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Pound sinks to record low against the dollar as chancellor and prime minister defend mini-budget | Business News

The pound has fallen to a record low against the dollar amid a fresh investor rush towards the US currency globally.

Sterling slipped by nearly 5% early on Monday to $1.0327 – building on fresh 1985 lows seen on Friday after UK chancellor Kwasi Kwarteng unveiled the biggest programme of tax cuts for 50 years.

The market delivered a verdict on whether the public finances would be sustainable following the £45bn tax-slashing package.

The pound plunged below its all-time low against the greenback – set in February 1985 – of $1.054 early on Monday in Asian trading, fuelling fears that parity was even possible.

Cost of living latest

It later stabilised around $1.05405 – still 3% below the previous session’s close and 7% down on where it had stood early on Friday morning before the mini-budget.

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The government’s growth plan was clearly the catalyst for Friday’s plunge but traders said it had since intensified the focus more widely as the dollar also shot up against a basket of other international currencies.

Joseph Capurso, head of international economics at Commonwealth Bank of Australia, wrote: “The poor situation in the UK exacerbates support for the USD, (which) can track higher again this week.

“If a sense of crisis about the world economy were to emerge, the USD could jump significantly.”

The euro fell to fresh 20-year lows versus the greenback amid growing recession fears linked to the war in Ukraine and in the wake of Italy’s elections that will see a far-right leader become the country’s new PM.

The Japanese yen was among other currencies in focus.

The trouble for both the UK and Europe more generally is that weak currencies raise dollar denominated import costs, potentially fuelling inflation further.

The UK also faces goods from the continent becoming more expensive because its value has also slipped sharply versus the euro – standing at €1.0948.

Naeem Aslam, chief market analyst at Avatrade, believed sterling would fall back again in European dealing.

“The reality is that the cost of living crisis is going to become even worse as the currency has fallen this much.

“We believe that the GBP/USD pair could easily reach parity this week, if not in the coming days, given the current momentum that we are experiencing in the market.

“In order to save the currency from a huge disaster, the Bank of England is now likely to increase the interest rate by a full percentage point, and it is highly possible that the Bank of England does this in an unprecedented fashion.

Both the chancellor and Prime Minister Liz Truss defended their programme.

In an interview with CNN on Sunday, Ms Truss rejected comparisons with US President Joe Biden’s approach after he said he was “sick and tired of trickle-down economics”.

She said: “We all need to decide what the tax rates are in our own country, but my view is we absolutely need to be incentivising growth at what is a very, very difficult time for the global economy.”

Asked whether she was “recklessly running up the deficit,” Ms Truss said: “I don’t really accept the premise of the question at all.”

Mr Kwarteng suggested his announcements were just the beginning of the government’s agenda to revive the UK’s stagnant economy.

“We’ve only been here 19 days. I want to see, over the next year, people retain more of their income because I believe that it’s the British people that are going to drive this economy,” he told the BBC’s Sunday With Laura Kuenssberg programme.

Read more: Mini-budget: PM going for broke in hope of winning big – but has she misjudged the public mood? | Beth Rigby

Mr Kwarteng is reportedly considering abolishing a charge for parents who earn more than £50,000 and claim child benefit, increasing the annual allowances on pension pots and a tax break for people who stay at home to care for children or loved ones.

If sterling fell to parity with the US dollar, it could trigger a rebellion among Tory backbenchers who could refuse to vote for the government’s finance bill or submit letters of no confidence, the Daily Telegraph reported, citing backers and critics of the prime minister.

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Truss and Kwarteng defend plans

Asked whether he was nervous about the dropping pound, falling stock markets and rising cost of government borrowing, Mr Kwarteng said: “We’ve got to have a much more front-footed approach to growth and that’s what my Friday statement was all about.

“I think that if we can get some of the reforms… if we get business back on its feet, we can get this country moving and we can grow our economy, and that’s what my focus is 100% about.”

He refused to comment on market movements, saying: “I’ve been focused on the longer term and the medium term, and I think it was absolutely necessary that we had a long-term growth plan.”

Great debate
Truss to face Starmer at the despatch box in PMQs and brief her cabinet on her first full day as prime minister | Politics News

New Prime Minister Liz Truss will go head-to-head with Sir Keir Starmer for the first time today as the pair cross swords in Prime Minister’s Questions at noon.

On Tuesday, in her first speech as prime minister, Ms Truss said the UK would “ride out the storm” caused by the war in Ukraine and promised a package of reforms to “transform Britain” including measures to boost growth and put the NHS on a “firm footing”.

She also pledged to tackle soaring energy bills as an immediate priority. She is expected to announce a plan to freeze bills later in the week.

Liz Truss announces her cabinet – Politics latest

It has been reported that the freeze will be around £2,500 – more than £500 above the current price cap but £1,000 less than the limit due to be imposed in October.

Labour leader Sir Keir will likely probe Ms Truss on her prospective energy proposals at PMQs.

His party has called for the energy price cap to be frozen now, which would be paid for introducing a new windfall tax on oil and gas companies’ profits without a “major tax loophole” it claims the government’s current windfall tax has.

After giving her speech outside Number 10, Ms Truss then appointed her cabinet team who will gather for their first meeting this morning.

Supporters of leadership rival Rishi Sunak – including former justice secretary Dominic Raab, former transport secretary Grant Shapps and former health secretary Steve Barclay – were removed from their senior government positions.

Loyal allies of Ms Truss were rewarded for their long-term support, including friend Therese Coffey who was promoted from work and pensions secretary to health secretary and deputy prime minister.

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Big promises from the new PM

Elsewhere, former business secretary Kwasi Kwarteng was elevated to chancellor – and Sky News understands in the first few hours of the job he summoned the bosses of Britain’s biggest banks for talks today.

Posting on social media, Mr Kwarteng said being offered the position was “the honour of a lifetime”.

Read more: Who is Kwasi Kwarteng?

Former attorney general Suella Braverman was appointed home secretary following Priti Patel’s departure, while James Cleverly was promoted to the position of foreign secretary which Ms Truss had previously held.

Mr Cleverly had worked as a minister in the foreign office for two years, acting effectively as Ms Truss’s deputy.

Former minister of state for Brexit opportunities and government efficiency Jacob Rees-Mogg was promoted to business secretary, while Former Northern Ireland secretary Brandon Lewis’s loyalty to Ms Truss saw him awarded the justice brief.

Former chancellor of the Duchy of Lancaster and policing minister Kit Malthouse was given the education beat, while former international trade secretary Anne-Marie Trevelyan will deal with the autumn of planned railway strikes in her new role as transport secretary.

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Who are Liz Truss’s top three cabinet members?

The PM’s press secretary said Ms Truss had appointed a cabinet “which represents the depth and breadth of talent in the Conservative Party” and which will “unify the party, get our economy growing and deliver for the British people”.

More junior ministers are expected to be appointed today.

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Read more: The conundrum facing Liz Truss could trigger ‘existential threat’ to Conservative Party
Truss needs to put her gaffe-prone days as foreign secretary behind her if she wants international respect

Shortly after making her first address outside Downing Street, the new PM made her first call – as promised – to Ukrainian President Volodymyr Zelenskyy.

In a statement after they had spoken, Ms Truss said: “Ukraine can depend on the UK for support in the long term.”

Meanwhile, in a post on social media, President Zelenskyy said he thanked Ms Truss for the UK’s continued support for Ukraine and invited her to visit the country.

Ms Truss also spoke to US President Joe Biden.

President Biden offered his congratulations, saying he looked forward to “deepening the special relationship between our countries and working in close cooperation on global challenges, including continued support for Ukraine as it defends itself against Russian aggression”.

Ms Truss said she and Mr Biden discussed working together on shared challenges such as the economic impact of the war in Ukraine and promised to build on “UK-US links”.

Day one: New Prime Minister Liz Truss to see Queen in Scotland and unveil energy price freeze that could last until 2024 | Politics News

Liz Truss is making a frantic 1,000-mile dash to see the Queen before launching her premiership with a £100bn energy price freeze that could last until the next election.

She is flying 500 miles each way to Balmoral to be handed the keys to No 10 by the monarch before addressing the nation from Downing Street with a pledge to slash household bills.

Politics Hub live updates: Older Tory voters ‘have gone off’ new PM

What’s happening today?

First up, we’ll be hearing from outgoing prime minister Boris Johnson at around 7.30am as he gives his farewell address outside Downing Street.

He and Ms Truss will then both fly to Aberdeen on separate planes for their meetings with the monarch.

Mr Johnson will get there first at 11.20am and will formally hand in his resignation to the Queen.

Once he has left, his successor will be invited in for her first private audience with the monarch. She will get to Balmoral for around 12.10pm, when she will be appointed Britain’s next prime minister and asked to form an administration.

After her half an hour with the Queen, Ms Truss is expected to fly back to London.

There she’ll give her first address as prime minister at about 4pm.

She will be greeted by the cabinet secretary at the door of Number 10 and will be clapped in by staff before heading into the Cabinet Room to receive security and intelligence briefings from civil servants.

The nuclear codes will be handed over to her and she will write “letters of last resort” to commanders of submarines carrying Trident nuclear missiles with orders on what to do if the government has been wiped out in a nuclear attack.

Her emergency package to tackle the cost of living crisis is expected to include freezing energy bills for homes and businesses until January next year at least – and possibly until 2024.

It would mean that for a typical household, energy bills would be frozen at just under £2,000. The initial cost to taxpayers would be £40bn – to be paid for by more government borrowing.

Over the past 24 hours, Truss allies have been locked in talks with energy bosses, thrashing out details of the price freeze, which if it lasts two years could eventually cost £100bn.

Government ministers are expected to claim the new PM’s plan is more generous than the price freeze proposed by Labour, but she is expected to reject their demand for a windfall tax.

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Backbench Boris: What will outgoing PM do now?

Who will be in the cabinet?

The big cabinet jobs have long been settled and will be filled by Ms Truss’s closest allies, including Kwasi Kwarteng as chancellor, James Cleverly as foreign secretary and Therese Coffey tipped for health secretary.

After Priti Patel quit as home secretary, she is expected to be replaced by Suella Braverman. Culture secretary and Boris Johnson cheerleader Nadine Dorries is expected to follow Ms Patel in resigning.

But on policy issues, dealing with the cost of living crisis is the new prime minister’s most urgent priority. In her speech after she was declared Tory leader, she vowed to deal with people’s energy bills.

At the moment, household energy bills are capped at £1,971 – rising to £3,549 in October. The price cap is due to rise again in January when bills are forecast to pass £5,000.

But under the new PM’s price freeze plan, the government would directly intervene in the wholesale energy market, subsidising the cost of gas bought by electricity generators and suppliers.

That would mean taxpayers taking on the risk of the surging wholesale gas prices while subsidising the cost of energy for hard-pressed households and businesses currently fearing bankruptcy.

Read more:
Beth Rigby analysis: New PM already facing a crucial few weeks
Even Sweden’s PM has been tweeting the wrong Liz Truss
What does Westminster think of Liz Truss’s victory?

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What will be in the new PM’s in-tray?

Plan to be outlined as early as Thursday

After the new prime minister’s pledge of help on the steps of No 10, full details are expected from either Ms Truss or her new chancellor Mr Kwarteng as early as this Thursday.

Her Downing Street address on return from Balmoral will also include pledges on tax cuts and moves to tackle the crisis facing the NHS. Allies are describing her strategy as a “shock and awe” approach.

Besides her policy initiatives, the new PM faces the task of uniting her bitterly divided party. After her 57%-43% victory over Rishi Sunak, many Tory MPs are urging her to heal the wounds of the leadership contest.

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Sunak supporter and former cabinet minister Theresa Villiers told Sky News she would now support Ms Truss’s policies, such as the cut to National Insurance that was bitterly attacked by the former chancellor.

But Ms Villiers warned: “It will be really important to ensure that whatever decisions are taken on tax don’t impact on inflation or add excessively to borrowing.”

On energy bills, she said: “There is a case for some more broadly based support as well, targeting it towards those on low incomes.”

John Penrose, who resigned from his government job over Mr Johnson’s partygate conduct, said Ms Truss had a “clear win”, but added: “We’ll have to wait and see if she can deliver, but she said the right things.”

And on energy bills, 1922 Committee treasurer Sir Geoffrey Clifton-Brown told Sky News: “I wouldn’t give a very big package to everybody, because that’s simply racking up our already huge debt and is going to have to be paid back some time.”

Online Safety Bill campaigners join forces to urge next prime minister to prioritise new legislation | UK News

A group of campaigners, survivors and families affected by abuse on social media have written to the Tory leadership candidates to urge the next prime minister to prioritise the Online Safety Bill.

Danielle Armitage is one of those who have signed the open letter addressed to the candidates.

She was only 14-years-old when she was groomed while playing an online interactive game for children.

The man claimed to be 16 years old, however he was in fact in his late 40s at the time.

Ms Armitage, who has waived her anonymity to warn others about what happened to her, told Sky News that initially “he arranged to meet me after school”.

“I got into his car and discovered that he was a lot older than what he said. I just froze from that point,” she said.

He drove Ms Armitage to a forest, and that’s when the first sexual assault took place.

More on Online Safety Bill

The situation then “escalated”, and subsequent assaults became more violent.

Ms Armitage said: “He said if I spoke out or told anybody, he’d threaten my family. I felt like I had to see him again.”

She added: “By coming together and speaking out, we want the next prime minister to know what happened to us was avoidable.

“It’s in their hands to protect our children, and to make sure there are safety measures in place for children using the internet.”

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March 2022: What is the Online Safety Bill?

Campaigners are calling on Liz Truss and Rishi Sunak to resist calls to water down the planned internet safety laws and commit to delivering them without delay.

The proposed legislation had been scheduled to make its way through parliament before the summer recess but, due to competing demands in the chamber, has now been delayed until a new prime minister is in place.

It aims to regulate social platforms, to ensure they protect their users from harmful content, with fines and other potential penalties for those who fail to do so.

There are concerns in some quarters that the bill will damage free speech and enable censorship, while others believe it does not go far enough to curb the spread of harmful material online.

In their letter, the campaigners said it is “upsetting” to see some opponents of the bill “rejoicing at this delay and calling for the legislation to be scrapped altogether”.

The coalition is made up of 15 grooming and sexual abuse survivors, and parents of children who died by suicide after seeing harmful content online.

“We have long campaigned for laws to better protect children online and were frustrated and disappointed to see the Online Safety Bill delayed rather than pass through parliament last month,” the letter reads.

“With every month the legislation is delayed, the NSPCC say we will see more than 3,500 online child sexual abuse crimes against children. These offences have increased tenfold in just a decade. And bullying, pro-anorexia posts, harmful self-harm and suicide content continue to fill children’s streams.

“This level of harm against children would not be accepted in any other industry, which is why the next prime minister must make the Online Safety Bill a national priority and pave the way for urgent regulation to begin.”

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Concerns have been raised by experts on all sides of the debate around the bill after changes in government and ministers with different priorities overseeing the legislation.

In their letter, the campaigners insisted Ms Truss or Mr Sunak must move forward with the bill.

“Should you become the next prime minister, we urge you to keep the promise made to children and families and deliver a robust Online Safety Bill in full and without delay,” they said.

“Any watering down of the bill would be unacceptable and break the commitment made to children and families in the Conservative Party manifesto to deliver the strongest possible protections for children online.”

New PM hopeful pledges: Truss – ‘I’ll be your minister for the Union’. Sunak – ‘I’ll make Britain energy secure’ | Politics News

The two prime ministerial hopefuls have each pledged new commitments if elected – with Liz Truss saying she would take on the role of ‘minister for the Union’ and Rishi Sunak promising to make Britain more “energy secure”.

Ms Truss made a promise to uphold the United Kingdom as she hit out at politicians in the devolved administrations for playing “political games” rather than delivering for voters.

The Foreign Secretary confirmed if she succeeds in becoming prime minister, she would also be minister for the Union – a position created and held by Boris Johnson.

Her intervention came after she sparked controversy by denouncing Scotland’s First Minister Nicola Sturgeon as an “attention seeker” suggesting she would ignore her demands for a fresh referendum on independence.

Meanwhile, Mr Sunak has committed to introducing legislation to make the UK “energy independent” by 2045 at the latest, as he vowed to ensure there is no repeat of the looming winter crisis.

The former chancellor said if he took on the role at Number 10 on 5 September, he would put in place immediate support for households – particularly the most vulnerable – faced with soaring energy bills, as well as boosting North Sea gas production.

FILE - British Conservative Party member Rishi Sunak launches his campaign for the Conservative Party leadership, in London, Tuesday, July 12, 2022. Britain...s next prime minister will take office amid turmoil: galloping inflation, a war in Ukraine, souring relations with China, a changing climate. But not all those issues are getting equal attention as Foreign Secretary Liz Truss and former Treasury chief Sunak vie for the votes of about 180,000 Conservative Party members. (AP Photo/Alberto Pezzali, File)
Pic: Associated Press

He would do this, he said, by deregulation which would allow gas production to increase over the winter.

Regulations governing offshore wind, rooftop solar and nuclear would be overhauled to scale up supply, while fracking for shale gas would be allowed where there is local consent, he added.

‘We are not four separate nations’

In a statement, Ms Truss – who remains the clear favourite to succeed Mr Johnson – insisted she would govern for the whole UK “family” if she gains the keys to No 10.

“Having grown up in Paisley before going to a comprehensive school in Leeds, I consider myself a child of the Union. When I say I will deliver for our country, I mean all of it,” she said.

“For too long, people in parts of our United Kingdom have been let down by their devolved administrations playing political games instead of focusing on their priorities. If elected prime minister, I will deliver for our whole country.

“We are not four separate nations in an agreement of convenience, as some would have us believe. We are one great country which shares a history and institutions, but also family and friends, memories and values.”

Britain's Conservative Party leadership candidate Liz Truss speaks during a hustings event, part of the Conservative party leadership campaign, in Cheltenham, Britain, August 11, 2022. REUTERS/Toby Melville

Read more:
What have Truss and Sunak pledged for the country so far?

Ahead of a visit next week to Scotland, she accused the SNP of being preoccupied with the issue of independence when, she said, they should be focused on averting a recession.

However, the SNP hit back, saying she had “a total disregard for Scotland”.

Mr Sunk concentrated his efforts on the energy crisis, also pledging the creation of a new energy security task force and

He said he would take steps to radically reduce energy waste, with low cost measures to insulate millions of homes.

In the longer term, he promised to reform the energy market – which was no longer “fit for purpose” – to cut bills, with the establishment of a new dedicated energy department to lead the change.

Labour, meanwhile, was not impressed.

Ed Miliband, shadow climate change and net zero secretary, said he didn’t believe “the man who dragged his feet for months on the windfall tax, then introduced a massive loophole for oil and gas companies” could “tackle the bills crisis the British people face”.

He added: “The truth is, that both Rishi Sunak and Liz Truss just don’t get it when it comes to the scale of the emergency families are facing.”

Boris Johnson will not intervene in cost of living crisis as that is ‘for future prime minister’ | Politics News

Downing Street has rejected calls for Boris Johnson to summon an emergency COBRA meeting to deal with the cost of living crisis.

Gordon Brown, the former Labour prime minister, has called for Mr Johnson to meet with his two potential successors and thrash out a financial package of measures before energy bills soar in October.

He said people will go cold and hungry this winter if urgent action isn’t taken now, telling Sky News he was seeing poverty in his hometown in Fife “that I did not expect to see ever again in my lifetime“.

Politics Hub: Brown slams ‘vacuum’ at heart of government

But the prime minister’s spokesman said that although the government recognises the challenges facing struggling households, “by convention it is not for this prime minister to make major fiscal interventions during this period. It will be for a future prime minister.”

He also defended Mr Johnson for going on holiday as the Bank of England warned of a looming recession, saying the public understand it’s “not unusual for ministers to take time off during recess”.

Mr Johnson and Chancellor Nadhim Zahawi faced criticism for being missing in action amid grim forecasts that the UK is heading for the worst financial crisis since the 2008 crash, with interests rates soaring to their highest level in 27 years.

The PM’s spokesperson said Mr Johnson – who is now back in No 10 after his holiday in Slovenia – had spoken to Mr Zahawi while on his break to discuss measures that will be coming in this year.

He suggested Mr Johnson had no plans to sit down with Liz Truss or Rishi Sunak, saying: “Both candidates have spoken about new things they would introduce.”

(left to right) Prime Minister Boris Johnson, Chancellor of the Exchequer Nadhim Zahawi, and Work and Pensions Secretary Therese Coffey, during a Cabinet meeting at 10 Downing Street, London. Picture date: Tuesday July 19, 2022.
Boris Johnson and Nadhim Zahawi have been criticised for doing nothing in the face of a grim economic forecast

Ms Truss has pledged to reverse the national insurance tax rise immediately if she becomes prime minister, while Mr Sunak has promised a VAT cut on energy bills.

Neither have ruled out further direct support for families struggling with mounting energy bills, which are expected to climb to nearly £4,000 a year from January as gas prices continue to push upward.

However, Mr Brown said new measures cannot wait as he criticised their “obsession” with tax cuts.

Read more:
Calls for emergency increase to Universal Credit
PM and chancellor ‘completely on top’ of economy despite being on holiday
Truss and Sunak face calls for daily COBRA meetings

Mr Brown set out his own vision for dealing with the cost of living crisis, including changing the windfall tax, a cap on energy bills and reforming the benefits system.

He branded the Tory party’s windfall tax “stupid”, claiming the opt-outs included in the tax brought forward when Mr Sunak was chancellor reduced the value of the tax from £15bn to £5bn.

Ms Truss and Mr Sunak continue to clash over their plans for the economy.

Mr Sunak launched a fresh attack on his opponent’s plan for tax cuts in an emergency budget, describing it as a “big bung” for large businesses and the better-off that would do little to help those most in need over the coming winter.

Northern Ireland Secretary Brandon Lewis – who is backing Ms Truss, the foreign secretary – said they would look to do “whatever we can” to help people under pressure from rising inflation.

“She’s willing to do more to help people but her focus is around doing it in a way that puts more money in people’s pockets, creating a high-growth economy with higher wages, more people in work,” he said.

“So rather than having handouts, what we do is have a low-tax economy that’s driving growth and therefore with people having more money in their pockets, they’re better placed to deal with some of the challenges that we see.”

Labour leader Sir Keir Starmer says he sacked shadow minister for making up policy ‘on the hoof’ at picket line | Politics News

Labour leader Sir Keir Starmer has said one of his shadow ministers was sacked yesterday for making up policy “on the hoof” as he stood on a picket line during rail strikes.

Sam Tarry was dismissed from his role as a junior shadow transport minister after he disobeyed orders for frontbench Labour MPs to not appear on picket lines during Wednesday’s rail strike.

He told Sky News workers should be offered pay rises in line with inflation – however Labour’s position is that pay negotiations are for unions and ministers.

Speaking for the first time since he was sacked, Sir Keir explained: “Sam Tarry was sacked because he booked himself onto media programmes without permission and then made up policy on the hoof.

“That can’t be tolerated in any organisation because we have got collective responsibility, so that was relatively straightforward.”

“Of course, as far as the industrial action is concerned, I completely understand the frustration of so many working people who have seen the prices go up, have seen inflation through the roof and their wages haven’t gone up.

“So the Labour Party will always be on the side of working people but we need collective responsibility as any organisation does.”

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Labour minister defies Starmer

Earlier, former shadow chancellor John McDonnell, who is still an MP, told Sky News he was backing Mr Tarry’s position and criticised Sir Keir for sacking him.

He said it was a “severe mistake” as the Labour Party was formed by the trade unions “so when the trade unions have a just cause, we support them – and this is a just cause”.