Inside Politics: Another bad day for UK Plc

Hello there, I’m Matt Mathers and welcome to The Independent’s Inside Politics newsletter.

The pound slumped last night after the Bank of England effectively said that it is going to stop printing money to prop up pension funds. Sometimes you can’t even see the Anti-Growth Coalition at work.

Our political commentator Andrew Grice on what to look out for today:

Liz Truss and Keir Starmer will lock horns at prime minister’s questions for the second time. A lot has happened since their first clash on 7 September, so there is no shortage of ammunition for the Labour leader. As part of her charm offensive directed at Tory MPs, Truss is due to address the weekly meeting of the 1922 committee of backbenchers.

More unflattering light may be shone on Kwasi Kwarteng’s mini-Budget when think tanks including the Institute for Fiscal Studies and Resolution Foundation give evidence to the Treasury select committee. Graham Stuart, the climate minister, will be quizzed by the environmental audit committee.

Once again, it has not been a good 24 hours for UK Plc after chancellor Kwasi Kwarteng’s “mini-Budget” sparked chaos in the markets. The pound fell sharply against the dollar last night – below $1.10 – after Andrew Bailey, the governor of the Bank of England Anti-Growth Coalition (AGC) confirmed that he would end emergency support for pension funds on Friday. Some funds were at risk of collapse before the intervention because of a sharp fall in the worth of government bonds, following Kwarteng’s statement to MPs in the Commons last month.

Analysts had previously warned that pensions, heavily tied up in government debt, faced a cliff edge when the Bank ’s help came to an end and those concerns have been reflected on the front of some of the papers this morning, with fears of further turmoil in the markets if the Bank does indeed pull the plug (some reports this morning say the Friday deadline may well be extended) at the end of the week – a day after its officials warned of a “material risk to UK financial stability”.

Against this backdrop, and No 10 saying earlier this week that it is in “listening mode”, we report today that Downing Street is wavering on the package of tax cuts in Kwarteng’s plan amid mounting pressure from financial markets and public criticism yesterday from the International Monetary Fund. A senior No 10 official told The Independent that staffers have been tasked with re-examining measures unveiled in the chancellor’s poorly-received statement to see if changes or U-turns might be required.

Speaking of U-turns, Jacob Rees-Mogg, the business secretary, has launched plans for a cap on revenues of low-carbon electricity generators, in what effectively amounts to a temporary windfall tax on the sector’s profits. Labour said that prime minister Liz Truss had been “dragged kicking and screaming” into the U-turn, after months of resisting its calls for further levies on the extraordinary profits being made by the energy companies. Reports suggest that the cap could limit prices to as little as £50-£70 per megawatt hour – compared to current prices of around £500 – with the government taking as much as 90 per cent of wholesale revenues above this level. The business department declined to confirm the figures.

To round things off the Office for National Statistics has within the past hour published growth figures. Britain’s economy fell by 0.3 per cent between July and August, down from downwardly revised growth of 0.1 per cent the previous month, the ONS said. Experts had been expecting economic growth to flatline in August. The latest data means the economy is on track to contract overall in the third quarter, with the ONS confirming there would need to be growth of more than 1 per cent in September to prevent a quarterly decline.

It should be an interesting session of PMQs.

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Over at AGC HQ, Labour leader Keir Starmer announced a shake-up of his top team as he put his party on an election footing, telling staffers that Truss’s government could fall at “any time”.

The changes will see policy and communications roles move to Labour HQ, reporting to general secretary David Evans.

Starmer’s chief of staff Sam White will leave as part of the merger of roles from the leader’s office and party headquarters. “We’ve been planning this for a while but the scale of the Tory collapse has brought it forward,” he said.

In a call with Labour staff Starmer said it was “not a time for complacency or caution”, urging his party to “seize the opportunity we have and show the British people we are the party that can lead our country forward”.

See all of The Independent’s daily cartoons here

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Speaking to Sky News, Stephen Hammond becomes first Tory MP to publicly call for corporation tax cut to be scrapped.

“It is clear that if you look at international tax rates for corporates, keeping it at a level below the 24p level but keeping it above the 19p level would raise money and that would be a sensible way at this stage.”

Ben Chu, BBC Newsnight economics editor, on the chancellor’s much-moved fiscal plan. Is another U-turn on the cards?

“Interesting – both former IMF chief economist Ken Rogoff and Ngaire Woods of the Blavatnik School of government tell #Newsnight they don’t think the chancellor can wait until 31 October to reveal his medium term fiscal plan…”

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