Bank of England to stop government bond buying scheme today
The Bank of England is set to stop its government bond buying scheme today after attempting to reassure the UK’s financial markets.
The Bank launched the unprecedented intervention after the chancellor’s mini-budget caused chaos within the markets, as well as a potential pension pots crisis.
It promised to buy up to £65bn in UK government bonds – which are known as gilts – from those who wanted to sell them.
The government issues bonds to generate money for government spending, which it can then spend on infrastructure.
In the UK, they are often used to service pension funds and the life insurance market.
Banks and large financial institutions that originally buy the gilts from the government at auction can sell them on to smaller financial institutions, traders or investors on the open market.
The price – or rate – at which they are bought and sold will be higher if investors think the government is able to repay the debt when the bond matures.
But when confidence in the UK economy falls, so does the bond price.
This increases the yield – the rate of interest – or cost of borrowing – as investors seek to protect their money.
Please use Chrome browser for a more accessible video player
What is a bond buying scheme?
How much did the BoE spend on bonds?
The scheme launched by the Bank of England was designed to restore confidence in the government’s finances – increasing bond prices and decreasing the yields it has to pay on them.
Initially, the Bank’s intervention seemed to push down yields on these gilts.
But on Wednesday, yields had surged as high as 5.1%, the same level they reached before the Bank’s initial intervention.
As part of the programme, the Bank bought around £4.35bn of bonds on Wednesday and £4.7bn on Thursday in an increased effort to help soothe the markets.
It brings the total bond buying to £17.8bn.
Ultimately, it has helped to prop up pension funds at a time when they were already under a lot of strain from global financial pressures.
Click to subscribe to the Sky News Daily wherever you get your podcasts
Another government U-turn expected
Chancellor Kwasi Kwarteng and Prime Minister Liz Truss are now under pressure to reinstate a planned increase in corporation tax from April.
On Thursday night, the chancellor announced he would be returning to the UK from the US earlier than planned, amid growing expectation of a government U-turn on corporation tax.
The widely anticipated move appeared to reassure the finance industry, after Bank of England Governor Andrew Bailey spooked the markets by insisting that the emergency support would not be extended.
Read more:
What on earth is happening in UK markets?
Is your pension at risk? – Here’s a helpful guide
Economy shrinks unexpectedly in August
Mr Kwarteng has also that there would be “no real cuts to public spending”, appearing to double down on comments made in the House of Commons by the PM on Wednesday.
The government’s plans revolve around securing an increase in economic growth – with a target of an annual rise of around 2.5% in gross domestic product.
The crucial date will be 31 October, when the forecasts presented by the Office for Budget Responsibility alongside the chancellor’s statement will give an assessment on whether such a plan is realistic.
Baroness Michelle Mone has broadened her attack on her political critics, accusing Conservative leader Kemi Badenoch of using “inflammatory” and “reckless” language that could prejudice a police investigation into her role in the awarding of PPE contracts.
A day after she wrote to Sir Keir Starmer, accusing the government of pursuing a vendetta against her, the former Conservative peer responded to comments by Ms Badenoch following a High Court ruling that a company linked to Baroness Mone’s husband must repay £122m received for surgical gowns.
The court found that PPE Medpro, founded by her husband Doug Barrowman, was in breach of contract with the Department of Health and gave it two weeks to repay the sum.
While not a director of the company, Baroness Mone used her political contacts to introduce PPE Medpro to the government’s “VIP fast-lane” at the start of the pandemic, and a family trust of which her children are beneficiaries received £29m of the profits.
A separate criminal investigation by the National Crime Agency (NCA) is ongoing, and assets linked to the couple worth £75m have been frozen while it continues.
In a series of radio interviews, Ms Badenoch criticised Baroness Mone, accusing her of bringing shame on the Conservative Party and calling for her to step down from the House of Lords.
“Where people do wrong, they should be punished,” she said. “They should face the full force of the law and this is something that I very strongly believe in,” she said.
“And as the prosecution against her continues, they should throw the book at her for every single bit of wrongdoing that has taken place.”
Please use Chrome browser for a more accessible video player
Baroness Mone ‘should resign’
In a letter from her private office, Baroness Mone accuses the Tory leader of being ignorant of the facts and calls out a series of other Conservative politicians who introduced companies to the VIP lane.
“I was shocked to the core to read about your inflammatory language on BBC Radio yesterday calling for me to resign from the House of Lords,” she writes.
“You are commenting on a live criminal investigation that could prejudice the outcome of any trial, and in so doing, you are reportable to the attorney general for breach of and contempt of court. Does no one ever tell you these things before you and your colleagues make reckless statements in the public domain?”
Read more from Sky News:
Customer details stolen in Renault cyber attack
Japan could run out of Asahi
Tinned tuna-owner to unveil £1.5bn float
Baroness Mone goes on to say the NCA investigation has “nothing to do with PPE Medpro and the contracts”.
“The case theory of the NCA investigation is that I somehow misled the Conservative government about my alleged concealed involvement and ended up pocketing a lot of money,” she writes. “Well I’m sorry to disappoint you, but it isn’t true.”
She also says the Conservative government knew of her involvement and names former health secretary Matt Hancock, Lord Agnew, Lord Feldman and Lord Chadlington as being among 51 “mostly Conservative peers and MPs” who introduced providers to the VIP lane.
“So Kemi, my role was exactly the same as all other Conservative MPs and peers who were trying to help provide PPE… if I have done wrong, then so have all the others in the VIP lane. In which case, you should be calling out for them to resign as well. That’s if you manage to work out what it is they are supposed to have done wrong.”
Please use Chrome browser for a more accessible video player
The High Court says a company linked to Mone breached a government contract of nearly £122m
She concludes by saying she has no wish to rejoin the Lords as a Conservative peer when her leave of absence ends, “that’s assuming there still is a Conservative Party before the next General Election”.
The letter comes as an online petition calling for Baroness Mone to step down from the Lords, launched by the Covid-19 Bereaved Families for Justice, attracted 60,000 signatures in 24 hours.
The Conservative Party has been approached for comment.
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment12 months agoHere are the best electric bikes you can buy at every price level in October 2024