Truss urged by Starmer to recall Parliament as pound slumps despite Bank of England intervention

Labour leader adds to pressure on prime minister to call MPs back from conference recess to debate financial crisis

(EPA)

Labour leader Sir Keir Starmer has called for Liz Truss to recall Parliament to address the financial crisis after the Bank of England was forced to intervene to calm markets.

And he urged the government to abandon the mini-Budget measures that triggered the market turmoil after the pound fell to a record low against the dollar on Monday.

He added his weight to cross-party calls for MPs to return from conference recess after a rare intervention by the IMF, urging Kwasi Kwarteng to rethink his tax cuts.

“The move by the Bank of England is very serious,” Sir Keir said at the Labour conference.

“And I think many people will now be extremely worried about their mortgage, about prices going up, and now about their pensions.

“The government has clearly lost control of the economy.”

He added: “What the government needs to do now is recall Parliament and abandon this budget before any more damage is done.”

The International Monetary Fund hit out at Liz Truss and Kwasi Kwarteng’s tax cuts for the rich, warning that “large and untargeted fiscal packages” would “likely increase inequality” in Britain.

The Bank of England announced on Wednesday morning it would buy government bonds in a bid to stave off a “material risk to UK financial stability.”

Liberal Democrat Treasury spokesperson Sarah Olney called the government “totally blinded by ideology” amid the market turmoil. The Lib Dems said Parliament should be recalled to discuss action to ensure financial stability.

“Truss and Kwarteng have been in government for three weeks and the IMF has already been forced to issue a statement on their reckless economic policy,” Ms Olney said.

She added: “Both are totally blinded by ideology, which is making millions across the UK suffer. We need to recall Parliament to fix this mess.”

Scotland’s first minister Nicola Sturgeon said the Commons should be recalled to address the economic turmoil. She said the UK was in the “grip of (a) rapidly deteriorating economic crisis.”

The emergency intervention by the Bank of England to “reduce damage” from the government’s policies was “extraordinary,” she said before adding “where even is PM” Liz Truss as she called for conference recess to be curtailed.

Kwasi Kwarteng met with business leaders in the City (HM Treasury)

Ms Sturgeon added that “as at least an initial symbol of sense” the plan to abolish the additional rate of income tax for top earners should be “dumped”.

Rachel Reeves has called for an “urgent statement” from the chancellor to address “the crisis that he has made”. The shadow chancellor said of the Conservatives: “Their decisions will cause higher inflation and higher interest rates – and are not a credible plan for growth.

“The chancellor must make an urgent statement on how he is going to fix the crisis that he has made.”

The Treasury said the Bank was responding to “dysfunction in gilt markets” and was acting to restore “orderly market conditions”. A spokesperson said the operation was “fully indemnified” by the Treasury.

“Global financial markets have seen significant volatility in recent days,” said the Treasury. “The Bank has identified a risk from recent dysfunction in gilt markets, so the Bank will temporarily carry out purchases of long-dated UK government bonds from today in order to restore orderly market conditions.”

Kwasi Kwarteng has been meeting business leaders to reassure the City about his economic plans amid criticism.

Sir Charlie Bean said it would be better to “get a Tardis and go back” and undo Mr Kwarteng’s mini-Budget, and warned of possible public spending cuts of up to £50bn a year. “Frankly, the only way you can really deal with this is with a very fundamental rethinking of the boundaries of the state,” he told Sky News.

Sir Charlie said that despite Wednesday’s intervention on bonds, interest rates will still likely need to rise – suggesting a base rate hike of another 1.5 percentage points. “The need for an immediate rate increase is much reduced. It is not going to go away though,” he told the BBC.