So now we know. Kwasi Kwarteng is to be the scapegoat for the disastrous Mini Budget and the fall out from it since despite it being Whitehall and the Treasury that no doubt devised the Mini Budget and Liz Truss will also have signed it off.
Prime Minister confirmed that Kwarteng is no longer Chancellor, Jeremy Hunt is the replacement. An experienced hand that we believe was selected to try and bring cohesion to a divided party and also the person to deliver a U-turn Budget on 31st October.
We expect previously proposed tax cuts to move to U-turns, more stealth tax increases that will mainly affect business, the wealthy and those with property investments, spending cuts and a more measured approach to the recession that is to come as well as continued and sustained inflation and of course, much higher interest rates.
The Bank of England has also confirmed that its support for the UK Gilt (government borrowing) will stop and pension funds will have to stand on their own. Before the Mini Budget, on 23 September, gilts yields i.e., the cost of government borrowing was at 3.59%. Immediately after the Mini Budget, gilt yields (borrowing costs) rose to 5.17% but have fallen back today to 4.22%. This means the capital value of existing gilts have gone up, relieving the capital value/funding position of pension funds. We await a tighter, more sensible Autumn Budget from the new Chancellor on the 31 October.