December 6, 2022

UK finance minister cuts IMF visit as pressure mounts for U-turn

Kwarteng on Monday sought to allay lingering concerns by pushing the date of his plan to balance the government’s finances to Oct. 31.

Ian Forsyth | Getty Images News | Good pictures

LONDON – UK Finance Minister Kwasi Kwarteng cut short a trip to the International Monetary Fund this week, with Prime Minister Liz Truss returning to London amid reports. Some consider his government’s market-rocking tax cuts a U-turn.

Quarteng told reporters on Thursday that he would return from the US ahead of schedule, without providing further details. Reuters reportedCiting unnamed sources, the finance minister plans to meet colleagues to work on the government’s medium-term budget plan.

Earlier, Quarteng insisted that he was “not going anywhere” and that he and Truss would “100%” still be in their jobs next month.

Kwarteng pulled out of international finance meetings in Washington, D.C. amid a growing political backlash against the Conservative government’s proposed tax cuts.

The debt-financing measures, announced on September 23 and estimated to total 43 billion pounds ($48.7 billion), sent financial markets reeling. The British pound fell to a level All-time lows against the US dollar, Borrowing costs rose sharply and the Bank of England He was forced to intervene.

Sky News reported Debates are underway in Downing Street on Thursday over whether to reconsider some of the tax cuts announced by Kwarteng in the government’s so-called “mini-budget”. Corporation tax and dividend tax changes are also thought to be on the cards.

Sterling appeared in the news.

The British pound traded up 2% at $1.1319 on Thursday. Stronger-than-expected US inflation data. Sterling last traded down 0.8% at $1.124.

Meanwhile, long-dated UK government bonds – known as gilts – were trading at 4.35% on Friday morning, with the 30-year yield.

Truss is under great pressure to rethink his economic policies as opinion polls show support for his government plummeting.

Jacob King | Pa pictures | Good pictures

Truss and Kwarteng have repeatedly defended the government’s aggressive spending plan, insisting the proposals are necessary to spur economic growth.

Last week, Kwarteng reversed a plan to scrap the 45% income tax on those earning more than £150,000 ($167,646) a year.

Speaking from the US on Thursday, Kwarteng responded to questions about the potential U-turn by saying he was “fully focused on delivering the growth plan”.

However, Truss is under huge pressure to revise policies Opinion polls show that support for his government has fallen And investors continue to worry about the potential impact on public finances.

An official spokesperson for Truss told CNBC on Thursday that there was no change in the government’s position when asked about reports of a possible U-turn.

‘Let’s wait and see’

The Bank of England warned on Tuesday that “the prospect of a self-reinforcing ‘fire sale’ dynamic poses a material risk to UK financial stability.”

Bloomberg | Bloomberg | Good pictures

The intervention marked the second expansion of the bank’s rescue package in as many days after it raised its daily gilt purchase limit on Monday. The end of the purchase program on Friday.

In mid-week, Truss told MPs he would not cut public spending to help pay for the government’s tax cuts.

— CNBC’s Elliott Smith contributed to this report.