Pound sinks to record low against the dollar as chancellor and prime minister defend mini-budget - Sky News

The pound has fallen to a record low against the dollar amid a fresh investor rush towards the US currency globally.

Sterling slipped by nearly 5% early on Monday to $1.0327 - building on fresh 1985 lows seen on Friday after UK chancellor Kwasi Kwarteng unveiled the biggest programme of tax cuts for 50 years.

The £45bn tax-slashing package saw the market deliver a verdict on whether the public finances would be sustainable.

The pound plunged below its all-time low against the greenback of $1.054 early on Monday in Asian trading, fuelling fears at that time that parity was even possible.

However, it later stabilised around $1.05405 - still 3% below the previous session's close.

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Both the chancellor and Prime Minister Liz Truss defended their programme.

More on Kwasi Kwarteng

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In an interview with CNN on Sunday, Ms Truss rejected comparisons with US President Joe Biden's approach after he said he was "sick and tired of trickle-down economics".

She said: "We all need to decide what the tax rates are in our own country, but my view is we absolutely need to be incentivising growth at what is a very, very difficult time for the global economy."

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Asked whether she was "recklessly running up the deficit," Ms Truss said: "I don't really accept the premise of the question at all".

Mr Kwarteng suggested his announcements were just the beginning of the government's agenda to revive the UK's stagnant economy.

"We've only been here 19 days. I want to see, over the next year, people retain more of their income because I believe that it's the British people that are going to drive this economy," he told the BBC's Sunday With Laura Kuenssberg programme.

Read more: Mini-budget: PM going for broke in hope of winning big - but has she misjudged the public mood? | Beth Rigby

Mr Kwarteng is reportedly considering abolishing a charge for parents who earn more than £50,000 and claim child benefit, increasing the annual allowances on pension pots and a tax break for people who stay at home to care for children or loved ones.

If sterling fell to parity with the US dollar, it could trigger a rebellion among Tory backbenchers who could refuse to vote for the government's finance bill or submit letters of no confidence, the Daily Telegraph reported, citing backers and critics of the prime minister.

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Truss and Kwarteng defend plans

Asked whether he was nervous about the dropping pound, falling stock markets and rising cost of government borrowing, Mr Kwarteng said: "We've got to have a much more front-footed approach to growth and that's what my Friday statement was all about.

"I think that if we can get some of the reforms... if we get business back on its feet, we can get this country moving and we can grow our economy, and that's what my focus is 100% about."

He refused to comment on market movements, saying: "I've been focused on the longer term and the medium term, and I think it was absolutely necessary that we had a long-term growth plan."

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2022-09-26 03:46:29Z
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