FirstFT: Kwarteng insists Truss will be ‘fiscally responsible’ if named PM

Good morning. As the UK Conservative party leadership election ends today, Kwasi Kwarteng, who has been tipped as Britain’s next chancellor, has launched a pre-emptive bid to reassure markets that Liz Truss will not blow a hole in public finances if she is named prime minister as expected.

Kwarteng writes in the Financial Times that although there will need to be “some fiscal loosening”, the new administration would act in “a fiscally responsible way”. Truss’s allies admitted that the Treasury’s fiscal framework would be reviewed “given the severity of the economic shocks we face”.

If elected, Truss has promised to immediately set out “action on energy bills and energy supply”. But Rishi Sunak, the former chancellor and her leadership rival, has warned that Truss would “pour fuel on the fire” of inflation and could unsettle markets by borrowing tens of billions of pounds for unfunded tax cuts.

Kwarteng and Truss have prioritised cutting taxes — which they claim will stimulate growth — over questions of how benefits are spread between the rich and the poor.

Thank you for reading FirstFT Europe/Africa. We hope you have a great week — Gary

Five more stories in the news

1. Opec+ mulls oil supply cuts amid crude sell-off The Saudi Arabia-led oil cartel will consider a cut in oil supply to prop up prices when it meets today in Vienna. An 11 per cent drop in oil prices last week prompted a clamour from some Opec+ members to reverse months of supply increases.

2. EU seeks crisis powers over businesses Brussels is proposing wide-ranging powers to require businesses to stockpile supplies and break delivery contracts to protect the single market from supply shocks and prevent shortages in critical industries in the event of a crisis such as a pandemic, according to draft legislation seen by the FT.

3. Strains mount in European power market Government intervention will be needed to relieve strains on Europe’s power market, industry figures warned, after Sweden and Finland launched emergency backstops for producers and UK electricity generators called on the British government to help. Prices are expected to rise sharply today after Russia announced it would no longer supply gas through the Nord Stream 1 pipeline.

4. Surging inflation takes priority for ECB Several European Central Bank rate-setters have said they are focusing on current, record inflation levels ahead of a policy meeting this week, supplanting an earlier, more dovish approach that hinged on two-year price forecasts, raising expectations of a 0.75 percentage point rise for only the second time in the central bank’s history.

‘There are no doves left at the ECB, only average hawks and uber-hawks’ — Katharina Utermöhl, Allianz

5. Lloyd’s of London defends cyber insurance exclusion Lloyd’s of London has defended a requirement that cyber policies have an exemption for state-backed attacks to limit systemic risk in the insurance market, following a backlash among brokers and academics. Lawyers have warned that the ambiguous nature of cyber attacks could raise issues.

The day ahead

UK legal strike action Criminal barristers in England and Wales will begin indefinite strike action over fee levels for legal aid work. Barristers have staged a number of walkouts since late June, disrupting criminal trials.

UK immigration A legal challenge to the government’s policy of sending migrants to Rwanda opens in the High Court. The hearing is expected to last five days.

Economic data Service sector purchasing managers’ indices are out for the eurozone, France, Germany, Italy, Japan, China and the UK. The EU publishes July retail sales figures and Switzerland has second-quarter GDP.

Lebanon presidential election The country’s parliament votes today to decide the next president for a term of six years.

Russian economy The country’s annual Eastern Economic Forum begins in Vladivostok.

Energy industry The Gastech conference begins today in Milan.

US financial markets are closed today for the Labor Day national holiday

What else we’re reading

Crypto real estate: the property market built on digital assets There are tens of thousands of bitcoin acolytes with the equivalent of more than $1mn in their digital wallets. A survey of US housebuyers found that 12 per cent of first-time buyers planned to liquidate digital assets for a down payment. Agents are aiming to tap that pool of buyers and convert cryptocurrency into bricks and mortar.

Why the office-home balance is still a challenge Many bosses have been trying for months to get their colleagues to spend more time in the office, but the results have been mixed. The complexities of hybrid work arrangements mean that most companies are still trying to figure out what “hybrid” actually means for them — and for their employees.

‘A deglobalising world will be an inflationary one’ The war in Ukraine, the global carbon neutrality push, US-China decoupling, Federal Reserve rate rises putting a cap on easy money — there is no getting around the fact that a deglobalising world will also be a more inflationary one, at least in the short term, writes Rana Foroohar.

Ukraine’s hackers: an ex-spook, a Starlink and ‘owning’ Russia Within hours of Russia’s invasion of Ukraine, an army of ex-hackers and IT professionals mobilised to unleash an unprecedented cyber war against Moscow. Six months into the conflict, some of the hackers tell their stories.

Imran Khan: man of the people or agent of chaos? Pakistan’s cricketer-turned-prime minister has not faded into obscurity since he was ousted in a no-confidence vote in April. In rallies across the country, the 69-year-old is enjoying a political rebirth, and his populist comeback is putting pressure on the government as the economy teeters.

Travel

Many of us try to avoid tourist traps when travelling, but after an extraordinary meal at a Mediterranean honeypot, restaurant critic Tim Hayward has resolved to stop listening to food snobs.