Liz Truss to hold emergency talks with OBR after failing to calm markets | Liz Truss

Liz Truss will hold emergency talks with the head of Britain’s independent fiscal watchdog after failing to quell panic in financial markets or shore up support from Tory MPs for her sweeping economic plan.

In a highly unusual move, the prime minister will meet Richard Hughes of the Office for Budget Responsibility (OBR) on Friday, along with his chancellor, Kwasi Kwarteng, before being presented with a first draft of his full budget forecast next week.

A government insider said the OBR meeting was ‘like trying to read the manual after breaking the trick’ after last week’s announcement of sweeping tax cuts sparked investor panic over the future health of the UK economy, causing a sharp drop in value. of the pound and driving up the government’s borrowing costs.

Truss is facing urgent calls from the Treasury select committee to present the government’s financial statements, which are not due until November 23, by at least a month – and to release growth forecasts as soon as possible to help calm nervousness. On Thursday evening, the OBR confirmed that it could have produced a forecast in time for the mini-budget, but Kwarteng did not ask it to do so.

Treasury select committee chairman Mel Stride told the Guardian there was a way out of the current economic situation for the government, but added: ‘It’s not a very wide way out. There is a lot of work to do. It’s a huge challenge.

The Guardian understands Truss will use the meeting to discuss dramatic economic and fiscal developments since March, the last time the OBR released growth forecasts. Kwarteng will continue to liaise with the body during the forecasting process ahead of the release of the next figures. Alarm spread across the Conservative Party last night after Truss ruled out any U-turn in the mini budget and a shock YouGov poll gave Labor a record 33 point lead, on 54 per cent, from 21 per cent for the Conservatives, doubling their lead from just four days ago.

Only 37% of Conservative voters in 2019 said they would now vote Conservative. Veteran Tory MP Sir Charles Walker said if the poll’s lead was repeated in an election the Tories would ‘cease to exist as a political party’.

After days of silence at the Labor conference in Liverpool, Truss embarked on a series of local BBC radio interviews in which she insisted her economic policy was on the right track, despite the need for emergency intervention by the Bank of England.

In her first public statements since the International Monetary Fund’s warnings and the Bank’s intervention to prevent a run on pension funds, Truss said she was ‘ready to make tough decisions’ and would not change. not his approach despite the pressure.

After hearing about financial concerns from several listeners, she insisted that people would feel the longer-term benefits. “It’s the right plan we’ve laid out,” Truss told BBC Radio Norfolk. “Of course, there will always be people who oppose this or that measure. And it’s not necessarily easy. But we have to.

‘I have to do what I believe is right’: Liz Truss defends mini budget on BBC Radio Norfolk – audio

Pressed repeatedly by presenters as to why she cut taxes mainly for the wealthiest people, she dismissed any suggestion of error. “Some of these decisions are difficult,” she told BBC Radio Lancashire. “Some people don’t like them. But what I couldn’t do was let the situation drift. That is why my government has taken urgent action.

In a particularly awkward exchange on BBC Radio Stoke, there were long silences when she was asked about the hikes in mortgage payments, which will rise as interest rates rise, eclipsing any savings her measures could have help people achieve.

Shadow Chancellor Rachel Reeves has claimed the talks have ‘made this dire situation even worse’ as she urged the Prime Minister to recall Parliament ahead of the Conservative Party conference.

“This is a serious situation created in Downing Street and is the direct result of the reckless actions of the Conservative government,” she said. “If the Prime Minister continues to prioritize saving face over saving people’s homes, Tory MPs must join Labor in demanding the recall of Parliament so that this suicide bomber budget can be cancelled.”

However, Kwarteng insisted during a visit to Darlington that the government was ‘sticking to the growth plan’, arguing it was ‘absolutely essential’ to revive the debate, raising concerns among Tory MPs as to his rigid commitment to his ideological approach.

Ahead of what is sure to be a feverish party conference, Kwarteng sent a private note to Tory MPs saying, “We need your support. In the message, the chancellor said he understood their “concern” about the mini-budget, but called on them for public support. “The only people who win if we divide are Labor,” he wrote.

He sets out a rationale for his plans to cut taxes and borrow to reduce the cost of living for the British public, insisting: “We will show the markets that our plan is sound.”

Its chief secretary, Chris Philp, has been accused of echoing the “Crisis, what crisis? remarks attributed to James Callaghan during the winter of discontent of the 1970s after he was asked on LBC Radio: “It’s a crisis, you accept that? Or was it all part of Friday’s plan? He replied, “I don’t accept the word ‘crisis’ at all.”

However, the repercussions of the Bank of England’s Wednesday bailout of £65bn of Britain’s final salary pension funds were felt in international financial markets, sending stocks in Europe, the US and the United States plummeting. Asia.

The FTSE 100 fell 160 points to 6,858, matching a similar 2.4% decline in the value of the top 500 US companies. Economists and investor groups said the lack of stability in a previously robust financial center like the UK should be a warning against excessive risk-taking by governments and financial institutions.

UK banks have withdrawn their mortgage products at an unprecedented rate, and the average price of a two-year fixed-rate mortgage has jumped above 5%. More than 40% of available mortgages have now been taken off the market, while providers such as Santander, Nationwide and HSBC have reviewed loans.

Faced with the prospect of rapidly rising mortgage costs, homebuilders suffered a stock market crash, while the value of UK retailers was also down as the potential for falling house prices grew more likely – reversing two years of double-digit increases.

Mark Carney, former Governor of the Bank of England, accused Truss’ government of “undermining” the country’s economic institutions and working “at cross purposes” with Threadneedle Street. He said: “Unfortunately, having a partial budget, in these circumstances – difficult global economy, difficult position in financial markets, working against the tide with the Bank – has led to quite dramatic movements in the markets financial.

“What’s left of the budget [are] the actual measures that would drive the acceleration of growth. The numbers have to add up.

Simon Wolfson, chief executive of Next and a Tory peer, has warned that the UK could be heading for a second cost of living crisis next year as the fall in the value of the pound leads to further price rises .

“The devaluation of the pound looks set to prolong inflation even after factory prices ease,” he said. “It looks like we’re about to have two cost-of-living crises: this year, a squeeze on the supply side; next year, a currency-induced price hike as the devaluation takes effect.

A Treasury spokesperson said: ‘Last week the Chancellor presented the first stage of the Government’s growth plan, with further supply-side reforms to come in the coming weeks – including announcements on changes to the planning system, business regulations, child care, immigration, agricultural productivity and digital infrastructure.

“The Chancellor has mandated the OBR to produce an economic and budgetary forecast which will be published on 23 November. At the same time, it will present the government’s medium-term budgetary plan, which will be based on the commitment to reduce the debt as a percentage of GDP in the medium term.

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