Suffolk Secret retweetledi
I promised I’d get back to you. Sorry for the delay. And for the length:
To argue the Bank of England bears primary responsibility for the gilt yield spike and sterling collapse during your 49-day premiership requires selective interpretation and revisionist history.
Liability-driven investments (LDIs) in pension funds did indeed amplify market volatility but your mini-budget’s unfunded £45 billion tax cuts (September 23, 2022) was the decisive trigger which provoked the LDI crisis in the first place, all the more so since it was delivered without Office for Budget Responsibility (OBR) scrutiny, which eroded investor confidence in UK fiscal credibility.
You cite a May 2024 BoE Staff Working Paper on “LASH risk” (Liquidity After Solvency Hedging) to claim the Bank confessed that LDI failures caused ~66 basis points (bps) of the 103 bps rise in 30-year gilt yields from September 23 to October 10, 2022—implying your mini-budget was a sideshow. That is untrue.
The paper is research, not an official BoE position or “admission of failure.” It models how LDI margin calls created a feedback loop of forced gilt sales but explicitly frames the mini-budget as the initial catalyst—yields jumped ~30 bps immediately post-announcement, before LDI dynamics fully kicked in.
Economist Renaud Bourlès (Sciences Po) explains how blaming the Bank ignores how the unfunded cuts signalled fiscal recklessness, prompting investors to demand higher yields (a risk premium) on UK debt.
The Chicago Fed’s 2023 review echoes this: LDI vulnerabilities were a “structural factor,” but the budget’s scale—equivalent to 2% of GDP in net borrowing—ignited the fire, not some unrelated Bank oversight.
The Bank’s September 28 intervention actually saved the government and made £3.8 billion profits on resales. There was no taxpayer loss. Calling this a “failure” whitewashes how it was your Budget which necessitated the bailout in the first place.
The Bank’s September 22, 2022 notice on active QT (quantitative tightening)— planning ~£35-40 billion in annual gilt sales starting October 31— was not pre-emptive sabotage. It has been pre-announced, markets had anticipated it for months; yields were stable pre-Budget. Your Chancellor proceeded as if neither you nor your Chancellor even knew about it.
Yields didn’t surge until after the Budget announced energy subsidies, corporation tax cuts and top-rate income tax abolition — all adding tens of billions to the deficit without offsets. The Bank paused sales amid the turmoil. Blaming QT deflects from your choice to deliver the “fiscal event” without OBR forecasts, which Treasury officials warned would spook bondholders.
Sterling’s plunge to $1.03 (September 26) was a direct verdict on your Budget: markets priced in default risk, not Bank dovishness on interest rates. Post-crisis, the pound recovered, but the episode cemented a “Truss premium” on UK assets—higher yields persisting into 2025.
Labour is wrong to claim you crashed the economy. You didn’t. The system moved fast enough to right your government’s wrongs. But you left some deep fiscal scars that are still with us — including a persistent 0.5-1% premium vs. peers, adding £10-15 billion annually to debt interest (now 10% of spending). Mortgages rose 2-3% faster than elsewhere, costing households £1,000+ a year.
In different ways Reeves is now in danger of creating a second ClusterTruss.
Liz Truss@trussliz
This is completely false @afneil. You should know better and do some proper research. The @bankofengland have admitted that in 2022 two thirds of the market spike was down to their failure over LDIs and pension funds. That's not including the fact that they announced the sale of £40bn of gilts the night before the Mini-Budget, queering the pitch. Or that they did not raise interest rates as much as the Fed. Why is the establishment media so beholden to the @bankofengland? It's a big part of the dire straits Britain is in.
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