UK chancellor Kwasi Kwarteng has told leading bankers, insurers and asset managers he is “confident” that his economic strategy will work, as he tried to reassure the City of London after days of turmoil in financial markets.
The meeting between Kwarteng and the heads of companies, including Aviva, Legal and General, Royal London, BlackRock, Fidelity and JPMorgan, came the day after sterling hit a record low against the US dollar in response to the chancellor’s mini-Budget unveiled last week.
Kwarteng used the meeting, which was ostensibly scheduled to discuss regulatory reforms in the City, to try and reassure top bankers and investors that he had a grip on the situation.
The chancellor said he was meeting Andrew Bailey, governor of the Bank of England, on a daily basis to try to stabilise markets. “We’re working closely together,” he said.
The pound rose against the dollar on Tuesday following its steep falls the previous day, but remained close to its lowest levels since 1985 at $1.08. UK government borrowing costs are on course for one of their biggest-ever monthly rises, while mortgage lenders on Monday stopped offering new home loans because of market volatility.
Kwarteng said he remained committed to bringing debt under control and insisted that his £45bn of tax cuts — to be funded by borrowing — would boost growth in the medium term.
“We are confident in our long-term strategy to drive economic growth through tax cuts and supply side reform,” he said. “Supply side reforms are critical — increasing capacity brings down prices.”
In a readout of the meeting issued by the Treasury, Kwarteng also told the City leaders: “We are committed to fiscal discipline, and won’t reopen the spending review.”
He said that he would publish “a credible plan to get debt to gross domestic product falling” on November 23, alongside forecasts by the independent Office for Budget Responsibility.
“We have responded in the immediate term with an expansionary fiscal stance on energy because we had to,” said Kwarteng. “With two exogenous shocks — Covid-19 and Ukraine — we had to intervene. Our 70-year high tax burden was also unsustainable.
“I’m confident that with our growth plan and the upcoming medium-term fiscal plan — with close co-operation with the Bank — our approach will work.”
The chancellor also said that a so-called Big Bang 2.0 reform package for the City was a top priority. The details are expected to be set out in the coming weeks.
Kwarteng has already announced the scrapping of a cap on bankers’ bonuses and told the financial services leaders that he would “sort out” Solvency II, the EU regulations covering the insurance sector.