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Labour Likens Tory "Mini Budget" Fallout To Black Wednesday Economic Crash

The pound reached a record low on Monday. (Alamy)

2 min read

Kwasi Kwarteng's "mini budget" and the subsequent fall of the pound is like the Black Wednesday economic collapse, a senior member of the Shadow Cabinet has said.

Jonathan Reynolds, Shadow Secretary of State for Business and Industrial Strategy, said on Monday morning that Friday's financial statement would be remembered as a "moment of economic disaster" that would do serious damage to the Conservative party's reputation.

Earlier in the day, Shadow Chancellor Rachel Reeves accused Kwarteng and Prime Minister Liz Truss of "gambling all of our money" on their controversial economic policy paying off.

The pound plunged to its lowest ever level against the dollar on Monday, and a 37-year low, as the markets continue to react negatively to the government's plans for sweeping tax cuts funded by tens of billions of pounds worth of borrowing.

In a bid to kickstart growth, Kwarteng announced on Friday that the government would cut the top rate of income tax, scrap the cap on bankers' bonuses, and reverse the planned National Insurance Contribution rise.

However, his House of Commons statement was followed by rapid fall of in the value of pound over the weekend, with economists warning today that it could reach parity with the dollar. 

Speaking at Labour conference in Liverpool, Reynolds said it would not be "overdramatic" to liken the last few days to the Black Wednesday crash of 1992, when the UK was forced to withdraw from the Exchange Rate Mechanism. The Conservative government led by John Major went on to suffer a landslide defeat five years later. 

"The political effect of Friday – and I'm not being overdramatic – is not dissimilar in principle to Black Wednesday," the Shadow Cabinet Minister said.

He added: "The government is entirely responsible for what frankly will be remembered as a moment of economic disaster on Friday.

"That budget wasn't designed to appeal to me, or the delegates at this conference, but it fundamentally misunderstood the market reaction it generated."

Reynolds said that the markets are not a "mystical force" but "individual people making the decision that what Kwasi Kwarteng set out on Friday was unsustainable".

"They don't have faith in the plans that have been put forward," he said.

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