As markets opened the weekend after Kwasi Kwarteng’s mini-Budget and his promise of “more to come”, the pound plummeted to an all-time low of $1.035 against the dollar. Gilts had already suffered their heaviest selling in three decades on the previous Friday. Interest rates on 10-year gilts rose to over four per cent. The cost of a new mortgage headed above 6 per cent.
It fell to the Treasury’s chief economist to inform the Chancellor of the state of the market reaction. The Bank of England said it “[would] not hesitate” to raise interest rates in an effort to calm markets and shore up the pound. Kwarteng pledged to reveal a debt plan in November. The Daily Mail urged him to “hold his nerve”.
Having spent the weekend at Chevening, Liz Truss was reportedly “cut off” from the situation, and it was “a long time for the scales to fall from her eyes”. According to her biographer, she “had no concept of how badly this thing was landing”. In an interview with CNN, released the previous evening, she had defended “helping ordinary people with their taxes”.
Meanwhile, following reports that Truss was pushing for “wide-ranging reform of Britain’s visa system” to “increase immigration to boost economic growth”, the Home Secretary was reported to be “insisting that immigration must fall even as Britain pushes for growth”. Ben Wallace also hailed the Ministry of Defence was “actually going to grow again” due to a promised uplift in spending from Truss.
Labour’s conference continued. Rachel Reeves promised an increase in the minimum wage, the re-introduction of the 45p tac rate, and a doubling in the number of medical school places. Lisa Nandy declared “levelling up to be dead”, and Peter Mandelson predicted his party was on the verge of a “1997-style landslide”.
That evening, a YouGov poll was released putting Labour’s lead over the Conservatives at 17 points – the largest in over two decades. 72 per cent of voters rejected Kwarteng’s decision to scrap the 45p tax rate, including 69 per cent of 2019 Conservatives. 71 per cent rejected lifting the cap on bankers’ bonuses, including 67 per cent of 2019 Conservatives.
With acknowledgments to Harry Cole and James Heale‘s Out of the Blue: the Inside Story of the Unexpected Rise and Rapid Fall of Liz Truss