Ex-deputy governor of the Bank of England Sir Paul Tucker joined ITV’s Robert Peston yesterday as the pair dissected how Chancellor Kwasi Kwarteng’s mini-budget announced has impacted pensions. Threadneedle Street pledged to buy £65billion in Government bonds yesterday after Mr Kwarteng’s fiscal statement sparked financial turmoil with the pound plummeting to its lowest ever level against the dollar.
The Bank of England also warned that the UK now faced a “material risk” to its financial stability.
Mr Kwarteng’s announcement, which included a move to scrap the top rate of income tax, totalled around £45billion in tax cuts.
Sir Paul, who served as deputy governor from 2009 to 2013, suggested fiscal difficulties had led to an “unjustifiable weakness” in Britain’s pension fund industry.
Sir Paul said: “Because of a sin of omission on Friday, because the Chancellor didn’t say something about what the fiscal framework would be and because, perhaps, ministers were a bit nonchalant about that over the weekend, although I am sure that they’re not really nonchalant about it, there was a sell-off in the guilt market and as that occurred tremendous pressure fell on the pension funds.”
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He added: “This actually has revealed a real weakness, an unjustifiable weakness in the UK’s pension fund industry.”
Sir Paul also sat as a member of the Monetary Policy Committee from 2002 to 2013.
Lord Kenneth Clarke, who served as Chancellor under Sir John Major, also appeared on Peston to discuss the current economic events.
The ex-Rushcliffe MP said: “I’ve never known a Budget cause a financial crisis like this, and I think the Government and the Bank of England are still going to have to act to calm it down and get us back to normality.”
But Treasury Minister Andrew Griffith said that the Government’s proposals were the “right plans” to grow the UK economy.
He claimed “every major economy is dealing with exactly the same issues” and said the impact of “Putin’s war in Ukraine is cascading through things like the cost of energy, some of the supply side implications of that”.