© Reuters. FILE PHOTO: Britain’s Business, Energy and Industrial Strategy Secretary Jacob Rees-Mogg walks outside Downing Street in London, Britain, September 23, 2022. REUTERS/Clodagh Kilcoyne/File Photo
By William James
LONDON (Reuters) – British business minister Jacob Rees-Mogg said on Wednesday the government’s “mini-budget” was not to blame for turmoil in the bond markets, accused the IMF of an anti-British bias and cast doubt on official data showing the economy contracted.
His comments drew criticism at a time when Liz Truss’s newly formed Conservative government is trying to shore up credibility with international investors and restore confidence in its economic competence.
Rees-Mogg, appointed by Truss when she took office last month, used a round of interviews to reject criticism that the government triggered a bond market rout by announcing 45 billion pounds ($49.86 billion) of tax cuts funded by higher borrowing and undefined supply-side reforms.
“It’s primarily caused by interest rate differentials rather than by the fiscal announcement,” he told BBC radio.
Before entering politics Rees-Mogg founded an emerging markets investment firm and he was at the forefront of the charge for Britain to leave the European Union. His appointment to a senior ministerial role under Truss was met with scepticism by some business leaders.
The day before the tax-cutting fiscal statement, the Bank of England raised interest rates by less than its U.S. counterpart.
Citing this, Rees-Mogg chastised his interviewer for saying it was the budget that caused a selloff in British currency and bonds. His comments went further than other ministers who have stressed global factors were also involved.
“I think jumping to conclusions about causality is not meeting the BBC’s requirement for impartiality,” he told the license-fee funded BBC. “It is a commentary rather than a factual question.”
Top Bank of England officials have repeatedly said that UK-specific factors were behind the sharp moves in British assets, including the mini-budget on Sept. 23.
On the day of the fiscal statement, one economist at U.S. bank Citi described it as “huge, unfunded gamble for the UK economy” and others described the market gyrations as reflective of concern about Britain’s fiscal credibility.
Since then the BoE has had to intervene to stabilise markets after the sharp drop in British government bonds threatened pension funds, which hold large amounts of long-dated gilts.
“This kind of comment actively undermines the credibility of the government in the eyes of markets, who all know that it’s total nonsense,” said Rupert Harrison, a Portfolio Manager at Blackrock (NYSE:) in response to Rees-Mogg’s comments.
Harrison worked until 2015 as an adviser to then-Conservative finance minister George Osborne.
In recent weeks the International Monetary Fund has taken the rare step of criticising a G7-member country’s economic policy. Rees-Mogg responded by saying the IMF was “not normally a friend of this government”.
In Monday’s interviews, he also said Office for National Statistics data showing the economy unexpectedly shrank in August should not be relied upon as early readings are often subject to revision.
($1 = 0.9026 pounds)