Pound rallies as Jeremy Hunt expected to scrap parts of mini Budget in emergency statement

17 October 2022, 07:42 | Updated: 17 October 2022, 10:46

The pound has rallied against the dollar ahead of an emergency statement by new chancellor Jeremy Hunt, who is hoping to calm markets after weeks of turmoil.

Jeremy Hunt is due set out billions of pounds of savings to stabilise the public finances in an emergency statement on Monday.

His plans are expected to involve scrapping large parts of Kwasi Kwarteng's mini Budget, which sent the markets into turmoil when it was announced on September 23.

In a statement, the Treasury said the new Chancellor was fast-tracking his plans - which will be released in full on October 31 - following conversations with the Prime Minister over the weekend.

Sterling rose more than 1 per cent against the dollar at news of the announcement, reaching 1.131. There were fears that it would be another tough day for the currency and long-term Government bonds, or gilts.

Yields on gilts fell by about 8 per cent in early trading after the Chancellor’s statements, amid fears the sell-off in gilt markets would carry on with the Bank of England ending its bond-buying programme.

Friday’s U-turn on corporation tax – another humiliating reversal for Liz Truss, whose entire tax-cutting scheme looks dead in the water – did not calm markets sufficiently.

The Treasury said Mr Hunt had also met with the Governor of the Bank of England and the Head of the Debt Management Office on Sunday night to brief them on the plans.

Read more: Hunt meets Truss at Chequers hours after Chancellor insists PM 'still in charge'

Read more: Chancellor Jeremy Hunt to delay the 1p cut to income tax as he admits mini-budget went “too far, too fast”

It comes as Liz Truss' position as Prime Minister appeared in danger over the weekend, with three Tory MPs openly calling for her to quit.

The Prime Minister sacked her Chancellor and effectively ditched her economic agenda in a bid to restore credibility to her administration after revealing a mini-budget that sent markets into meltdown.

The U-turns have seemingly done little to quash growing disquiet within the party, with MPs Crispin Blunt, Andrew Bridgen and Jamie Wallis calling for her resignation on Sunday.

Her fate also hangs on the mood of the markets, with all eyes on how they will react on Monday morning.

Columnist brutally sums up chances of Liz Truss surviving as PM

For a prime minister to lose their job they must either resign, their party must lose a general election or they must lose a confidence vote.

But current Conservative Party rules forbid a confidence ballot for another 11 months - because it says a PM cannot have one in their first year in office - and the next general election is not due until late 2024.

But given the backlash against the PM, there is speculation Tory MPs could bypass the current rules.

Read more: US president says UK economy turmoil was ‘predictable’ and cutting taxes for the rich ‘was a mistake’

Read more: Miriam Margolyes delivers F-word rant at Jeremy Hunt

Alternatively the 1922 Committee executive could be forced to change the party rules to allow a vote if there is enough pressure from MPs.

Even if a confidence vote is not held, mounting criticism from her own party may force Ms Truss to resign anyway.

If enough MPs submitted letters of no confidence to prove Ms Truss could not command her party or pass legislation, her hand would likely be forced.

Liz Truss' dismal press conference performance

With the backdrop of rumoured plots and plans to install the defeated Rishi Sunak or Ben Wallace as the new leader, Ms Truss met with her new Chancellor in Chequers to draw up a new budget for October 31.

Mr Hunt, who carried out something of a media blitz on behalf of the Prime Minister over the weekend, insisted that she was still in charge even as he diagnosed the need for a tough package of tax rises and spending cuts in order to steady the UK economy.

Penny Mordaunt also offered the Prime Minister her full support, using a piece in the Telegraph to warn that the UK "needs stability, not a soap opera".

She told colleagues that the "national mission" is clear but said it "needs pragmatism and teamwork".

"It needs us to work with the Prime Minister and her new Chancellor. It needs all of us."

Read more: Truss will survive the next two weeks says new Chancellor Hunt, as he admits some taxes ‘will have to’ go up

Read more: 'It's over': Time 'running out' for Truss as Tories turn on her after humiliating tax u-turn

The presence of Mr Hunt was welcomed by many MPs, but many senior figures admitted it was an open question whether the Prime Minister could still survive the current crisis.

Labour added to that pressure, with Sir Keir Starmer calling on her to appear before the Commons on Monday.

The Labour leader quipped that Ms Truss is now "in office but not in power".

Liz Truss can't 'carry on' as PM says Kristin Oswald

It comes as a new poll, first published in the Guardian, predicted a landslide for Labour and wipe-out for the Tories.

The poll, by Opinium for the Trades Union Congress and using the MRP method to estimate constituency-level results, put Labour on 411 seats compared to the Tories on 137.

In a sign of how divided the party is, former culture secretary Nadine Dorries hit out at her party colleagues.

"I cannot imagine there's one G7 country which thinks we're worthy of a place at the table.

"The removal of one electorally successful PM, the disgraceful plotting to remove another by those who didn't get their way first time round is destabilising our economy and our reputation," she tweeted.