Bank of England steps in for the third time amid 'fire sale' fear over budget

Chancellor warned of 'big and painful' spending cuts ahead

- Nicholas Cecil, David Bond, Jonathan Prynn and Rachael Burford

THE Bank of England was forced today into a third emergency intervention in an effort to ensure Britain's financial stability threatened by the mayhem sparked by Kwasi Kwarteng's mini-budget.

In a move unprecedented in its 328-year history, the BoE stepped in to buy index-linked gilts amid fears of another "fire sale" of these Government bonds. It stressed that it was putting in this "back-stop" to "restore orderly market conditions". The bank acted just hours before Liz Truss was due to chair the Cabinet and as MPs returned to Westminster amid a febrile mood over her premiership which started just over a month ago.

MPs were due to vote to reverse the National Insurance hike introduced by ex-Chancellor Rishi Sunak. Mr Kwarteng was also due to face questions from MPs in the Commons after announcing on Monday that he would deliver a new fiscal statement on October 31 which is expected to seek to explain how the Government will pay for £43 billion of unfunded tax cuts.

But the Institute for Fiscal Studies warned the Chancellor, who this evening is due to fly to Washington DC for meetings of the IMF and the World. Bank, that he will have to find "big, painful spending cuts" of more than £60 billion or reverse much of his miniBudget if he is to meet his target to get the public finances back under control.