Mini-budget U-turn on table as Kwasi Kwarteng flies home - BBC

EPA

By Faisal Islam, economics editor in Washington DC, Chris Mason, political editor, & Becky Morton, political reporter

BBC News

Chancellor Kwasi Kwarteng has cut short his visit to the US for urgent talks in Downing Street, with a U-turn over the mini-budget on the table.

Mr Kwarteng is flying home early from Washington DC after days of open revolt among Tory MPs over his economic plan.

Prime Minister Liz Truss is facing calls to change her plan to calm market turbulence and reassure her party.

No 10 downplayed speculation of imminent changes to the plan after reports suggested parts may be ditched.

A Downing Street source told the BBC the prime minister thinks the chancellor is "doing an excellent job and they are in lockstep".

Many Tory MPs think a further change of plan is inevitable, following a previous U-turn on Ms Truss's plan to scrap the top rate of income tax.

• Live updates: Chancellor to return for crunch talks
• Chris Mason: Can Liz Truss salvage her premiership?
• Pound rises on talk of mini-budget U-turn

A mini-budget announced by Mr Kwarteng last month - featuring a £45bn raft of tax cuts, funded by borrowing - spooked financial markets and prompted a drop in the value of the pound.

The continuing turmoil prompted an intervention from the Bank of England, which involved buying government bonds to stabilise their value.

The Bank has said it is withdrawing that programme of emergency support as planned on Friday. But the pound has rallied in value following speculation in Westminster that another U-turn was in the offing.

Mr Kwarteng had been in Washington DC for a meeting of global finance ministers.

Speaking about the change in his travel plans, a source close to the chancellor said he "really wants to engage not only with government colleagues, but also MPs" over the financial plans.

No 11 dismissed a comparison to the Greek financial crisis of 2011, when its finance minister was hauled back from an international meeting to meet the country's prime minister.

Trade Minister Greg Hands told Sky News it was "not unusual" for a minister to cut short an international visit by a day.

The tense atmosphere in Westminster was apparent as the BBC spoke to dozens of sources across Parliament and the government on Thursday.

"It's checkmate, we're screwed," one Tory MP remarked.

"There is no question in my mind, they'll have to junk loads of this stuff and U-turn," another said.

If the government does announce changes to its plans it is not clear when this might happen.

Mr Kwarteng has said he was "not going anywhere" and when asked if he and Ms Truss would still be in their jobs this time next month, replied: "Absolutely, 100%."

The chancellor is set to spell out how he will pay for the government's £43bn package of tax cuts and get the UK's national debt falling in a statement on 31 October, alongside an independent economic forecast.

Although the government has already scrapped its plan to scrap the top rate of income tax, this only made up £2bn of the tax cuts announced by the chancellor last month.

While some Tory MPs think the government's tax-cutting plans should be reversed, others believe the help with energy bills should be more targeted.

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Among the possible U-turns, there has been speculation the government could reverse its plan for corporation tax.

Ms Truss has pledged to scrap a planned rise to the tax, which was set to increase from 19% to 25% in 2023.

When asked about the positive market response to the speculation of a U-turn on corporation tax, Mr Kwarteng told the Daily Telegraph: "Let's see."

However, he added that he still thought ensuring "competitive" tax rates for businesses was a "great idea".

Former home secretary Priti Patel told Sky News the market would now "dictate" the prime minister's decision on corporation tax "primarily because we want to see stability".

Other scenarios being discussed by some Tory MPs include the chancellor resigning or the prime minister being ousted.

But there is little agreement on what should happen next or who should replace Ms Truss if she is removed.

According to the Times, senior Conservatives are holding talks about replacing Ms Truss with a joint ticket of Rishi Sunak and Penny Mordaunt, who both ran for the leadership this summer.

Unlike the summer leadership contest, MPs would propose just one person to succeed the PM, with the other individual taking a senior cabinet role, the paper reported.

• The pitfalls lying ahead for an embattled PM
• Where are the other bits of government's growth plan?
• What will the tax changes mean for you?

Senior Tories are continuing to call for the government to change course.

Mel Stride, the chairman of the Treasury Select Committee, called on the chancellor to make a "significant" announcement "sooner rather than later".

However, he told BBC Breakfast that he did not back a change in leadership, saying "the last thing we need is more market turbulence".

Former minister Johnny Mercer called for a "course correction" from No 10, describing the impact of rising mortgage rates on people who want to buy a home as "politically unsurvivable".

Scottish Conservative leader Douglas Ross called on the prime minister and chancellor to "get a grip" on the economy.

But, asked whether he believed Ms Truss could win the next general election, he replied: "Yes."

Other Tory MPs expressed support for the prime minister and said she must not reverse her plans.

Sir Christopher Chope, a Truss backer, told the BBC Two's Newsnight: "If we were to increase corporation tax having said that we're not going to, that would be totally inconsistent with the prime minister's policy of promoting growth, growth and growth."

He added that a U-turn would be a "complete betrayal" of what she believed in, saying he did not think it would not happen.

Wales Office Minister David Davies said the government had to be "flexible" in what he described as an economic "storm", adding that Mr Kwarteng should remain chancellor.

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2022-10-14 07:22:12Z
1607505298

Mini-budget U-turn on table as Kwasi Kwarteng flies home - BBC

EPA

By Faisal Islam, economics editor in Washington DC, Chris Mason, political editor, & Becky Morton, political reporter

BBC News

Chancellor Kwasi Kwarteng has cut short his visit to the US for urgent talks in Downing Street, with a U-turn over the mini-budget on the table.

Prime Minister Liz Truss is facing calls to change her plan to calm market turbulence and reassure her party.

Mr Kwarteng is flying home early from Washington DC for discussions with the prime minister and Conservative MPs.

Reports on Thursday suggested the government was looking at which parts of its tax-cutting plans to ditch.

Many Tory MPs think a further change of plan is inevitable, following a previous U-turn on Ms Truss's plan to scrap the top rate of income tax.

• Live updates: Chancellor to return for crunch talks
• Chris Mason: Can Liz Truss salvage her premiership?
• Pound rises on talk of mini-budget U-turn

A mini-budget announced by Mr Kwarteng last month - featuring a £45bn raft of tax cuts, funded by borrowing - spooked financial markets and prompted a drop in the value of the pound.

The continuing turmoil prompted an intervention from the Bank of England, which involved buying government bonds to stabilise their value.

The Bank has said it is withdrawing that programme of emergency support as planned on Friday. But the pound has rallied in value following speculation in Westminster that another U-turn was in the offing.

Mr Kwarteng had been in Washington DC for a meeting of global finance ministers.

Speaking about the change in his travel plans, a source close to the chancellor said he "really wants to engage not only with government colleagues, but also MPs" over the financial plans.

No 11 dismissed a comparison to the Greek financial crisis of 2011, when its finance minister was hauled back from an international meeting to meet the country's prime minister.

Trade Minister Greg Hands told Sky News it was "not unusual" for a minister to cut short an international visit by a day.

The tense atmosphere in Westminster was apparent as the BBC spoke to dozens of sources across Parliament and the government on Thursday.

"It's checkmate, we're screwed," one Tory MP remarked.

"There is no question in my mind, they'll have to junk loads of this stuff and U-turn," another said.

If the government does announce changes to its plans it is not clear when this might happen.

Mr Kwarteng has said he was "not going anywhere" and when asked if he and Ms Truss would still be in their jobs this time next month, replied: "Absolutely, 100%."

The chancellor is set to spell out how he will pay for the government's £43bn package of tax cuts and get the UK's national debt falling in a statement on 31 October, alongside an independent economic forecast.

Although the government has already scrapped its plan to scrap the top rate of income tax, this only made up £2bn of the tax cuts announced by the chancellor last month.

While some Tory MPs think the government's tax-cutting plans should be reversed, others believe the help with energy bills should be more targeted.

This video can not be played

To play this video you need to enable JavaScript in your browser.

Among the possible U-turns, there has been speculation the government could reverse its plan for corporation tax.

Ms Truss has pledged to scrap a planned rise to the tax, which was set to increase from 19% to 25% in 2023.

When asked about the positive market response to the speculation of a U-turn on corporation tax, Mr Kwarteng told the Daily Telegraph: "Let's see."

However, he added that he still thought ensuring "competitive" tax rates for businesses was a "great idea".

Former home secretary Priti Patel told Sky News the market would now "dictate" the prime minister's decision on corporation tax "primarily because we want to see stability".

Other scenarios being discussed by some Tory MPs include the chancellor resigning or the prime minister being ousted.

But there is little agreement on what should happen next or who should replace Ms Truss if she is removed.

According to the Times, senior Conservatives are holding talks about replacing Ms Truss with a joint ticket of Rishi Sunak and Penny Mordaunt, who both ran for the leadership this summer.

Unlike the summer leadership contest, MPs would propose just one person to succeed the PM, with the other individual taking a senior cabinet role, the paper reported.

• The pitfalls lying ahead for an embattled PM
• Where are the other bits of government's growth plan?
• What will the tax changes mean for you?

Senior Tories are continuing to call for the government to change course.

Mel Stride, the chairman of the Treasury Select Committee, called on the chancellor to make a "significant" announcement "sooner rather than later".

However, he told BBC Breakfast that he did not back a change in leadership, saying "the last thing we need is more market turbulence".

Former minister Johnny Mercer called for a "course correction" from No 10, describing the impact of rising mortgage rates on people who want to buy a home as "politically unsurvivable".

Scottish Conservative leader Douglas Ross called on the prime minister and chancellor to "get a grip" on the economy.

But, asked whether he believed Ms Truss could win the next general election, he replied: "Yes."

Other Tory MPs expressed support for the prime minister and said she must not reverse her plans.

Sir Christopher Chope, a Truss backer, told the BBC Two's Newsnight: "If we were to increase corporation tax having said that we're not going to, that would be totally inconsistent with the prime minister's policy of promoting growth, growth and growth."

He added that a U-turn would be a "complete betrayal" of what she believed in, saying he did not think it would not happen.

Wales Office Minister David Davies said the government had to be "flexible" in what he described as an economic "storm", adding that Mr Kwarteng should remain chancellor.

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2022-10-14 06:49:03Z
1607505298

Kwasi Kwarteng says he is focused on mini-budget and 'not going anywhere' - Guardian News

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2022-10-13 14:33:28Z
1607505298

Lucy Letby trial: Nurse accused of murder 'cared deeply about babies' - BBC

A nurse accused of murdering babies on a neonatal ward "cared deeply" for those she had to look after, a court has heard.

Lucy Letby is charged with killing seven babies and attempting to murder 10 others at Countess of Chester Hospital in 2015 and 2016.

Outlining Ms Letby's defence, Ben Myers KC, said she was a "dedicated nurse" and in "no way did she want to harm them".

Ms Letby, 32, denies 22 charges.

Mr Myers told the court: "She trained hard to be a neonatal nurse and what she wanted was to care for babies she looked after.

"The defence say she is not guilty of causing intentional harm to any baby or to killing any baby.

"She loved her job. She cared deeply about the babies and also cared for their families.

"She had a fulfilling life, had friends, a life outside work."

Manchester Crown Court earlier heard how she had penned passages including "I am evil" and "I killed them on purpose because I'm not good enough to care for them".

The notes were among other papers and post-it notes which also contained "many protestations of innocence", the jury was told.

CPS

But Mr Myers said "anyone with an ounce of human understanding" would see the notes as "the anguished outpouring of a young woman in fear and despair when she realises the enormity of what is being said about her".

He continued: "We recognise the sadness and the stress, and even the anger, that comes with allegations like these.

"I start on behalf of the defence by acknowledging how upsetting the allegations will be and acknowledging the very great loss and sadness of the families involved.

"Anything that I do, or say, during this trial is not intended to diminish that in any way."

But he told jurors it would be "staggeringly unfair" to convict a person without a word of evidence.

• Nurse killed baby and sent parents card, jury told
• Mum walked in on nurse killing baby, jury hears
• Nurse poisoned babies with insulin, trial told

He said there was "a real danger" people will simply accept the prosecution theory of guilt "based firmly on coincidence".

Pointing to Ms Letby, of Hereford, sitting in the dock, he told jurors: "It is important to be careful that blame is not heaped on that woman when there may be others who have made mistakes or a system which has failed."

In some cases, he said, no-one could say why a particular child deteriorated or died.

Julia Quenzler/BBC

Mr Myers said the jury had been shown Ms Letby's text messages, her Facebook searches on the families of babies she was alleged to have harmed and "pieces of paper" and mentioned "amateur psychology".

But he said the "foundation" of the case was medical evidence.

Mr Myers said causes of a baby's deterioration or death were not always clear.

He added in this case the babies were "clinically fragile" and in conditions that could change "very swiftly and deteriorate very rapidly".

Mr Myers said: "Ms Letby is adamant she's done nothing intentionally to harm these babies."

With Child A, the first murder count, Ms Letby was said to have injected air into the child, but he said the defence does not accept an air embolus - or air bubble - was the cause of death.

Mr Myers said the "polite" way of describing the care of Child A on the unit was "sub-optimal".

PA Media

With Child B, who was Child A's twin sister, who Ms Letby is accused of trying to kill, it was a "good example" of the "assumption of guilt" and experts had been "influenced by the theory of harm".

Mr Myers said Child C, who Ms Letby is also alleged to have murdered by injecting him with air, was a "very premature" baby, born at 30 weeks.

He said such babies were vulnerable, especially to infection, and Child C should have been at a specialist children's hospital.

Mr Myers said the hospital failed to provide adequate care for Child D, who Ms Letby was alleged to have murdered with air.

He said it was "beyond dispute" Child D should have been given antibiotics hours before she was treated with them, and there was more evidence infection played a part in her death.

He said the prosecution alleged Ms Letby injected Child E with a fatal amount of air and attacked him in front of his mother.

He said: "We say there is no clear explanation in his case for what happened.

"That being so, it is not right to rely on the assumption of guilt."

He next turned to allegations that Ms Letby attempted to murder Child F - the twin brother of Child E - and Child L by poisoning them with insulin.

The barrister said there was "nothing in fact" to establish this.

Child G, who Ms Letby is accused of attempting to murder on three occasions, was an "extremely premature" baby who was "high risk", he said.

The defence did not accept Ms Letby did anything to contribute to Child's G health problems in the neonatal unit.

Child H, who Ms Letby is alleged to have attacked twice, was another example of "sub-optimal care" by the hospital and "nothing to do with Lucy Letby", he said.

Mr Myers said the defence did not accept Ms Letby caused any harm to Child I, who she is said to have tried to kill on three occasions before succeeding on the fourth attempt.

He said: "We will say her collapses and ultimately death were part of a series of clinical problems which may well have been inevitable given her extreme prematurity."

Mr Myers said the hospital was "well out of its depth" with Child J, who Ms Letby is said to have tried to murder, and knowing how to treat her.

He said an assumption of deliberate harm had been made rather than an alternative explanation of a baby receiving inadequate care.

Julia Quenzler/BBC

Child K, who is subject of another count of attempted murder, was said to have been harmed with the deliberate dislodging of a breathing tube.

But Mr Myers said the probable cause was the child inadvertently moving the tube herself.

Her case was another example of "sub-optimal care" in that she should have been treated at a more specialist unit.

Mr Myers said the defense did not accept that Child M, who is the twin brother of Child L, was harmed by an injection of excessive air or airway obstruction.

The defence's insisted there was no obvious cause of his collapse.

Mr Myers said: "We are back in the territory of blame being put on Lucy Letby because there is no obvious alternative."

Addressing the allegation that Child N was deliberately harmed by a nasogastric tube being pushed into his throat which caused him to scream, Mr Myers said: "The defence observe there are many reasons why a baby will shout or scream.

SWNS

"We say it is more far more likely to be hunger. That may sound banal but sometimes it can be true."

Mr Myers said Child N was another baby who received "sub-optimal care" - not from Ms Letby - and should have been treated elsewhere.

The barrister said there was no evidence that Ms Letby inflicted harm to either Child O or Child P - two of three triplets - who she is said to have murdered, or to Child Q, who she allegedly attempted to murder.

Finally, Mr Myers said there were problems with the way the neonatal unit was run, suggesting it was overstretched and understaffed.

He added: "This whole case is complicated.

"Sat in that dock is a young woman who says this is not her fault, so we need to look at the evidence."

The trial was adjourned until Friday morning.

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2022-10-13 16:38:21Z
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Chancellor Kwasi Kwarteng insists he is 'not going anywhere' and is 'totally focused' on growth plan - Sky News

The chancellor has insisted he is "not going anywhere" amid the economic turmoil in the UK and said he remains "totally focused" on delivering the government's growth plan.

During a visit to Washington DC, Kwasi Kwarteng was asked whether he and Liz Truss, the prime minister, will be in their respective roles this time next month.

"Absolutely. 100%. I'm not going anywhere," he said.

The chancellor admitted there has been some "domestic turbulence" since he unveiled his tax-cutting mini-budget at the end of September and the pound fell to record lows against the dollar, but said there is "a very dicey situation globally".

Truss is out 'and we have the numbers', says Tory MP - politics latest

"I speak to Number 10, the PM all the time, and we are totally focused on delivering the growth plan," he said.

Pushed on whether there will be any more reversals of policies in the mini-budget, Mr Kwarteng said: "I am totally focused on the growth agenda."

More on Kwasi Kwarteng

Related Topics:

Last week, after open revolt from Tory MPs and a surge in support for Labour in the polls, Ms Truss and Mr Kwarteng abandoned the plan to abolish the highest 45% tax rate.

Sky News understands discussions are under way in Downing Street over whether to scrap some of the contentious proposals which remain in the chancellor's tax-cutting mini-budget.

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The proposed changes to corporation tax and dividend tax are those understood to be under discussion.

Downing Street insisted earlier on Thursday that there will be no more U-turns on policies in the government's tax-cutting mini-budget despite pressure from Conservative MPs for changes to be made.

Asked to confirm there would be no further reversals, the prime minister's official spokesman said: "Yes, as I said to a number of questions on this yesterday - and the position has not changed from what I set out to you all then."

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2:48

Discussions happening over whether to scrap parts of the mini-budget

Ms Truss faces open revolt in her party over the £45bn package of unfunded tax cuts in the mini-budget, which unleashed chaos in the markets when it was announced last month.

The chancellor will set out his debt-cutting plan in more detail on 31 October, having bowed to pressure to bring the date forward from 23 November given the economic turbulence.

Earlier on Thursday, James Cleverly, the foreign secretary, refused to say there would be no more reversals

He told Sky News the Halloween statement would give "a more holistic assessment of the public finances and our response to the global headwinds that every democracy, every economy in the world is facing".

Pressed on the plan to axe the increase in corporation tax from 19% to 25% in April, Mr Cleverly said it is "absolutely right" the government helps businesses to "stay competitive" and "stay afloat".

The Treasury had vowed to reduce the rate of income tax on dividends by 1.25 percentage points.

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2:54

How long can Truss stay in power?

Mr Kwarteng is meeting with International Monetary Fund (IMF) leaders in Washington DC today, after the institution's chief economist said tax cuts threatened to cause "problems" for the UK economy.

Speaking at a press conference in Washington, the managing director of the IMF said it is sometimes right for a "recalibration" of policies as she was questioned over reports of further U-turns after the mini-budget market chaos.

Kristalina Georgieva said: "Our message to everybody, not just the UK, is that at this time, fiscal policy should not undermine monetary policy."

Read more:
What on earth is happening in UK markets?
What are bonds and where do they fit in the mini-budget crisis?

Meanwhile, in a post on social media on Thursday, former Conservative chancellor George Osborne questioned why Ms Truss and Mr Kwarteng would wait for the chancellor's statement on 31 October to perform an "inevitable U-turn" on their mini-budget.

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1:32

Tories 'must get back to being fiscally responsible'

On Wednesday, Mel Stride, the Tory chairman of the Commons Treasury Committee, said that given Ms Truss's commitments to protect public spending, there was a question over whether any plan that did not include "at least some element of further row back" on the tax-slashing package can reassure investors.

While David Davis, the Tory former minister, called the mini-budget a "maxi-shambles" and suggested reversing some of the tax cuts would allow Ms Truss and Mr Kwarteng to avert leadership challenges for a few months.

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2022-10-13 14:15:00Z
1607505298

PMQs: Liz Truss pledges no public spending cuts as she defends mini-budget - BBC

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By Chris Mason & Sam Francis

BBC Politics

Liz Truss has said she is "absolutely" not planning public spending cuts.

Markets are waiting to find out how the government proposes to bring down debt, following the chancellor's tax cutting mini-budget last month.

Ms Truss told MPs the government would focus on reducing debt "not by cutting public spending but by making sure we spend public money well".

Sir Keir Starmer said the government's "borrowing spree" had left homeowners worried about their mortgages.

Speaking during Prime Minister's Questions, the Labour leader called for a reversal of the mini-budget, which set out plans for £43bn borrowing to fund tax cuts intended to stimulate economic growth.

Government borrowing costs have increased following market turmoil over the last month, and the Bank of England has warned interest rates could rise again.

Meanwhile, the Institute for Fiscal Studies think tank has warned that the chancellor will need to make spending cuts to put the country's finances on a sustainable path, saying the government would have to spend £60bn a year less by 2026-27.

The chancellor has promised the government's economic plan will be outlined on 31 October, accompanied by an assessment by the independent Office for Budget Responsibility.

During PMQs, Sir Keir asked Ms Truss if she stood by her pledge, made during her leadership election, that "I'm not planning public spending reductions".

• Recession risk rises as economy unexpectedly shrinks
• Why is the Bank of England spending billions?

The prime minister replied: "Absolutely. What we will make sure is that over the medium term the debt is falling. But we will do that not by cutting public spending but by making sure we spend public money well."

Following PMQs, the prime minister's spokesman said there will be "difficult decisions" for the government regarding public spending, and that the chancellor would announce measures "in due course".

The government has previously said it was committed to spending settlements, set out in the 2021 Comprehensive Spending Review.

Chancellor Kwasi Kwarteng said earlier this month: "I think it's a matter of good practice and really important that we stick within the envelope of the CSR."

The review set out plans for increases to public spending above inflation, but with prices now rising, with inflation at 9.9% in August, government department budgets will come under pressure.

The prime minister's official spokesman has so far refused to confirm whether departmental budgets would stick to the below inflation increases set out in the CSR.

Privately several senior government figures have acknowledged there will "belt tightening" in departmental budgets coming.

Reporters repeatedly asked if public money being spent on the energy price cap freeze explains how the government can say that there won't be spending cuts, when belts are expected to be tightened.

Given the size of the intervention in the energy markets, there would still be capacity for significant cuts in some budgets, while allowing the PM to accurately say that government spending overall has increased.

At PMQs, Sir Keir said the prime minister needs to "stop ducking responsibility".

He told her: "Does she think the public will ever forgive the Conservative Party if they keep on defending this madness and go ahead with their kamikaze budget?"

Ms Truss hit back, asking whether Labour would reverse the government's support for energy bills.

The PM said: "We are seeing interest rates rising globally in the face of Putin's appalling war in Ukraine.

"What we are making sure is that we protect our economy at this very difficult time internationally.

"As a result of our action - and this has been independently corroborated - we will see higher growth and lower inflation."

In the House of Commons later, answering questions from MPs on the economic situation, Chief Secretary to the Treasury Chris Philp said there would be "no real term cuts" to public spending.

"We do plan iron discipline when it comes to spending restraint," he added.

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Treasury Select Committee chair Mel Stride called on the Treasury to "come forward with a further rowing back" on the tax announcements in the mini-budget.

Mr Stride, who is Conservative MP for Central Devon, said the Chancellor has "a huge challenge" reassuring the markets ahead of his 31 October announcement.

"He has to get the fiscal rules right, he has to come forward with spending restraint and revenue raisers that are politically deliverable," Mr Stride said.

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2022-10-12 16:21:31Z
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