‘Unhelpful’ Rishi Sunak blasted for ‘odd’ market remarks

Truss v Sunak: Pienaar identifies 'threatening' aspect for Tories

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The former Chancellor has branded his opponent Liz Truss “complacent and irresponsible” for ignoring a supposed loss of market confidence in the British economy. Speaking to the Financial Times, Mr Sunak said he “struggled” to envision how Ms Truss’s sweeping tax cut agenda will be funded.

He also claimed her plans would push inflation upwards even further and increase the UK’s borrowing costs.

But these suggestions have been rebuffed by an economist saying there is no sign of panic, even with the leadership result just days away.

Economist Julian Jessop said on Twitter: “This is unhelpful from #RishiSunak.

“Markets aren’t stupid. #LizTruss is clear favourite to win, but there is no sign of panic.

“(The recent jump in gilt yields is not much larger than the rise in Germany, while #sterling’s slump against the dollar has been matched by the euro.)”

He continued: “On the specifics… 1. odd to worry about the cost of index-linked debt when the real rates are still negative.

“2. odd to flag up concerns about the vulnerability to higher short-term rates while at the same time dismissing #Truss’ proposal to extend the maturity of borrowing.”

Currently, large investors are betting on an upward tick in UK borrowing costs due to fears out of control energy costs will force the Bank of England to increase interest rates considerably.

The BofE has been increasing interest rates incrementally throughout this year.

For the first time in 14 years, the two-year gilt yield, which reflects market expectations for BoE policy, reached three percent on Tuesday.

Mr Sunak said: “We have more inflation-linked debt by a margin than any other G7 economy — basically more than double.

“Because of the structure of QE [quantitative easing], we’re also particularly much more sensitive to an upward rate cycle than we have been.”

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He said it would be “complacent and irresponsible not to be thinking about the risks to the public finances”.

Mr Sunak added: “Ultimately, you have to decide whether you think sustainable rates of borrowing are important or not. I think they are.”

The former Chancellor has made getting a grip on inflation one of his top agendas throughout the leadership race – but has differed to Ms Truss on how to go about it.

Ms Truss has promised a slew of tax cuts, including a reversal of the National Insurance increase and cancelling an uplift in corporation tax, due next year.

Mr Sunak has promised to cut taxes but only once inflation is under control.

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