won on a split decision following the match in Saudi Arabia.

Usyk had 115-112 and 114-113 on two cards, while Fury took the other 114-113.

Fury disputed his loss after the match, saying: “I believe I won that fight. I believe he won a few rounds but I won more of them.

“Make no mistake I won that fight and I’ll be back.”

In response Usyk said he was “ready for a rematch”.

Fury came under early pressure, with Usyk taking the centre of the ring with an aggressive offensive from the start.

At one point Fury was pushed against the ropes and started laughing as Usyk applied pressure.

The “Gypsy King” looked relaxed as he moved around the ring in the early rounds and picked his shots.

But after Usyk landed a right hook in the ninth round it looked as if Fury was in serious trouble. The Ukrainian followed up by unloading freely but somehow the bookmakers’ favourite stayed on his feet and was saved by the bell.

Last night, Fury weighed in at 262lbs (18st 10lbs) – nearly three stone heavier than Usyk, who clocked in at a career heaviest of 223lbs (15st 13lbs).

Fury refused to look at his opponent during a news conference on Thursday, but did not back down at the weigh-in last night, where the pair almost came to blows before being separated by their entourages.

Usyk arrived into the ring first, dressed as a Cossack warrior.

Fury entered to songs by Barry White and Bonnie Tyler, with the “Gypsy King” spending several minutes dancing on stage before the song changed to Holding Out For A Hero.

Anthony Joshua watched from the ringside, knowing he could meet the winner early next year.

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UK

Brixham: Warning ‘heads are going to roll’ after water parasite outbreak – as ‘nearly every house in one close has someone ill’

Published

17 hours ago

May 18, 2024

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Brixham: Warning 'heads are going to roll' after water parasite outbreak - as 'nearly every house in one close has someone ill'

Thousands of homes have had their boiling water restrictions lifted after a water tank infected with cryptosporidium was drained and cleaned, South West Water has said.

About 16,000 households in the Brixham area of Devon were told to boil their drinking water following 46 confirmed cases of the disease.

On Saturday afternoon South West Water lifted the boiling restrictions for 14,500 homes after water quality monitoring results found no traces of cryptosporidium in the Alston supply area.

Cryptosporidiosis is caused by a tiny parasite and can lead to vomiting, stomach cramps and watery diarrhoea lasting about two weeks.

More cases are expected to be confirmed due to a delay in developing symptoms – and about 100 more people around Brixham were reporting signs of it on Friday.

South West Water believes the parasite probably entered supplies through a damaged pipe in a field containing animal faeces.

A contaminated water tank at Hillhead reservoir, where cryptosporidium was detected, was drained overnight and “thoroughly cleaned” on Saturday, South West Water said.

One local resident said she knew of only four houses out of 21 in Raddicombe Close, on the outskirts of Brixham, which have not had at least one person fall ill with cryptosporidiosis.

The local MP has warned “heads are going to roll” over the incident.

Tory MP Anthony Mangnall, whose constituency includes Brixham, told LBC: “This is such a serious matter that yes, I think heads are going to roll over this.”

He claimed the supplier had been too slow to issue its safety alert.

Mr Mangnall said: “From starting this week with a denial from South West Water that it was anything to do with them, delaying the fact that the boil water notice came in – meaning thousands of people used the water network – to then issuing it on Wednesday, and there are a lot of people who are very ill.”

He called it an “absolutely disastrous week” and said locals were furious.

South West Water has said it’s “deeply sorry” and that it’s been “working tirelessly” to identify the source of the problem and fix it.

Liberal Democrat leader Sir Ed Davey accused the government of not doing enough to hold water companies to account.

He told Sky News the firms were “putting profit over the environment, over public health” after multiple cases of sewage being released into rivers and seas.

“We [Liberal Democrats] wouldn’t wait for fines for pollution,” Sir Ed said.

“There should be a sewage tax on the profits of these water companies so we can get the money now.

“There needs to be much tougher regulation… and we may need to look at restructuring the whole water industry.”

It comes as dozens of protests over sewage releases were planned for Saturday.

Surfers Against Sewage is promoting “paddle-out” demonstrations at 30 locations, with Olympian Dame Kelly Holmes among those at the event in Brighton.

UK

Devon: Confirmed cases of disease more than double to 46 after parasite found in drinking water

Published

1 day ago

May 18, 2024

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Devon: Confirmed cases of disease more than double to 46 after parasite found in drinking water

The confirmed cases of a waterborne disease caused by a parasite have more than doubled.

There are now 46 confirmed cases of cryptosporidiosis, a diarrhoeal illness, the UK Health Security Agency (UKHSA) has said – with more than 100 further people reporting similar symptoms in the Brixham area.

Other reported cases of diarrhoea and vomiting in residents and visitors to the south Devon town are also under investigation. Hundreds of locals have also reported feeling unwell over the last two weeks on social media.

MPs and South West Water officials have confirmed the parasite most likely entered water supplies through animal faeces, but an investigation is still ongoing.

What is cryptosporidiosis disease?

The UKHSA first confirmed cases of the disease at around midday on Wednesday, while locals were initially told by South West Water that their tap water was uncontaminated and safe to drink.

But after testing supplies in the Hillhead reservoir, the water company found “small traces” of the parasite cryptosporidium – which causes cryptosporidiosis – and told residents in parts of Brixham and Alston to boil their drinking water on Wednesday.

A total of 16,000 households and businesses in Brixham, Boohay, Kingswear, Roseland and North West Paignton were impacted and offered £15 compensation at first.

Over the next two days, South West Water apologised to those affected and increased the offer to £115. Amid the chaos, one primary school closed its doors on Thursday due to not having safe running drinking water.

‘Very hard questions for water company’

Speaking to Sky News yesterday, South West Water’s chief customer officer Laura Flowerdew confirmed it was likely a broken air valve contaminated by animal faeces that had caused the outbreak.

However, she refused to give a timeframe on how long the incident would be ongoing – leaving thousands of residents facing an uncertain future.

Speaking on Friday at the University of Exeter, Health Secretary Victoria Atkins said there will be “very, very hard questions” for South West Water over the outbreak.

“At the moment I think we probably need to give them the space to conduct their investigation; we know that they have identified the source,” she said.

“The public will want to know how on earth that source happened, what was the chain of events that led to this, because of course we all understand the expectation that we all have when we turn our taps on is that [we get] clean drinking water and we want to be able to trust it.”

‘Expect to see more cases’

Totnes MP Anthony Mangnall also warned the boil notice could last “at least a further six or seven days” and called for more transparency.

Professor Paul Hunter, a specialist in medical microbiology at the University of East Anglia, told Sky News if the parasite was “a continuous thing” present in water supplies for a prolonged period, then “you’d expect to see more cases” for another two weeks.

It comes as hotel owners in the area told Sky News the outbreak has led to people cancelling their stay, while a head chef said “I can’t wash salad in the sink”.

‘Destroyed our business’

Stephen Colemansfield, owner of Redlands Guest House in Brixham, told Sky News the outbreak has “destroyed our business at the moment”.

“Our guests have cancelled because of the mixed messages that are being sent out by South West Water.”

Rob, head chef at the Steam Packet Inn in Kingswear near Dartmouth, also said his brother-in-law is one of the 46 confirmed cases of cryptosporidiosis and has been sick for two weeks.

The UKHSA is working with Torbay Council, South West Water, NHS Devon and the Environment Agency on the incident.