Bank of England in £65bn scramble to avert financial crisis
The Bank of England has been forced into emergency action to halt a run on Britain’s pension funds after the impact of Kwasi Kwarteng’s ill-received mini budget prompted fears of a 2008-style financial crisis.
Threadneedle Street said the fallout from a dramatic rise in government borrowing costs since the chancellor’s statement had left it with no choice but to intervene to protect the UK’s financial system.
City sources said the surprise move, less than a week after Kwarteng’s unfunded tax giveaways, was needed to halt a “doom loop” in the bond markets that risked draining pension funds of cash and leaving them at risk of insolvency.
The Bank was concerned that it threatened the financial health of Britain’s biggest pensions and insurance companies, which together manage trillions of pounds of people’s cash.
In a reversal of a policy position announced on the day before Kwarteng’s fiscal event, the Bank said it was setting aside £65bn to buy bonds over the next 13 working days to ease pressure on pension funds and insurance companies.
Liz Truss was facing calls from jittery Conservative MPs on Wednesday to sack Kwarteng or face a mutiny after the Bank of England’s emergency intervention prompted comparisons with Black Wednesday, the day in September 1992 when John Major’s Tory government was humbled by speculators led by George Soros. Tory MPs claimed that Kwarteng would have to resign for the party to survive the financial crisis as they urged the prime minister to reverse her plan to scrap the top 45p tax rate, which they said had gone down badly with the public.
Labour leader Keir Starmer accused the government of “losing control of the economy” and called for parliament to be recalled ahead of the Conservative party’s
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