By Stefan Boscia
Kwasi Kwarteng was warned by senior civil servants about a potential adverse market reaction to measures announced in the catastrophic mini-Budget, it has been revealed.
Beth Russell, second permanent secretary at the Treasury, today said she told the former chancellor that financing £50bn of tax cuts through borrowing could spook the markets.
Financial markets reacted poorly to the package, leading to the pound plummeting and a deep sell-off in the UK bond market.
Kwarteng told the Financial Times last week that he and ex-PM Liz Truss “were too impatient” and that they “blew it”.
Russell told MPs on parliament’sTreasury Select Committee that “we gave all the advice we should have done to ministers on the economic and fiscal backdrop” in the lead-up to the mini-Budget.
She said Kwarteng was warned about “the market position and particularly around the financing requirement, which was a big issue because of the cost of the measures”.
Almost all of Kwarteng’s tax cuts were scrapped, with new chancellor Jeremy Hunt instead hiking the tax burden to the highest level in 70 years.
The mini-Budget and subsequent U-turn was the main cause of Truss’ downfall after just 49 days in office, with the ex-PM forced to dump her entire economic strategy just weeks into the job.
The pound has since recovered against the US dollar, while bond yields are now at similar levels to before the mini-Budget.
Rishi Sunak and Hunt have instead followed a path of fiscal consolidation, hiking taxes for everyone last month and signalling future spending cuts.
Kwarteng said over the weekend that “people got carried away, myself included”.
“There was no tactical subtlety whatsoever,” he said.
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