Labour says Tories have ‘lost control of the economy’ as recession looms – UK politics live

Labour says interest rates hikes ‘further proof that Tories have lost control of economy’

The Bank of England’s decision to raise interest rates by 0.5 percentage points is “further proof” the Conservative party has lost control of the economy, Labour has said.

The shadow chancellor, Rachel Reeves, said:

As families and pensioners worry about how they’re going to pay their bills, the Tory leadership candidates are touring the country announcing unworkable policies that will do nothing to help people get through this crisis.

Labour would help households right now by removing the tax breaks that are subsidising oil and gas producers and using that money to help people now, including by cutting VAT on energy bills. (3/4)

— Rachel Reeves (@RachelReevesMP) August 4, 2022

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Tory leadership hopeful Liz Truss said:

Today’s news underlines the need for the bold economic plan that I am advocating.

We need to take immediate action to deal with the cost-of-living crisis, grow the economy and delivering as much support to people as possible.

As prime minister, I’d use an emergency budget to kickstart my plan to get our economy growing and offer immediate help to people struggling with their bills.

Through supply side reforms, dealing with burdensome business regulation and cutting taxes, I will get our economy back on track. My tax cuts are necessary, affordable and not inflationary.

You cannot tax your way to growth. Business as usual will not do. Instead, we need a new approach on the economy, we need to challenge the failing economic orthodoxy and we need to deliver the necessary reform to tackle inflation and achieve sustainable growth.

The Conservative former chancellor Ken Clarke has suggested that Liz Truss’s plan for immediate tax cuts could make inflation “worse” and risks “contributing to the problem”.

Speaking to BBC Radio 4’s World at One, he warned of a “very unpleasant” winter for many households in the country following news that the Bank of England has pushed interest rates up 0.5 percentage points.

He said:

Nothing is certain, but I’ve thought for some time we faced the risk of an extremely serious recession. This winter is certainly going to be very unpleasant for many households in the country and I think it’s absolutely inevitable the Bank of England acted as it did.

He also said:

I very much hope we don’t see an increase in the number of people destitute in this country. We already have too many people in abject poverty and the number is likely to rise, and I think the government should be looking at things that help the very poorest and the very low-paid, and things like universal credit.

What we don’t want is immediate tax cuts which cheer up the better off and are particularly valuable to the very wealthy.

An immediate tax cut could make inflation worse, he said, adding:

It’d really run the risk of contributing to the problem so I don’t think tax cuts are terribly relevant at the moment.

I think targeted help for the poorest and less well-paid is justified – they’ve done some of that already and I think they may have to do more.

BoE forecasts ‘concerning for many people’, says chancellor

The chancellor, Nadhim Zahawi, has published a statement following news that the Bank of England has pushed interest rates up 0.5 percentage points.

Zahawi said he was aware that the forecasts “will be concerning for many people”. He went on to say:

Addressing the cost of living is a top priority and we have been taking action to support people through these tough times with our 37 billion package of help for households, which includes direct payments of 1,200 to the most vulnerable families and a 400 discount on energy bills for everyone.

He added:

We are also taking important steps to get inflation under control through strong, independent monetary policy, responsible tax and spending decisions, and reforms to boost our productivity and growth.

The economy recovered strongly from the pandemic, with the fastest growth in the G7 last year, and I’m confident that the action we are taking means we can also overcome these global challenges.

Rory Carroll

Rory Carroll

Michelle O’Neill, Sinn Féin’s first minister designate, has sparked a backlash in Northern Ireland for saying there was “no alternative” to the IRA’s armed campaign during the Troubles.

O’Neill suggested the Irish Republican Army, which killed about half of the 3,600 people killed during the 30-year conflict, had no choice but to shoot and bomb until the 1998 Good Friday agreement.

“I don’t think any Irish person ever woke up one morning and thought that conflict was a good idea, but the war came to Ireland,” she told the BBC in an interview broadcast this week. “I think at the time there was no alternative, but now, thankfully, we have an alternative to conflict and that’s the Good Friday agreement.”

Unionist politicians and victims’ rights groups accused O’Neill of ignoring historical reality and justifying mass murder.

“There was never a justification for violence,” said Jeffrey Donaldson, leader of the Democratic Unionist party.

Even in Northern Ireland’s darkest days the overwhelming majority of our people respected democracy, the rule of law and – where they felt passionately about a particular cause – took part in peaceful protest. Sinn Féin can pretend there was no alternative but they are condemned by the facts.

Read the full article here.

Denis Campbell

Denis Campbell

NHS leaders have accused Liz Truss and Rishi Sunak of offering “glib soundbites, gimmicks and political rhetoric” on the health service rather than proper solutions to its growing crisis.

The NHS Confederation levelled that criticism today when it published letters it had sent to the two contenders in the Conservative leadership race to become the UK’s next prime minister.

It urged the foreign secretary and ex-chancellor to be much more honest about the depth of the problems affecting the NHS and the scale and cost of the policies needed to address that.

Its intervention comes after Sunak was ridiculed for proposing £10 fines for people who fail to attend GP appointments. Truss faced questions over how her commitment to scrapping the national insurance rise and reducing taxes generally would affect NHS funding.

Danny Mortimer, the confederation’s deputy chief executive, said that as the Conservative party leadership race entered its final weeks “healthcare leaders are approaching winter with a real sense of foreboding”.

Mortimer said:

They are urging both the remaining candidates to inject their public debate with a sense of urgency and show a real understanding about the huge pressures the NHS and social care are under.

Now is not the time for glib soundbites, gimmicks and political rhetoric. The NHS needs the new head of government to set out a realistic reset on health and social care.

He added:

We need both Mr Sunak and Ms Truss to demonstrate a heavy dose of realism about the state of the NHS and the promise of an open, frank and honest conversation about what this means.

The confederation is an important NHS body because it represents hospitals and other NHS providers of care in England, Wales and Northern Ireland.

In a plea to the contenders, Mortimer urged them to disavow Boris Johnson’s repeated insistence – which is not backed by evidence – that the crumbling social care system has been “fixed”.

He added:

To truly level with the public they must acknowledge that this means crumbling buildings and ill-equipped outdated estate, 105,000 NHS staff and 165,000 social care vacancies at the last count, and a social care system in desperate need of repair and very far from being fixed, as the current prime minister would have us believe.

NHS bosses want the next prime minister to bring forward three major policies to help relieve the huge pressure it is under: a capital investment programme to upgrade and replace outdated facilities; a detailed plan to address the service’s chronic workforce shortages; and emergency help for social care.

In response to the Bank of England’s interest hike, Rishi Sunak said he would “prioritise gripping inflation, growing the economy and then cutting taxes”.

The former chancellor said it was “imperative that any future government grips inflation, not exacerbates it”.

Sunak added:

Increasing borrowing will put upward pressure on interest rates, which will mean increased payments on people’s mortgages. It will also make high inflation and high prices last for longer, making everyone poorer.

Labour says interest rates hikes ‘further proof that Tories have lost control of economy’

The Bank of England’s decision to raise interest rates by 0.5 percentage points is “further proof” the Conservative party has lost control of the economy, Labour has said.

The shadow chancellor, Rachel Reeves, said:

As families and pensioners worry about how they’re going to pay their bills, the Tory leadership candidates are touring the country announcing unworkable policies that will do nothing to help people get through this crisis.

Labour would help households right now by removing the tax breaks that are subsidising oil and gas producers and using that money to help people now, including by cutting VAT on energy bills. (3/4)

— Rachel Reeves (@RachelReevesMP) August 4, 2022

Phillip Inman

Phillip Inman

The Bank of England has raised interest rates by 0.5 percentage points to tackle the soaring cost of living, despite concerns that the economy is heading for a recession.

In the biggest increase in rates in 27 years, policymakers at the central bank voted to raise the base rate for a sixth time in succession to 1.75%, in line with the expectations of City economists. The decision takes UK rates to the highest level since the end of 2008.

The Bank’s monetary policy committee (MPC) has been increasing the cost of borrowing since December in response to increasing rates of inflation, made worse by the Russian invasion of Ukraine, which has sent the cost of gas rising to record highs.

Inflation increased to 9.4% in the year to June and is expected to rise further over the coming months.

Follow our Business live blog here:

The NHS has been “absent” from the Conservative leadership contest, the former health secretary, Jeremy Hunt, said at a time when “staff shortages and morale have never been worse” in the health service.

Hunt, who is backing Sunak in the race, warned that “after energy bills the biggest issue facing the new prime minister will be a looming winter crisis”.

This winter “will be the toughest ever” judging by the state of the ambulance and A&E services over the summer, he wrote in a series of tweets.

He said:

If the NHS continues this spiral of decline with ambulances, A&Es & GP surgeries all in serious crisis, we’ll see avoidable deaths mount up this winter. Staff know there’s no silver bullet, but they need to know there’s a plan.

These are my suggestions.1/ A mass overseas recruitment drive for doctors & nurses as a temporary, short-term lever – allowing drs from countries with good medical education systems like Canada and Germany to be green listed so they don’t have to resit pointless additional exams

— Jeremy Hunt (@Jeremy_Hunt) August 4, 2022

Hunt also called on an immediate exemption for doctors to public sector pension rules “which are currently forcing them to retire in their fifties in alarming numbers”.

He added:

Make flexible working automatic across the NHS so we don’t drive staff with young families to become locums or agency nurses, which is often the only way they can juggle work and home life.

4/ Ditch the Stalinist centralism that has given the NHS more targets than any healthcare system in the world: replace national targets with easily accessible data that allows everyone to compare performance (CQC Ofsted style ratings work well).

— Jeremy Hunt (@Jeremy_Hunt) August 4, 2022

Hunt added:

Move back to the system where everyone has their own GP rather than just being attached to a surgery. A study showed a 25% cut in mortality & 30% drop in hospital visits for people who saw the same GP (keeping our promise to recruit 6000 more GPs will help achieve this).

6/ Hospitals are full of people who can’t be discharged due to social care issues, mainly staff shortages. Local authorities need help now to boost pay rates for care workers, as they’re currently losing them in droves to the retail and hospitality sectors.

— Jeremy Hunt (@Jeremy_Hunt) August 4, 2022

Liz Truss would review Bank of England mandate, says Tory ally

Jessica Elgot

Jessica Elgot

Liz Truss would review whether the Bank of England’s mandate is “fit for purpose”, a cabinet backer has said, suggesting she would examine its “exclusionary independence on interest rates”, as the Bank prepares for a crunch rates decision.

The attorney general, Suella Braverman, told Sky News the Tory leadership frontrunner would look again at the Bank’s powers. “Interest rates should have been raised a long time ago and the Bank of England has been too slow in this regard,” she said.

She added:

Liz Truss has made clear that she wants to review the mandate that the Bank of England has, so that’s going to be looking in detail at exactly what the Bank of England does and see whether it’s actually fit for purpose in terms of its entire exclusionary independence over interest rates.

It came hours before the Bank was expected to raise interest rates by half a percentage point – the biggest increase since 1995. The energy price cap will also be changed quarterly instead of every six months, Ofgem announced on Thursday.

Truss told a Conservative hustings on Wednesday night she would alter the Bank’s mandate because of the changing economic picture.

The best way of dealing with inflation is monetary policy, and what I have said is I want to change the Bank of England’s mandate to make sure in the future it matches some of the most effective central banks in the world at controlling inflation.

The last time the mandate was looked at was in 1997 under Gordon Brown. Things are very, very different now.

Read the full article here.

The attorney general, Suella Braverman, has backed Liz Truss’s plan to scrap diversity and inclusion roles in the civil service, claiming they are “patronising” and “divisive”.

Braverman, who ran for the leadership role herself before supporting Truss, said she was “horrified” to discover that hundreds of government lawyers were sent on 2,000 hours of taxpayer-funded courses last year where they were lectured on “white privilege”.

Writing for The Mail+, she said:

The experts on white privilege who shared their insights were cited as authoritative, but they all subscribed to the left-wing view on race, gender and sexuality which permeated their training materials.

She went on to describe diversity training “zealots” as behaving “like the witchfinders of the Middle Ages, they don the outfit of the inquisitor and never tire of rooting out unbelievers”.

She said she had told her officials to scrap diversity training schemes for government lawyers, and encouraged government ministers to do the same.

Braverman told Sky News that diversity and inclusion training within government departments came at “a huge cost to the tax payer”.

She said:

It’s been divisive, not inclusive. It’s been patronising, not empowering.

She added:

Civil servants are taught about micro-aggressions. They’re taught about white fragility. They’re taught about how to be a straight ally. I don’t think those are objectively impartial when it comes to politics.

And I don’t think they are good value for money. And I don’t think ultimately that’s what taxpayers want their civil servants or their government lawyers to be spending their time on.

Truss has promised to “tackle left-wing groupthink in government” and to scrap diversity and inclusion jobs, saying they “distract from delivering on the British people’s priorities”.

Rishi Sunak has not responded to an appeal from MPs to combat Islamophobia amid a row over his proposals on extremism, the Independent reports.

Sunak and his rival, Liz Truss, were sent letters by the All-Party Parliamentary Group on British Muslims calling for action after a series of delays and broken promises under Boris Johnson’s government.

The letter, which was sent out last week and was seen by the paper, called on the leadership contenders to commit to completing and publishing the investigation into allegations that Tory MP, Nusrat Ghani, had been sacked as a minister because of her “Muslimness”.

APPG vice-chair Afzal Khan wrote:

When a Muslim woman raises a direct experience of Islamophobic discrimination at the heart of government and her party, those allegations should be treated with the seriousness it deserves.

He added:

It is a depressing reality that Islamophobia has permeated into mainstream politics.

Khan said he hoped whoever became leader will take “tangible steps in rooting out this insidious hatred which threatens our British values”.

He also warned that a separative review published by the Conservative party was a “damning indictment of the prevalence of Islamophobia” and questioned what steps Truss or Sunak would taken “to reassure British Muslims of your commitment to tackling hatred and racism”.

Neither Truss nor Sunak has reportedly replied to the letters, and Sunak’s representatives did not respond to repeated requests for comment by the Independent.

A representative for Truss’s campaign said:

As prime minister, Liz Truss will take a zero tolerance approach to Islamophobia.

Javid denies Truss tax cuts plan will lead to increased borrowing

My colleague, Aubrey Allegretti, has the full story on Sajid Javid denying that Liz Truss’s tax cuts plan will lead to increased borrowing:

Swingeing tax cuts pledged by Liz Truss will not lead to dramatically increased government borrowing or fuel inflation, her latest high-profile supporter, Sajid Javid, has claimed, in response to accusations the Conservative leadership frontrunner’s “dangerous” plans would exacerbate the cost of living crisis.

Taking aim at Rishi Sunak, his former Treasury protege, Javid hit out at the “business-as-usual” approach from the former chancellor and added: “We can’t rely on increasing taxes again and again.”

Nearly a month to the day since the pair’s sensational resignation led to the downfall of Boris Johnson, Javid declined to endorse Sunak and instead backed Truss to become prime minister.

He admitted that her immediate tax cut pledges were “risky”, but told Times Radio:

Not cutting taxes now is also risky and I think it’s the riskier option.

There’s no risk-free option here and any leader has to grip this and come up with the right policy and I think that’s what Liz is offering.

Read Aubrey’s Allegretti’s full write-up:

Mel Stride, the chair of the Commons Treasury committee and supporter of Rishi Sunak, has warned that Liz Truss’s plans for the economy and public finances are “dangerous”.

He told BBC Radio 4’s Today programme:

What we must do now is avoid stoking the inflation and making the problem even worse. One of the ways you can make the problem very significantly worse is by coming forward with large-scale, tens of billions of pounds’ worth, of unfunded tax cuts.

He added:

The big decision, fiscally, here is around tax. You have to do it in a measured way and at the right time but not start coming forward with tens of billions of unfunded tax cuts right now. I think that would be really quite dangerous.

Liz Truss brushes off concerns about £8.8bn black hole in her budget

Aubrey Allegretti

Liz Truss has said an £8.8bn black hole in her savings budget caused by her abandoning a policy to cut public sector wages was not part of her “central costings” for funding a range of spending pledges, as she suggested the policy had been a “mistake”.

She also defended her stance on Brexit as a former remain supporter, claiming that the disruption she was concerned about prior to the referendum did not happen, despite the long queues recently seen at Channel crossings at the start of the school holidays.

Quizzed for the first time in front of Conservative members on a controversial policy that she was forced to U-turn on earlier this week, the frontrunner in the Tory leadership race said she never intended to slash the pay of teachers and nurses.

She made the comments despite her campaign having announced on Monday night a policy designed to reduce expenditure on civil service staff outside London.

“It was misinterpreted … by the media,” Truss told a crowd of Tory members in Cardiff, for the third hustings of the campaign.

It was never intended to apply to nurses, doctors and teachers. So I wanted to clear the matter up straight away. And I have been very clear. We’re now not going ahead with that policy.

It wasn’t a central part of my policy platform. And I’ve been clear that it is not happening.

Read the full article here.

Senior Tory and Rishi Sunak supporter, Mel Stride, said the polls giving Liz Truss a comfortable lead were “out of touch with the reality” of the Conservative leadership contest.

Stride, who heads the Treasury Select Committee, said Sunak’s economic plans were similar to those adopted by Margaret Thatcher in the early years of her premiership to combat high inflation.

He told LBC Radio:

The last thing Margaret Thatcher and Nigel Lawson would have done was what Liz is suggesting, ie. coming forward with all these unfunded tax cuts to stoke up inflation.

They got control of inflation and then Lawson went on to be one of the greatest tax cutting chancellors in our history. And that’s what Rishi can provide.

I think he’s just being honest. It’s very easy to stand up and promise tax cuts left, right and centre. He’s being honest about how we can get through but he does have a plan and I’m absolutely confident that he can deliver and, critically, win the next general election.

Some more lines from Sajid Javid, who last night threw his support behind Liz Truss to become the next Conservative leader. Speaking to Times Radio this morning, the former chancellor insisted Truss’s plans would not necessarily fuel inflation or ramp up borrowing.

Office for Budget Responsibility forecasts had around £31bn of “fiscal headroom” by 2024/25 “so that’s the first thing you can use to make tax cuts now”, he claimed.

Not going ahead with the planned increase in corporation tax from 19% to 25% in April would not have an impact on the inflation figures, he added.

Javid said:

It is not inflationary to not go ahead with a tax increase.

I don’t buy this argument that the things Liz is proposing, somehow they are all going to lead to higher inflation.

In the long-term they are going to help to fix the economy and that is the most important thing.

Sajid Javid says Liz Truss ‘best placed to unite the party’ in blow to Rishi Sunak

Good morning. Sajid Javid has endorsed Liz Truss as the next Conservative Party leader in a damaging blow to Rishi Sunak’s campaign, claiming that Truss is “best placed to unite the party” at a time when the Tories have “been in not a very good place”.

Javid told LBC this morning:

We need to fix things and to get a new leader in place as quickly as possible. But most importantly, that leader needs to be the right person to deal with the challenges that we have.

He said he had “huge respect” for both Truss and Sunak, who he described as both “incredibly capable and talented”. He added:

Like all Conservative party members, I have to make a choice. My choice is Truss. The reason I’ve made that decision is for three reasons: I think she’s best placed to unite the party and she’s already showing that with the broad support that she’s getting from MPs.

I think she’s got a better plan for fixing the economy. I think that is going to be absolutely crucial.

And thirdly, I think that she’s best placed to beat the labour Lib Dems and the SNP at the next election.

Javid’s endorsement of Truss came last night after a difficult day for Sunak, after a poll from the Conservatives put the foreign secretary 32 points ahead with party members, a day after YouGov showed similar results.

Javid, who worked with Sunak in the Treasury and resigned on the same day, triggering the downfall of Boris Johnson, said Truss was best placed to “reunite the party” and said a new approach to the economy was needed – a direct attack on Sunak.

In an article for the Times, Javid wrote:

I fought for strong fiscal rules in our last manifesto. But the circumstances we are in require a new approach. Over the long term, we are more likely to be fiscally sustainable by improving trend growth.

Only by getting growth back to pre-financial crisis levels can we hope to support the high-quality public services people rightly expect.

Sunak and Javid were once considered close allies though came into conflict once Javid returned to the cabinet and clashed over health spending.

Javid’s article directly challenged Sunak’s claim that tax cuts would be inflationary.

He wrote:

Some claim that tax cuts can only come once we have growth. I believe the exact opposite – tax cuts are a prerequisite for growth.

Speaking on Times Radio this morning, Javid rejected criticism of Truss’s policies – warning it would be “riskier” not to cut taxes. There was “no risk-free option” and any leader her to come to terms with this, he said.

He said:

Fixing the economy is absolutely central, not just to deal with the cost-of-living challenges but to pay for all the public services, in the long-term, that we all rely on.

I think the only way we can do that is to improve our long-term growth rate. We need to get it back to where we were pre-financial crisis, we’re a long way off.

To do that, it can’t be business as usual and it does mean, when it comes to our fiscal position – balancing the books and things – we’ve got to take a long-term view.

Here’s the agenda for the day.

9.30am: Office for National Statistics publishes earnings gaps for free school meals recipients in England.

12pm: Bank of England interest rate decision.

8pm: Sky Tory leadership debate with Sunak and Liz Truss.

I’ll be covering for Andrew Sparrow today. Do drop me a line if you have any questions or think I’ve missed anything. My email is leonie.chao-fong@theguardian.com or you can reach me on Twitter.


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