Bank of England Governor Andrew Bailey and former PM Liz Truss (Image: Getty)
A secret move by the Bank of England suggests that Liz Truss’s catastrophic mini-Budget with unfunded tax cuts was not entirely to blame for the UK’s economic meltdown, a financial expert has said.
Tax consultant Bob Lyddon said the creation of a Contingent Non-Bank Financial Repo Facility (CNRF) — designed to ease cashflow to non-bank financial institutions during a downturn — showed that not all is “rosy” with the UK economy.
Ms Truss and her chancellor Kwasi Kwarteng’s 2022 plans, which also included increased borrowing, were often seen as the cause of Britain’s soaring inflation.
It led to her removal from office after just 49 days, making her the shortest-serving prime minister in British history.
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Liz Truss and Kwasi Kwarteng pictured at the Tory party conference in 2022 (Image: Getty)
However, Mr Lyddon, who founded Lyddon Consulting Services, “implosion” in the economy “occurred because these were high-risk financial instruments through which the pension funds had taken a massive punt on UK that went spectacularly wrong when started rising at the end of 2021”.
He added: “It was fine for the Bank, and a phalanx of other self-interested parties, to heap the entire blame for the meltdown onto the mini-Budget and on to Liz Truss and Kwasi Kwarteng.
“The creation of the CNRF is a belated admission that there was much more to it than that.”
Liz Truss resigned in October 2022 (Image: Getty)
Mr Lyddon said the CNRF has been launched this year “as if it were a response to the fall of Silicon Valley Bank and Credit Suisse in 2023”.
But he believes it was actually done to “dampen down the powder keg” of current risk to the UK economy.
Ms Truss has often blamed Liability-Driven Investments (LDIs), where pension funds are invested, for the economic shock that caused her downfall.
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Mr Lyddon said of the Bank of England: “In its anxiety to pin the entire blame for the meltdown on the mini-Budget, it could not contradict its own PR by admitting any contributory errors on its side.
“Two years have elapsed since then in which the underlying problems have continued to expand unchecked. Now we have a belated and heavily disguised admission that not all in the garden is rosy.
“The CNRF looks suspiciously like a sticking plaster. It does not eliminate the risk of the powder keg blowing sky-high.
“If it does, the Bank won’t have Liz Truss and Kwasi Kwarteng to blame this time around.”
The Express has approached the Bank of England for comment.