Robert Peston has stepped forward to defend Liz Truss amidst criticisms surrounding the Bank of England’s handling of the British economy post-Truss’s mini-budget announcement. Peston concedes the flaws in Truss’s economic strategies but argues vehemently that the Bank of England’s communication with the government during the crisis was severely amiss.
During a discussion on the Rest is Money podcast alongside journalist Steph McGovern, Peston expressed understanding for Truss’s assertions regarding her lack of awareness regarding the instability of pension funds. Truss’s mini-budget, unveiled by Chancellor Kwasi Kwarteng, featured a series of tax cuts, including the elimination of the 45p top tax rate, the cancellation of the planned increase in corporation tax and National Insurance, doubling the threshold for stamp duty, and advancing a cut in the basic rate of income tax.
The aftermath of these tax reductions resulted in a loss of investor trust in the government, leading to a bond value crash and the pound plummeting to a historic low against the US dollar. McGovern highlighted the absence of a clear financial plan regarding how Truss intended to finance the tax cuts, ultimately resulting in a £45 billion deficit and ensuing chaos.
Peston contended that the crisis was worsened by factors beyond Truss’s direct control, particularly the ramifications on pension funds. Over time, pension funds had borrowed substantial amounts to invest in UK Government bonds, driven by what Peston perceives as insufficient regulations mandating pension funds to invest in ostensibly secure assets.
Expressing sympathy for Truss’s assertion that neither she nor Kwarteng had been forewarned about the precarious state of pension funds, Peston criticized both the Bank of England and the Treasury for their apparent lack of awareness regarding Britain’s financial vulnerabilities.
While acknowledging the unfavorable reception of Truss’s mini-budget, with dissatisfaction voiced by hedge fund managers and the affluent, Peston stressed the imperative of investigating the Bank of England’s missteps in communicating with the government. Despite the backlash, Truss has re-emerged in mainstream politics, addressing the Institute for Government think-tank in London, marking her first significant public appearance in the UK since her brief stint as the shortest-serving prime minister in history.
