WE reveal how the financial turmoil unfolded as the pension industry shook, with The Bank of England taking unprecedented action to save £1trillion of British savings.
6AM : THE tone was set for a day of extraordinary drama when the BBC kicked off yesterday’s morning bulletins with a gloomy, and highly controversial, attack on the Government’s mini Budget by the International Monetary Fund.
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The IMF, which is led by an ex-EU official, accused Chancellor Kwasi Kwarteng of destabilising the economy with tax cuts for the rich which spread “inequality”.
The intervention with a G7 economy is highly unusual — and triggered a furious response from some Tory MPs.
John Redwood accused the IMF of jumping the gun, saying the mini Budget plans would take time to bed in.
Nevertheless, the BBC lapped it up, and it set the tone for a feverish day on the money markets . . . and a near-crisis for pension funds.
7AM: The Pound, which has been struggling against a strong dollar for months, was falling again.
After dipping to an all-time low against the dollar, of $1.03 earlier this week, before rallying slightly, it was back down below $1.07.
8AM : An hour later, the FTSE 100 was falling. Even top economist Julian Jessop, a supporter of the PM’s economic plans, suggested that the economy was at risk of a “doom loop” of falling currency and rising interest rates.
10AM : Chancellor Kwasi Kwarteng and his Financial Secretary Andrew Griffith held crisis talks with banks including Morgan Stanley, JP Morgan and UBS. They were meant to be focused on how the Government would cut red tape to get Britain booming again.
But Mr Kwarteng was forced to calm nerves, insisting ministers were still committed to fiscal responsibility and getting debt under control.
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Behind the scenes, the Treasury was deep in discussions with the independent Bank of England about the market chaos.
11AM : In a bombshell statement, the Bank of England announced there was a “material risk” to the stability of the UK economy if it did not step in.
Just days after saying it would be selling off its government debt, the Bank announced it would in fact be BUYING around £65billion of so-called gilts, over the next two weeks,
The aim was to stop their value plummeting, which would imperil pension funds that own £1trillion of the debt. The Treasury said it was working in lockstep with the Bank — and supported its decision to intervene.
12PM: The Pound had dropped and rebounded again — but still appeared very unstable.
Any more damage
The value of the bonds bounced back and gilt costs stabilised as the Bank’s plan had the desired effect.
But the fact that such a major intervention had been required sparked panic among some Tory MPs, just days away from their first party conference with their new leader.
High Peak MP Robert Largan was among the first to put his head above the parapet and call for the Chancellor to ditch plans to scrap the 45p top rate of tax.
He said it was “a mistake” and ministers had to take a “pragmatic, fiscally responsible approach”.
2PM: As social media lit up with journalists relaying the fears of nervous Tory MPs, it was the turn of Labour leader Sir Keir Starmer to try to twist the knife.
“We absolutely need now for Parliament to be recalled,” he told TalkTV in Liverpool, demanding that Mr Kwarteng come back to the Commons to abandon his tax cuts “before any more damage is done”.
3PM : The epic scale of what was at stake became apparent as it emerged pension funds would likely have COLLAPSED — and spread contagion throughout the economy — had the Bank of England not intervened.
The revelation that Britain had been hours away from a Northern Rock-style meltdown left Tory MPs privately asking: Can the Chancellor survive?
Allies of Mr Kwarteng were quick to try to snuff out the speculation and insisted he was going nowhere.
4PM: Liz Truss took a call with Ukrainian President Volodymyr Zelensky. Cynical Westminster watchers noted that Boris Johnson would regularly call his Kyiv pal when in the midst of a domestic crisis.
With traders crying out for reassurance, Financial Secretary Mr Griffith was wheeled on to TV. Rejecting calls to row back on the mini Budget, he said: “We think they are the right plans because those plans make our economy competitive.
“That’s what I, the Chancellor and colleagues in Government are focused on — getting on and delivering that growth.”
4.30PM: The Spectator magazine — the bible of the Tory Party — published its front cover under the sarcastic headline “What Crisis?”. It featured a cartoon Truss and Kwarteng enjoying a drink while the world burns around them.
It quickly did the rounds on Tory MPs’ WhatsApp groups.
5PM: By the time the markets closed, the FTSE had recovered losses and the Pound had rebounded to $1.09, leaving the Treasury breathing a sigh of relief.
But jittery MPs came out to demand Mr Kwarteng bring forward details of his plans for the UK’s mounting debts, saying there was no way the economy would be able to wait until November.
More Tories, including former Chief Whip Julian Smith, went public too, urging changes to the Budget laid out just five days ago.
Former Chancellor Ken Clarke added that the Budget was a “serious mistake”.
6PM: Ministers had been kicked into gear, and were hitting the airwaves. Welsh Secretary Robert Buckland told everyone to “remain very steady and calm”.
Last night all eyes remained on Liz Truss to see if she would break cover. Battered, bruised but by no means beaten, she goes to bed having endured the most challenging day of her premiership — so far.
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