£ 1 trilhão de pensões economizado por pouco como Truss & Kwarteng acusado de ir AWOL

PENSION funds holding £1trillion of British savings were narrowly saved from disaster yesterday after a day of chaos.

O Bank of England took unprecedented action to prevent a run on pension funds which could have triggered mass insolvencies.

The Bank of England took unprecedented action to save £1trillion of British savings, spending £1billion
The Bank of England took unprecedented action to save £1trillion of British savings, spending £1billion
PM Liz Truss and Chancellor Kwasi Kwarteng were accused of going AWOL

PM Liz Truss and Chancellor Kwasi Kwarteng were accused of going AWOLCrédito: The Mega Agency
Ministers denied Chancellor Kwasi Kwarteng’s mini Budget last week was directly to blame

Ministers denied Chancellor Kwasi Kwarteng’s mini Budget last week was directly to blameCrédito: Alamy
Following the Mini-Budget on Friday the Pound dramatically fell
Following the Mini-Budget on Friday the Pound dramatically fell

Ministers denied Chancellor Kwasi Kwarteng'S mini Budget last week was directly to blame, and vowed to press ahead with £45billion de tax cuts.

The Bank of England was forced into emergency action yesterday to stop a Northern Rock-style run of pension funds.

Enormes chamas irrompem enquanto um grande incêndio atinge armazém de Illinois Liz Truss and Chancellor Kwasi Kwarteng were accused of going AWOL following a barrage of criticism over last week’s mini Budget.

Trabalho and some Tory MPs demanded the reversal of the abolition of the 45p top rate of income tax — which is being funded by Government debt and is blamed for spooking the markets.

Yesterday the Bank spent £1billion in a bid to calm nerves.

It also said it is prepared to buy up £65billion of long-term government debt — known as gilts — at “an urgent pace” to help restore “orderly market conditions”.

It is the first time the Bank has had to do so purely because markets were being so dysfunctional.

Mortgage panic continued with lenders pulling 1,000 deals in 24 hours amid fears interest rates could reach six per cent.

Experts said a perfect storm of higher rates, inflation and the risk of recession could see house prices plunge by ten to 15 por cento.

Neither Ms Truss nor Mr Kwarteng was seen in public yesterday.

But allies insisted the Chancellor would not resign, and that he and Ms Truss would plough on with all of last week’s £45billion of tax cuts. On a day of high drama, pension funds warned the Bank that they were just hours from going bust.

These funds owned around £1trillion of gilts.

House prices could plunge as a result of interest rates rising
House prices could plunge as a result of interest rates rising
It was feared the Bank of England could hike rates to 6% no 2023
It was feared the Bank of England could hike rates to 6% no 2023

But they were facing a run on funds because the prices of long-term gilts had halved in four days.

Fears around the health of the economy had caused the biggest sell-off of long-term government debt since the 1990s recession.

The chaos below the surface of the economy was similar to that seen with Northern Rock in the early days of the 2007/8 crise financeira.

The fear was the pension funds’ forced sell-off of gilts would result in a downward spiral of the market.

This would have had a devastating effect as value of gilts affects the prices of mortgages and hipotecas de depósito foram lançadas pelos principais bancos, incluindo Natwest e Barclays.

Opponents said the Government had caused the crisis by not setting out exactly how it would pay for last week’s measures, which also include a 1p cut to income tax for everyone, and slashing stamp duty.

The Chancellor and PM were last night under pressure to bring forward by eight weeks a blueprint to address the debt mountain.

Totally AWOL

Cabinet ministers will be asked to find efficiency savings from their Whitehall budgets to reduce the amount of borrowing, which could mean cuts to public services.

Yet Ms Truss had promised there would be no return to austerity in her Tory leadership bid during the summer. A Tory MP said their WhatsApp groups were “lighting up like a Christmas tree” last night with the weak reaction from the heart of Government.

One MP said: “Where on earth is the PM and Chancellor to reassure people?” Another replied: “Totally AWOL”.

Ms Truss faces a growing backlash from across her party, with some urging her to reverse her mini Budget plans.

Senior Tory MP Simon Hoare disse: “In the words of (ex-Chancellor) Norman Lamont on 1992’s Black Wednesday, ‘Today has been a very difficult day’.

“These are not circumstances beyond the control of Govt/Treasury. They were authored there. This inept madness cannot go on.”

Treasury sources dismissed suggestions Mr Kwarteng would quit as Chancellor after just three weeks.

The Bank of England has also faced stinging criticism for the current weakness of the Pound.

Em particular, it has been accused of being too slow to raise interest rates in recent months.

But yesterday it finally hit the panic button when the threat to pension funds became clear.

These are not circumstances beyond the control of Govt/Treasury. They were authored there. This inept madness cannot go on.

Senior Tory MP Simon Hoare

Paul Dales, chief UK economist at Capital Economics, disse: “This shows the Bank is going to do all it can to prevent a financial crisis and it is already working.

The Bank of England Governor Andrew Bailey speaks to the media

The Bank of England Governor Andrew Bailey speaks to the mediaCrédito: EPA


WHAT just happened?
The Bank of England yesterday made a dramatic intervention in the financial markets by saying it would buy government bonds, which are known as gilts.

It was the first time in history the Bank has bought government debt in this way.

Why did they do it?
The central bank was forced to act after a huge sell-off in the gilts, which are normally considered a super safe investment.

Pension funds own around £1trillion worth of government bonds. Following the fall in the value of the Pound and concerns over inflation, the value of the gilts fell — leaving pension funds at risk of going bust.

Why would the pension funds go bust?
A halving in the value of some types of gilts over the past four days meant they were suddenly worth much less than they were valued at in agreement between banks and the pension funds themselves, breaching their contracts.

Como um resultado, the banks were demanding pension funds find money to pay the difference. Por sua vez, this prompted the pension funds to sell other government bonds to raise this cash.

This drove down the value of the gilts even ­further — effectively locking them in a vicious cycle of falling gilt prices, and the need to sell more and more assets.

The danger was the ­pension funds would not be able to cover their losses — and would have then gone insolvent.

What would have happened next if the Bank of England did nothing?
Instability of the pension market would have a huge ripple effect across the financial system — but the biggest risk was that there was a fire sale of government gilts, which are used to price everything from mortgages to loans.

The Bank of England was worried that if the gilt market was distorted, it would upend the whole country.

Did the Bank’s plan work?
sim, almost immediately the yield (com o ex-clube Odense Boldklub) sobre 30- year government bonds fell back from 4.8 por cento para 4.1 por cento.

It has since stabilised the gilt market and will hopefully give pension funds some breathing space.

How will this impact interest rates?
Because the Bank has acted so decisively, economists reckon it will not have to take such drastic action on raising interest rates now.

Economists at Pantheon Economics say that the Bank will likely raise interest rates to four per cent by February and stop there, rather than keep hiking to six per cent as feared.

What does it mean for my pension?

Anyone with a private pension is not directly affected by the Bank of England’s bond buying today.

It has stepped in to ensure that the way ­pension cash is collectively invested remains stable — and is not affected by ­dramatic movements in the markets after the Pound plunged.

“While this is welcome, the fact that it needed to be done in the first place shows that UK markets are in a perilous position. It wouldn’t be a huge surprise if another problem in the financial markets popped up before long.”

The yield on government debts had jumped to the highest levels since 2008. Yields rise when bond prices fall because an investor wants more reward for backing a riskier financial product.

The danger was that the bonds owned by pension funds were rapidly slumping below what their accounts said they were worth. This prompted demands for cash to top-up the difference, leading them to sell billions of government debt to raise cash.

The problem was this caused a vicious cycle because the more government debt they sold, the weaker the gilt market became with prices plunging and yields rising.

As a result the pension funds would have had to keep selling into a market that was in a negative spiral.

Sources said that the Bank was concerned that pension funds would trigger a “fire sale” of government debt which would keep pushing the price lower to the point that there would no longer be any buyers.

A crash of the gilt market would be devastating as interest rates and borrowing are priced against it. The Bank’s intervention was designed to calm the market and stop the forced selling of gilts for a short period.

Becky O’Connor, head of pensions and savings at Interactive Investor, disse: “The Bank’s move was in part to support defined benefit pension schemes that have been under significant pressure to generate cash quickly, risking a vicious cycle where they would have had to sell more gilts, pushing up yields further.

“It’s another alarming unintended consequence of the mini Budget. While it shouldn’t worry pension savers unduly, it does show how economic shockwaves can damage financial stability of many parts of the market that sit behind the financial products and services we all rely on.”

It is also a stark U-turn for the Bank which five days ago said it would start selling off debt that it had accumulated during the pandemia and financial crisis.


By Ryan Sabey and Natasha Clark

A TREASURY minister last night insisted the Government would not U-turn on the £45billion of tax cuts announced in the mini Budget.

Andrew Griffith, financial secretary to the Treasury, refused to accept that the fall in the value of the pound and the surge in the cost of Government borrowing was because investors had lost confidence.

Asked if the Government was to blame for the turmoil on the markets, ele disse Notícias da Sky: “We are seeing the same impact of Coloque em'S guerra no Ucrânia cascading through things like the cost of energy, some of the supply side implications of that.

“That’s impacting every major economy where you’re seeing interest rates going up as well.”

When pressed on whether or not the UK economy was suffering worse than other countries, ele disse: “Every major economy is dealing with exactly these issues.

“We think they are the right plans because those plans make our economy competitive.

“Get on and deliver that plan. That’s what I, the Chancellor and my colleagues in government are focused on, is getting on and delivering that growth. That is what is going to allow consumers to benefit.

"Enquanto isso, we are protecting every household and every business from the biggest macro shock out there at the moment, which is the cost of energy.”

But one backbencher said: “In essence, what happened last week should be deleted from the record. They need to start again.” Another Tory MP questioned PM Liz Truss’s long-term future in Nº 10.

Ele disse: “If I were her, I wouldn’t be inviting people to Downing Street for Natal lunch.”

But others called for calm. One cabinet minister said: “People need to hold their nerve. Markets move, especially with big change. But change was and is needed.”

enquanto isso, Labour leader Sir Keir Starmer has demanded Parliament be recalled to discuss the fiasco.