Liz Truss 'committed' to economic plan despite Bank's latest intervention

Today pressure on the chancellor grew, as the Bank of England had to stage a third big intervention and then came a scolding from the International Monetary Fund. ITV News Economics Editor Joel Hills reports

Liz Truss remains committed to the economic measures set out in the mini-budget despite the latest emergency intervention by the Bank of England.

Downing Street also said Chancellor Kwasi Kwarteng will announce the government’s decision on uprating benefits during his medium-term fiscal plan on October 31.

Earlier on Tuesday, the Bank announced it will further bolster its emergency bond-buying plan as it warned the ongoing rout in the gilts market poses a “material risk to UK financial stability”.

The Bank said it will now widen the scope of its UK government bond-buying programme, which was launched in the wake of the mini-budget market turmoil, to include purchases of index-linked UK government bonds amid concerns over another “fire sale” of gilts.

Responding to The Bank's announcement, Ms Truss' official spokesperson said she is "committed to the growth measures set out by the Chancellor". He added that the PM did not discuss the central bank's intervention with her Cabinet during Tuesday morning's meeting.

“The additional measures announced today will support an orderly end to the Bank of England’s intervention scheme," he said.

Despite the prime minister's confidence, the markets don't trust the government. ITV News Political Correspondent Romilly Weeks reports on the latest economic turmoil

The sell-off in government bonds – also known as gilts – resumed on Monday as investor concerns failed to subside despite action by the Bank of England to double its daily bond-buying limit and Chancellor Kwasi Kwarteng’s move to bring forward his new fiscal plan and independent economic forecasts to October 31.

Long-dated gilt prices tumbled, which sent yields on 30-year bonds soaring to 4.7% on Monday – their highest level since the Bank of England was forced to step in last month to avoid a mini financial market crisis.

Dysfunction in this market, and the prospect of self-reinforcing "fire sale" dynamics pose a material risk to UK financial stability.

The Bank said that its latest efforts will “act as a further backstop to restore orderly market conditions”.

ITV News Economics Editor Joel Hills analyses why has the Bank of England has intervened again to calm the markets - and will it work?

When questioned in the House of Commons on Tuesday, Mr Kwarteng assured MPs that his mini-budget was "very, very strong package for business".

The chancellor also hit out at a supposed "anti-growth coalition" after Lib Dem MP Sarah Olney pointed out that the budget had sent "interest rates soaring" and caused "mortgage pain for millions".

Shadow chancellor Rachel Reeves described events since Kwasi Kwarteng’s mini-budget as a “British crisis made in Downing Street”.

'A crisis made in Downing Street': Shadow chancellor Rachel Reeves grills Kwasi Kwarteng

She said: “No other government is sabotaging their own country’s economic credibility as this government is."

Mr Kwarteng replied: “The IMF said today that actually the plan, the mini-budget has increased the forecast for growth, that’s exactly – precisely the opposite of what (she) has said."

Mr Kwarteng referred to the International Monetary Fund's prestigious World Economic Outlook (WEO), which was published earlier on Tuesday.

In the forecast, the Washington-based institution said the mini-budget is "expected" to lift growth, but also complicate "the flight against inflation".

Deputy Prime Minister Therese Coffey insisted pensions are safe despite the Bank of England’s warning of a “material risk to UK financial stability”.

She told BBC Breakfast: “I’m absolutely confident pensions are safe, the Bank of England is independent and undertaking its role in trying to bring some stability, which it had done.

“I’m not aware of the details of exactly what’s happened this morning. The short briefing message I’ve had from Treasury is that it’s a technical financial stability.”

Kwasi Kwarteng and Liz Truss have come under fire for their mini-budget.

Meanwhile, a pensions industry body said The Bank of England’s emergency action to calm the markets may need to be extended to manage volatility.

The Pensions and Lifetime Savings Association (PLSA) said a “key concern” of pension funds had been that the period of purchasing should not be ended too soon.Pat McFadden MP, Labour’s shadow chief secretary to the Treasury, said on Tuesday: “That the Bank of England has been forced to step in for a second day running to reassure markets shows the government's approach is not working, and creates renewed pressure for the chancellor to reverse his Budget.“

"They have lost all credibility and control and they must respect our nation's independent institutions, go back to the drawing board and reverse this damaging budget.”

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