Liz Truss meets European leaders in Prague as Irish deputy PM says NI protocol ‘a little too strict’ – as it happened

• Liz Truss is meeting leaders in Prague for the first-ever meeting of the European Political Community, a new group dedicated to advancing security and energy cooperation across the continent. Speaking to journalists this afternoon, she said her attendance was “not about moving closer to Europe”. She said:

This is not about moving closer to Europe. This is about working with Europe on issues that we both face. [We] both face rising energy costs, that’s why I took the decision to put in place the energy price guarantee so people in Britain weren’t facing bills of up to £6,000.

That is why we’re working with our European neighbours on doing more on the North Sea, on offshore wind, which I have been talking about today. We’re working with our partners on more nuclear energy, so that we’re never in the same position again of being dependent on Russia and Russia using energy as leverage against free democracies.

• The Labour party has claimed that some people with mortgages could have to pay £500 more per month as a result of the way mortgage rates have risen since the mini-budget last month. (See 10.25am.) Labour made the claim in a press release issued overnight, but it said that a letter from the Bank of England to the Commons Treasury committee released this morning backed up the allegation. The letter includes this chart, showing how UK government borrowing costs rose sharply after the mini-budget, while government borrowing costs in the US and in the eurozone rose only slightly over the same period. The government claims global factors have been behind people having to pay higher mortgages in the UK, but Pat McFadden, the shadow chief secretary to the Treasury, said the Bank of England chart disproved this. Here is the chart from the letter.

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And this is what McFadden said about it.

This shows once and for all that the Tories’ kamikaze budget is responsible for the economic chaos we have seen, leaving people with skyrocketing mortgage rates.

This is a Tory crisis made in Downing Street.

The government’s reckless mistakes show they cannot be trusted to manage the public finances.

In a separate development Jonathan Haskel, a member of the Bank’s monetary policy committee, said that sidelining the Office for Budget Responsibility, which is what happened before the mini-budget, “generates more uncertainty”. In a speech today he said:

Echoing the governor’s words of last week, I welcome the usual close involvement in the budget process of the OBR. A sidelined OBR generates more uncertainty by worsening everyone’s information base.

• Truss has restated her claim that global factors are primarily to blame for interest rates going up in the UK. Speaking in Prague, where she was asked about mortgage rates going up, she said:

We’re facing a very, very difficult economic situation. We have rising energy prices and we have rising interest rates around the world. The Federal Reserve has raised its interest rates to 4%.

• Households could experience a series of three-hour power cuts this winter if Vladimir Putin shuts off gas supplies from Russia and Britain experiences a cold snap, National Grid has warned. Labour has said the need for such a warning is a “direct consequence” of government policy. (See 4.33pm.)

• The former taoiseach Leo Varadkar has conceded that the Northern Ireland protocol is “a little too strict”, raising hopes of further EU compromises as talks reopen between London and Brussels.

• A Holyrood committee tasked with scrutinising the Scottish government’s gender recognition reform bill has given its support to the key principles for simplifying how transgender people can update their birth certificates – including the introduction of self-declaration.

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According to the Economist’s Sophie Pedder, Liz Truss and Emmanuel Macron may announce plans for a UK-France summit next year after their bilateral meeting in Prague this afternoon. It would be the first such summit for five years.

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The Labour party has said that Tory policies are directly to blame for the fact that the National Grid is now warning there is a risk families could face three-hour power cuts this winter. In a statement, Ed Miliband, the shadow secretary for climate change and net zero, said that if the government had invested more in energy security and insulation over the past decade, the UK would be better prepared for the winter. He said:

Today’s report from National Grid shows our vulnerability as a country as a direct consequence of a decade of failed Conservative energy policy.

Banning onshore wind, slashing investment in energy efficiency, stalling nuclear and closing gas storage have led to higher bills and reliance on gas imports, leaving us more exposed to the impact of Putin’s use of energy as a geopolitical weapon …

It is the government’s responsibility to ensure the UK is resilient, but instead they have left the UK’s key infrastructure dangerously exposed. The prime minister must meet with the National Grid as a matter of urgency and set out a plan.

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6 Oct 202211.20 EDT

Oxford University vice-chancellor uses final address to accuse government of not keeping funding promise

Richard Adams

Louise Richardson, the outgoing vice-chancellor of the University of Oxford, used her final oration to the university’s congregation to upbraid the government over its failure to help fund its new pandemic research institute, after £150m was promised by Boris Johnson at the height of the Covid outbreak. She said:

On 30 December 2020, in the presence of his senior advisers and industry leaders, the prime minister promised Oxford £150m for our new pandemic sciences institute. I, in turn, committed to raising an equivalent sum privately so that Oxford and the UK would have an institute that would retain our best scientists and serve as a magnet to scientists from around the world, and together we could ensure that the world is never again caught unprepared for a pandemic.

We have fulfilled our part of the deal and raised our share from several generous donors. We are still waiting for the government to fulfil its side of the bargain.

Richardson was also critical of the burden of regulation being imposed on universities, noting that the Office for Students (OfS) – the higher education regulator for England - published 600,000 words in regulatory documents in 2020–21, “30% more than Tolkien took to write The Lord of the Rings trilogy”, she noted, adding:

The OfS regulatory framework runs to 166 pages. It has a further 43 pages of updates and amendments, six of explanation of the amendments, and 20 setting out national standards for higher education. To this are added six regulatory notices and 20 pieces of formal regulatory advice. I can’t help noticing that the US constitution is in a similar format and runs to a total of 19 pages.

The heavy weight of regulation continues to be an unsustainable burden on university administration. Meanwhile, in my seven years as vice-chancellor, we have had eight secretaries of state for education.

6 Oct 202211.06 EDT

Bar Council says Suella Braverman's jibe against lawyers 'underming rule of law'

Diane Taylor

The Bar Council has accused Suella Braverman, the former attorney general who is now home secretary, of “inappropriate and unbecoming conduct” because of the critical remarks she made about lawyers in her Conservative party conference speech. Braverman said: “As for the lawyers, don’t get me started on the lawyers. And I’m a recovering lawyer.”

Mark Fenhalls KC, chair of the Bar Council, also accused ministers of undermining the rule of law. He told the Guardian:

The home secretary’s sniping about lawyers in her conference speech was both inappropriate and unbecoming. As one of the most senior and influential ministers in the government, Suella Braverman should help to raise the standards of public discourse and debate rather than lower them. The government knows how valuable law and legal services are to the UK economy and it is time that ministers stop undermining the rule of law and the UK’s legal profession.

Just a few weeks ago Fenhalls wrote something in Counsel magazine making a plea to government to stop trashing lawyers. Charlie Falconer, the Labour former lord chancellor, has also criticised Braverman for her speech. On Tuesday he said rubbishing the law in this way was terrible.

Braverman’s predecessor Priti Patel was also criticised for her attacks on “activist lawyers”.

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Keir Starmer has tweeted a clip from his local radio interview round this morning where he calls for the mini-budget to be abandoned and explains what he would do differently.

Conservative MPs who support Liz Truss have accused Nadine Dorries of criticising her (see 9.28am) on behalf of Boris Johnson, the Telegraph’s Camilla Turner reports.

In her story Turner quotes a series of MPs, all speaking anonymously, having a go at Dorries. Here’s an extract:

“I’m not certain we can take her too seriously on this front, she has allowed her personal loyalty to Boris to overshadow everything else,” one backbench MP told The Telegraph.

“I think if Boris is already plotting his comeback as some suggest he could pick some better mouthpieces.

“There is no getting around the fact that her remarks were unhelpful. But I would be more concerned if it was coming from Jacob Rees-Mogg or Iain Duncan Smith - people who carry serious heavyweight status. They all remain firmly with her.”

This is from the BBC’s Jessica Parker, who is covering the European Political Community summit in Prague.

Here’s a good question from below the line. It is prompted by this report.

Andrew- has the UK's credit rating ever been downgraded like this before?

whyisnothingsimple06 October 2022 9:40am

My colleague Graeme Wearden tells me:

This is the second time that the UK’s credit rating has been in this position. Fitch has previously placed the UK on AA- with a negative outlook, back in March 2020, due to the impact of the pandemic on the public finances.

According to the Economic History Review, the UK received its first sovereign credit rating in 1978 - and held that prized AAA rating until 2013, when Moody’s became the first to downgrade the UK.

During the Conservative party conference Kwasi Kwarteng, the chancellor, became irate in interviews when it was put to him that the Bank of England had had to spend £65bn rescuing the pensions industry because of his mini-budget. He pointed out that £65bn was the amount set aside to buy gilts to protect pension funds using liability-driven investment (LDI) strategies, not the amount that had actually been spent.

Today the Bank of England has confirmed that Kwarteng was right. In a letter to the Commons Treasury committee, Sir Jon Cunliffe, the Bank’s deputy governor for financial stability, says the actual amount spent has been much lower. As PA Media reports:

The Bank said it had stayed well within its daily limit of £5bn in gilt purchases, which it was forced to begin after fears that some UK pension schemes were at risk of collapse.

It said it has spent £3.7bn across six operations conducted so far, having reportedly bought no bonds on Tuesday and £22m worth on Monday, and said it would be unwound in a “smooth and orderly fashion” once it comes to its scheduled end on 14 October.

But a report by Joe Easton, for Bloomberg, will make less cheery reading for Kwarteng. Easton reports:

A wild first month for Liz Truss’s government has seen at least £300bn ($340bn) wiped from the combined value of the nation’s stock and bond markets.

While assets globally have been roiled by central bank efforts to tame surging inflation, confidence in the UK has been shaken. The September selloff on concerns about the Truss government’s tax cuts saw the pound hit a record low against the dollar, intervention by the Bank of England and a humiliating government climbdown amid questions over credibility.

“The feedback we get from investors is that they consider the UK uninvestable as long as there is such government chaos,” Liberum Capital Ltd strategist Joachim Klement said in written comments.

Households could experience a series of three-hour power cuts this winter if Vladimir Putin shuts off gas supplies from Russia and Britain experiences a cold snap, the National Grid has warned. My colleague Alex Lawson has the story here.

Leo Varadkar, Ireland’s tánaiste, or deputy prime minister, has said the Northern Ireland protocol was “a little too strict” in its original draft.

Speaking as talks between the EU and the UK on potential changes to the protocol, which could make it more acceptable to the British government, were to resume this afternoon, after a gap of around eight months, Varadkar insisted the protocol was working but said there was room for “further flexibility for some changes”.

The protocol was part of the Brexit agreement, and it stipulates that goods travelling from Great Britain to Northern Ireland must be subject to certain checks. It was agreed so that the EU can protect its single market without having to enforce controls at the border between Northern Ireland and Ireland.

Unionists in Northern Ireland have complained that the protocol is unduly restrictive, and some Brexiters object to it on principle. Even though Boris Johnson agreed to the protocol, his government subsequently described it as flawed and demanded changes.

Speaking in Dublin, Varadkar, who was taoiseach (Irish prime minister) when the protocol was agreed and who is now tánaiste in a coalition government, said:

We should not forget that the protocol is working. It was designed to prevent a hard border between north and south, and there is no hard border between north and south.

It was designed to protect the integrity of the single market and it has; and also the Northern Ireland economy is outperforming the rest of the UK economically.

But one thing that I would concede is that perhaps the protocol, as it was originally designed, was a little too strict.

The protocol has not been fully implemented and yet it is still working.

I think that, you know, demonstrates that there is some room for further flexibility for some changes that hopefully would make it acceptable to all sides.

Varadkar also said he thought there was “a window of opportunity” for the UK and the EU to reach an agreement over the protocol in the next fortnight. He went on:

That would be very beneficial for Ireland and Northern Ireland because it would allow us to get the [Northern Ireland] executive up and running, and could be helpful for Britain as well in economic terms.

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Momentum, the leftwing Labour group set up to champion the Jeremy Corbyn agenda, has criticised Keir Starmer for refusing to back pay rises for nurses and other workers in line with inflation. (See 10.51am.)

At the Labour party conference delegates passed a motion on pay, moved by the union Unison, calling for, among other things, workers to get “pay increases at least in line with inflation”. In theory, conference votes decide party policy, but in practice, leaders have the final say and it is not unusual for them to ignore certain conference votes.

According to a report by Harriet Line and Jason Groves in the Daily Mail, Liz Truss is determined not to uprate benefits in line with inflation, despite MPs from all wings of the Conservative party demanding this. They write:

The Daily Mail understands she remains determined to press ahead with uprating benefits in line with earnings. Sources indicated disability support may increase in line with inflation, but the PM continues to believe it would be unfair for most claimants to receive a bigger uplift than workers whose taxes fund their payments.

The Institute for Fiscal Studies said the move would cut state spending by around £7bn – because earnings are growing at 5.5 per cent, compared with inflation at around 10 per cent. One insider warned that if Miss Truss was forced into another U-turn, the rebels would be emboldened further still. ‘We’ve got to win this because our opponents are playing whack-a-mole,’ they said.

‘If we give way they will just move on to the next thing.’

And these are from the BBC’s Brussels correspondent, Jessica Parker.

Liz Truss was originally sceptical about the UK getting involved in the European Political Community. But she has put aside her doubts and, in an article in the Times, today she says she decided to go to Prague because “it is right that we find common cause with our European friends and allies”, particularly on security, energy and migration.

But she also says the new body must not become “an EU alternative”. She says:

Today’s meeting is not an EU construct or an EU alternative. I am very clear about that. It brings together governments from across Europe, around a third of whom are outside the EU. A post-Brexit Britain, as an independent country outside the EU, should be involved in discussions that affect the entire continent and all of us here at home. We are taking part as an independent sovereign nation, and we will act as one.

In a long analysis, my colleague Jennifer Rankin says there is a limit to what might be achieved today in terms of a reset for UK relations with the EU. Here’s an extract.

Truss remains the leader of one of the largest non-EU countries at the Prague meeting and the UK has won credit in Brussels as a strong supporter of Ukraine’s president, Volodymyr Zelenskiy, who will address the gathering via a video link. Truss will be one of four non-EU leaders to speak at the opening plenary, along with Zelenskiy and the prime ministers of Norway and Albania. One EU diplomat said it was welcome that Truss would meet her EU counterparts out of “the shadow of Brexit”, expressing the hope that “maybe it will mend those wounds that have been created on both sides because of Brexit”.

Nobody, however, expects the gathering to resolve deep and lingering post-Brexit conflicts. “The EPC cannot be a substitute for the natural course of exchanges between the EU and Great Britain on issues directly related to the post-Brexit difficulties,” Vimont said. “But it’s a nice political platform where people can talk to each other, and that can always be useful.”

The Prague summit is just one more positive wind acting on EU-UK relations. Antagonism over the contested Northern Ireland bill has been paused as the legislation makes slow progress in the House of Lords, a timetable that both EU and British diplomats think creates a positive space to revive talks. Also easing tensions, the arch Brexiter Steve Baker, now a junior minister for Northern Ireland, apologised to the EU and Ireland for his behaviour during the Brexit negotiations. Ireland’s taoiseach, Micheál Martin, said his comments were “honest” and “very helpful”.

But clouds remain on the horizon. Fabian Zuleeg, who leads the European Policy Centre thinktank in Brussels, said any suggestion the Prague summit could lead to a reset in EU-UK relations was “overburdening” one day of diplomacy in the Czech capital.

And here is the full article.

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