The Bank of England has been forced once again to take emergency action to ensure the UK’s “financial stability” as the fall-out from Kwasi Kwarteng’s mini-budget continues.
In an announcement on Tuesday morning, the Bank said it would buy up more government bonds in an attempt to prevent mortgage rates from soaring even further and stabilise the pensions industry.
It comes after the sell-off in government bonds – also known as gilts – resumed on Monday as investor concerns about the state of the British economy failed to subside.
The Bank first intervened with emergency action on September 28 after Kwasi Kwarteng’s mini-budget - which included £45 billion-worth of unfunded tax cuts - caused market chaos and left some pension funds close to collapse.
It said the measures helped the UK narrowly avoid a market meltdown caused by concerns over the chancellor’s plans.
The Bank ramped up its emergency action on Monday to avoid a cliff-edge when the programme draws to a close on Friday
Kwarteng was forced to bring forward his plan to bring down the national debt from November 23 to October 31 in an attempt to reassure investors.
But the move failed to calm the markets and the Bank took further action on Tuesday.
Pat McFadden, Labour’s shadow chief secretary to the Treasury, said the need for the Bank to step in for a second day running showed Kwarteng had “lost all credibility and control”.
“This is a Tory crisis made in Downing Street, being paid for by working people,” he said.
It comes as the Institute for Fiscal Studies warned Kwarteng would be forced to make “big and painful” spending cuts worth £60bn if he stuck to his current plans.
Paul Johnson, the director of the respected think-tank, said: “Try as hard as we can, given plausible forecasts, we can’t see how to get public finances on a sustainable path without big, painful spending cuts or a reversal of £43bn tax cuts just announced.
“The chancellor has a big job to reassure markets his mini-Budget spooked so badly.”