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Did Truss-supporting bankers make fortunes ‘shorting’ the pound? Insider dealing?

Easy money: it’s not quite a backhander for bankers who supported Liz Truss to have made fortunes “shorting” the pound in anticipation of its fall during and after Kwasi Kwarteng’s financial statement.

It is being reported that

Liz Truss-supporting investors made “small fortunes” as the value of the pound plummeted following the radical Conservative budget announced on Friday.

This is deeply concerning because it suggests corruption – that these businesspeople who helped Truss become prime minister may have been given knowledge of what Kwasi Kwarteng was going to say and advised to bet that the value of the pound would drop (also known as “shorting”).

An anonymous source quoted in the Sunday Times told the paper they had attended a dinner with hedge-fund managers who were said to have won big betting against the pound last week.

They were quoted as saying: “They were all supporters of Truss and every one of them was shorting the pound.”

The paper added: “Several made small fortunes on Friday betting against the currency.”

Seems straightforward enough, doesn’t it? Well…

Responding to speculation the traders were given insider knowledge of the budget before it was announced – which would be illegal if it were used for their financial gain – Tim Shipman, who co-authored the piece, said: “It’s not fraud, it’s just a bunch of city people having a view and betting on it. It wasn’t a Tory dinner where the mysteries of the budget were secretly conveyed over the canapes.”

Do you believe it?

A lot of people made a lot of money and they were all Tory-supporting backers of Liz Truss, but it was entirely innocent?

Some people have doubts:

What do you think happened?

Source: Liz Truss City backers ‘made small fortunes betting against plunging pound’, report claims

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How the Tories are spinning their mini-budget – and why it won’t work

“It is indicative of where this government’s priorities are that their first fiscal actions have focused on giving the most money not to those who need it most, but those who need it least,” writes Mainly Macro‘s Professor Simon Wren-Lewis of Kwasi Kwarteng’s mini-budget.

We know the headlines, and how awful they are: almost two-thirds of the tax gains go to the richest fifth of the population, with almost half going to the top five per cent; poorer households will get a small amount of this giveaway, but less than is needed to cover the increased costs of essentials (see the image at the top of this article).

The Institute for Fiscal Studies says your income would have to exceed £155,000 before you are better off, and if you earn a million a year you gain £40,000.

The tax cuts and spending plans mean there will be cuts in public spending after the next election, because the Institute for Fiscal Studies and the Resolution Foundation both predict budget deficits that are “not sustainable” – as would the Office for Budget Responsibility, Prof Wren-Lewis reckons, if it had been allowed to publish its post-budget forecast.

It raised borrowing costs and depreciated sterling

This means taxes will have to rise or spending will have to be cut, unless something very beneficial for the public finances turns up. Kwasi Kwarteng has committed himself to reducing government debt relative to GDP in the medium-term, meaning that if these deficit projections turn out to be even roughly right he is going to have to raise taxes or cut spending.

You don’t get to announce the biggest tax cut for 50 years in a deteriorating economic climate without severe implications for future spending.

Just six per cent of the population want lower taxes and lower spending on health, education and welfare, while 52 per cent want the opposite; this is a deeply unpopular policy.

So to the question posed by the headline: how are the Tories trying to make this nightmare look good?

Here’s Prof Wren-Lewis [boldings mine]:

What the government would like you to think is that this is about fairness vs growth. These measures are very unfair, but they say they are designed to increase long run growth so everyone will be better off (just the rich will be a lot better off than the poor). The spin, like the deficit spin that these same politicians lectured us with for the last 12 years but have now abandoned, is a load of nonsense.

There is no relationship between tax levels and prosperity. Worse still… the evidence clearly suggests that increasing inequality at the top reduces growth.

If the markets believed this budget would increase long run growth, sterling would appreciate. Instead the uncertainty created by an unfunded tax giveaway for the better off has led to the cost of government borrowing rising substantially both just before and following the budget, and sterling has fallen against the Euro.

There was only the smallest additional help beyond the price cap for those struggling to make ends meet, and instead more use of sanctions for [benefit] claimants, sanctions which the government’s own research says caused more harm than good [suicides] so they refused to publish it.

Alongside higher energy prices, we have sharply higher food prices which the government is ignoring.

Either the government is blind to the evidence, or they have to pretend it’s all about growth as a cover for the true reason for tax breaks for the rich: their ideology and party donors.

If this government really wanted to increase growth it would make trade with the EU easier, but right now it is doing the opposite.

It would be focusing only on encouraging the energy of the future, green energy, which is now much cheaper than gas, Instead they are encouraging fracking (and saying you shouldn’t worry about small earthquakes) and more investment in getting oil out of the North Sea.

If this government really wanted to increase growth, it would be helping the NHS reduce the number of people not working because they are sick by training more nurses and doctors and paying them more. Instead tax cuts now mean that in the future the NHS, with its record waiting lists, will be even worse than it is now, if it has a future at all.

In fact, Prof Wren-Lewis predicts huge public-sector cuts – which are perhaps the entire point of this exercise:

Cuts in spending that will be far deeper than anything George Osborne did, because UK public service provision is already at rock bottom and in some cases close to collapse.

An economy where the public sector no longer works is an economy that no longer works.

What this budget showed is a Chancellor who not only doesn’t understand this, but intends to make it worse.

Source: mainly macro: A budget that harms everyone except the very rich

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Kwarteng’s mini-budget: ‘economic and political madness’

The value of the pound crashed as Kwasi Kwarteng delivered his mini-budget speech on September 23.

That’s a staggering indictment against the Chancellor, his prime minister Liz Truss, and their government.

Any money saved by the measures in the budget is wiped out by the extra costs the crash will incur.

Watch:

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Shadow Chancellor sinks the knife into Kwasi Kwarteng over mini-budget

We’ve had everybody else’s point of view on Kwasi Kwarteng’s “fiscal event”, so let’s have Labour’s.

This Writer isn’t fond of Rachel Reeves but she really doesn’t mince her words here. It’s a bit of a tour de force:

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Martin Lewis explains Kwasi Kwarteng’s mini-budget. Let’s hope Kwarteng watches

For information, from the Money Saving Expert, who’s probably a lot more reliable on it than our muttering, giggling Chancellor of the Exchequer:

Oh! Here’s a clip by someone who thinks Kwarteng has scored a very bad ‘own goal’:

And here’s another perspective:

What do you think?

 

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Political suicide? Kwarteng’s plan to cut taxes and increase borrowing

Kwasi Kwarteng.

Kwasi Kwarteng says he wants to boost economic growth with a seismic series of policies – but will he simply tip the nation into enormous, unmanageable debt instead?

And, if Liz Truss is expecting to lose a future election, are the Tories planning to use this against a possible future Labour government, as they have with any number of false accusations in the past?

Here’s what Kwarteng has announced, according to the BBC:

– The basic rate of income tax will be cut by 1p to 19p from April 2023

– The 45p tax rate for top earners over £150,000 will be abolished, also from April next year

– The level at which house-buyers begin to pay stamp duty is doubled from £125,000 to £250,000

– First-time buyers will pay no stamp duty on homes worth £450,000, up from £300,000

– Planned rise on corporation tax from 19% to 25% is scrapped

– A 1.25% rise in National Insurance to be reversed from 6 Novemnber

 Cap on bankers’ bonuses, which limited rewards to twice the salary level, is axed

– Cost of subsidising both domestic and business energy bills will cost £60bn for the next six months

-Strike action: unions will be required to put offers to members during pay talks

– UK to introduce sales tax-free shopping for overseas visitors

“Money Saving Expert” Martin Lewis was among the first to raise concerns, describing the Chancellor’s statement as “staggering”.

He tweeted: “That really was quite a staggering statement from a Conservative party government

“Huge new borrowing at the same time as cutting taxes.

“It’s all aimed at growing the economy. I really hope it works. I really worry what happens if it doesn’t.”

If it doesn’t, the UK will be plunged into a huge amount of debt because it will not be able to support the amount of borrowing Kwarteng is proposing.

Campaigners and charities have described the mini-budget measures as a ‘hammer blow’ to the poor.

Becca Lyon, head of child poverty at Save the Children, said:

The prime minister said she would deliver on the cost-of-living crisis. Instead, the UK government has delivered tax cuts to help the richest and a hammer-blow to low-income families.

The chancellor has prioritised bankers’ bonuses over helping vulnerable children through the cost-of-living crisis, whose hard-working parents face impossible choices.

Today’s announcements overwhelmingly benefit the country’s wealthiest households, meanwhile almost four million children risk going cold and hungry this winter.

Alison Garnham, chief executive at the Child Poverty Action Group, said:

Today was a vital opportunity to provide reassurance and support to those who need it the most – but instead the Government risks a collision with reality, and the four million kids currently living in poverty in the UK will be forced to pay the price.

Imran Hussain, director of policy and campaigner at Action for Children, said:

If the new chancellor has money to spend on tax cuts for those who are relatively better off, then he has the money to spend throwing a lifeline to low-income families who are desperately struggling with the cost-of-living crisis. Many now face a bleak Christmas.

Whilst the energy price guarantee will help offset the near apocalyptic rises that had been predicted, it doesn’t address the mounting pressures families face with food, fuel, housing and other costs that continue to climb.

And Mark Russell, chief executive at the Children’s Society, said:

Changes to the tax system right now are barking up the wrong tree … We need to see far more direct support for families bearing the brunt of the cost-of-living crisis.

Still, what can you expect from a Chancellor who was seen muttering to himself and grinning like a drug-addled fool at the Queen’s funeral on Monday?

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Kwarteng’s mini-budget will still happen – probably at end of next week

Kwasi Kwarteng: he reckons he’s going to find a way to pay for Liz Truss’s energy price cap. But then, it’s not all that long since he said “fracking is over” – and look what has happened there.

A “fiscal event” to explain how the Liz Truss Tory governent will pay for its cap on energy bills will probably take place at the end of next week, it has been claimed.

We’re looking at September 23, it seems.

Also possible is an announcement of tax cuts to boost the economy and help (rich) people with rising living costs (that won’t affect them as much as the poor who won’t have help because they don’t pay tax).

During her campaign for the Tory leadership, Truss promised to undo the rise in National Insurance that was announced under Boris Johnson.

Apparently Kwarteng has announced a change in direction for the Treasury – that the department needed to focus on growing the economy by 2.5 per cent per year.

This follows the controversial sacking of top Treasury official Sir Tom Scholar.

Let’s have a look at that…

The implication is that the sacking was politically-motivated and Truss (along with Kwarteng and the rest) is replacing the UK’s formerly impartial civil service with one that is politically partisan.

This will lead to poor, ideologically-motivated decisions being pushed through by officials who should be advising politicians on the strengths or weaknesses of such moves.

It will destabilise the UK even further, at a time when we need a steady hand in charge.

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