Jacob Rees-Mogg claims parts of economy in ‘good state’

Parts of Britain’s economy are in “good state”, said business secretary Jacob Rees-Mogg despite negative growth, the falling pound, rising interest rates and fears for pensions.

Mr Rees-Mogg said the latest official figures showing that the UK economy shrank by 0.3 per cent in August was only “a small amount in a very large economy”.

He insisted that pension funds “aren’t at risk” – despite the pound falling again on Tuesday after the Bank of England governor warned its emergency plan aimed at protecting pensions would end on Friday.

Mr Rees-Mogg admitted his own mortgage payments had gone up in recent weeks. “Yes, mine has gone up,” he told Sky News. “Mortgage rates have gone up for everybody.”

But the business secretary that “there are bits of [the economy] in a good state” – highlighting low unemployment. “I think the economy has some good points and some areas of difficulty.”

Mr Rees-Mogg added: “There is a problem with inflation, and the difficulty with inflation is that monetary policy has to tighten, and if you tighten monetary policy it leads to higher mortgages and rates of interest for businesses. And that is never easy.”

The senior minister refused to get drawn into speculation about whether the Bank of England should extend its emergency bond-buying programme beyond the end of the week.

Asked if he had confidence in governor Andrew Bailey, Mr Rees-Mogg said: “Yes, of course … I’m not going to criticise the Bank of England or the governor. It is not for me to speculate on what the Bank of England is doing.”

The Bank intervened for the second time in as many days on Tuesday to prevent “fire sales” of pension fund assets, as traders continue to dump government bonds in the wake of chancellor Kwasi Kwarteng’s mini-budget.

Speaking in Washington DC on Tuesday night, Mr Bailey warned there could be no further extension beyond the end of the week.

“My message to the (pension) funds involved – you’ve got three days left now. You have got to get this done,” he said. “Part of the essence of a financial stability intervention is that it is clearly temporary.”

The Pensions and Lifetime Savings Association (PLSA) warned against ending it “too soon” – suggesting the Bank should continue its emergency bond-buying scheme until the end of October or beyond.

Former pensions minister Steve Webb also said Mr Bailey may have to continue to scheme beyond 14 October help. “It’s perfectly possible, although a lot has been done, that more help will be needed from the Bank on Friday,” he told BBC Radio 4’s The World Tonight.

Grilled on about the need for emergency action after the mini-Budget, Mr Rees-Mogg told LBC: “It is not abnormal for the Bank of England when a particular event take place that happens faster than is anticipated, or wasn’t anticipated.”

Liz Truss faces MPs on Wednesday for the first time since chancellor Mr Kwarteng’s £43bn mini-Budget tax giveaway unleashed chaos in the financial markets.

Senior Tory MP Mel Stride, chair of the Treasury select committee, suggested Ms Truss and Mr Kwarteng may have to U-turn on some of their tax cuts to win the support of MPs

Mr Stride told the BBC that “rowing back” on tax cuts “has to be on the table”. He told BBC Radio 4’s PM programme that if the choice became a fiscal plan which the markets “are just not going to buy” or U-turning on tax cuts, the chancellor had to be “brave”.

A senior No 10 official told The Independent that staffers have been tasked with re-examining measures unveiled in mini-Budget to see if changes or U-turns might be required.

The official said that staff “have been told to go through the measures and the OBR’s working line by line”.