Bank of England forced to step up bond-buying program amid market turmoil

The Bank of England has announced that it will extend continued its emergency bond-buying program as it warned that a continued rout on government debt poses a risk to financial stability. significant risk to the UK's financial stability," according to the central bank.

The Bank said on Tuesday morning that it would now widen the scope of its bond purchase plan operations to include buying pegged gilts in an attempt to prevent a 'fire sale'.

"The start of this week saw another significant repricing of UK government debt, particularly pegged gilts", he said. "The dysfunction of this market and the prospect of a self-reinforcing 'fire selling' dynamic poses a significant risk to the financial stability of the UK."

This comes as the Institute of Fiscal Studies (IFS) has warned that the government will need to cut spending by £60billion to balance the books by 2026-27.

If Liz Truss and her chancellor Kwasi Kwarteng aren't giving up on their tax cuts, they'll have to go public with 'painful' cuts sector cuts by 15% to rein in debt, the IFS found.

The Bank was forced to launch the emergency scheme on September 28 after market turmoil threatened pension funds. When asked if pensions were safe, Deputy Prime Minister Therese Coffey told Sky News: "I absolutely believe pensions are safe."

Ms Coffey insisted on Tuesday on the fact that UK public finances were still in "good shape". ”. Asked about the prospect of further austerity cuts, the deputy prime minister said: "I'm just not going to get into speculation."

The minister also denied that Mr Kwarteng had presented his medium-term budget plan for November 23 to October 31 as markets spooked.

Tory MP Mel Stride, chairman of the Treasury Select Committee, has warned that Mr Kwarteng may still have to go further if he wants to reassure nervous markets.

"The best option of all options is that what the Chancellor proposes on October 31 adds up, the markets trust her, and we start to see an easing of these rising interest rates, pressure on borrowing costs, mortgages etc,” he told BBC Newsnight. p>

Mr Stride added: “And it is possible to do it, but it may require a huge dose of political courage on his part, perhaps even to rev nir on the tax cuts that have been proposed. meanwhile they would oppose deep cuts in public sector spending, following the IFS warning of a return to austerity to address the black hole in public finances. p>

Kevin Hollinrake said: "Many MPs would be concerned if spending cuts impacted frontline services or made voters worse off in terms of welfare. In terms of impact on public services, as well as on welfare, spending cuts will be extremely difficult to pass through the House.”

A former cabinet minister backing Rishi Sunak told The Independent: "There's no way Tory MPs will accept savage austerity in a post-Covid cost of living crisis. Liz has gotten herself into a dead end."

Ms Truss is facing growing opposition within her own party over proposals not to increase benefits with inflation, a decision that would amount to cuts in real terms for the most vulnerable.

Mr Kwarteng is set to answer questions from MPs about his budget plans in the Common today, with questions about the Treasury in pencil for Tuesday afternoon.

Labour calls on the Chancellor to backtrack on the 'kamikaze' mini-budget tax cut. 'It will be up to Labor to clean up once again the Tory mess," Shadow Chancellor Rachel Reeves said.

Shadow Treasury Minister Pat McFadden said the Bank of England "had been forced into action for a second day in a row to reassure the markets shows that the government's approach is not working."

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