Liz Truss and Kwasi Kwarteng’s disastrous mini-budget caused the UK’s Brexit divorce bill to be even dearer, new figures have shown.
The budget, which included the biggest tax cuts since 1972 funded by a vast expansion in borrowing, saw the value of the pound tumble – and, as the UK’s payments to the EU are made in euros, that saw the bill rocket.
The figures, published in the Treasury’s own annual report, show that in the 2022/23 financial year, the UK government booked a £91 million loss on currency movements related to payments to the EU.
The Treasury’s “reportable losses” had previously ranged between nothing at all to just a few million pounds.
According to analysis by Reuters, around half of the £91 million loss stemmed from a payment to the EU on September 30 last year, a week after the announcement of Truss’s tax-cutting “Growth Plan”.
The €855 million payment cost Britain £764 million on a day when one pound would buy only €1.12. Back in April 2022, when the EU updated Britain’s payment schedule for June through to September, it assumed an exchange rate of around €1.18 euros.
Truss and Kwarteng’s mini-budget tanked when economists including those at the Bank of America and IMF baulked at the idea that £45bn of unfunded tax cuts for the rich could catalyse economic growth and pay for itself.
The pound fell to its lowest-ever level against the dollar, while gilt prices collapsed. Over four days, long-dated government bond yields – which move inversely to prices – rose by more than the annual increase in 23 of the past 27 years.
The mini-budget was initially hailed by Truss’s Brexit cheerleaders in the media, with Allister Heath of the Daily Telegraph calling it “the best budget I have ever heard a chancellor deliver, by a massive margin” while the Daily Mail splashed with the headline “At last, a real Tory budget”.
But it was junked largely in its entirety by Kwarteng’s successor, Jeremy Hunt, and Truss herself was gone little more than a month later.
A Treasury spokesperson said: “Foreign exchange fluctuations are expected over the lifetime of the Withdrawal Agreement.”
Labour’s shadow financial secretary to the Treasury, James Murray, said: “This is yet more evidence of the ruinous damage done to the UK’s public finances by this Tory government, handing over millions more to the EU than should have been paid, after their reckless policies sent the pound into freefall.”