Kwasi Kwarteng's Mini-Budget Did Cause Economic Chaos, Bank Of England Confirms

The government has insisted that global factors were responsible for the plummeting pound and soaring interest rates.
Kwasi Kwarteng at the Conservative conference in Birmingham.
Kwasi Kwarteng at the Conservative conference in Birmingham.
Aaron Chown via PA Wire/PA Images

Kwasi Kwarteng’s mini-budget was definitely to blame for the subsequent economic chaos which hit the UK, the Bank of England has confirmed.

Ministers have insisted that the plummeting value of the pound and spike in interest rates was down to global factors like the war in Ukraine.

But in a letter to Tory MP Mel Stride, the chairman of the Treasury select committee, Bank of England deputy governor Sir John Cunliffe produced data linking the crisis to the chancellor’s Commons statement on September 23.

It showed that the cost of government borrowing spiked in the immediate aftermath of the mini-budget, and only started to come down again after the Bank made ÂŁ65 billion available to bail out the UK pensions industry.

By contrast, the cost of government borrowing in America and the EU remained relatively flat while Britain’s financial markets went into meltdown.

The Bank of England graph showing the effect of the mini-budget
The Bank of England graph showing the effect of the mini-budget
Bank of England

The knock-on effect saw mortgage rates for homeowners go up, with the average cost of a two-year fixed rate deal reaching 6 per cent for the first time since 2008.

Pat McFadden, Labour’s shadow chief secretary to the Treasury, said: “This shows once and for all that the Tories’ kamikaze budget is responsible for the economic chaos we have seen, leaving people with skyrocketing mortgage rates.

“This is a Tory crisis made in Downing Street. The government’s reckless mistakes show they cannot be trusted to manage the public finances.

“They must revisit this budget as soon as possible and urgently publish Office for Budget Responsibility forecasts tomorrow when they receive them.”

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