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British Prime Minister Liz Truss Fires Finance Minister Kwarteng Fired Over Mini-Budget Fallout; Russia Steps Up Use of Iranian-Made Kamikaze Drones; January 6th Committee Votes to Subpoena Donald Trump. Aired 10-11a ET

Aired October 14, 2022 - 10:00   ET



BECKY ANDERSON, CNN ANCHOR: I'm Becky Anderson. Hello, and welcome to CONNECT THE WORLD here on CNN. And we begin this hour with high drama and

not a little humiliation in Downing Street.

British Prime Minister Liz Truss just held a news conference confirming another U-turn on what was her controversial mini-budget, reversing her

policy to scrap the planned rise in corporation tax.


LIZ TRUSS, BRITISH PRIME MINISTER: We owe it to the next generation to improve our economic performance, to deliver higher wages, new jobs, and

better public services, and to ease the burden of debt. I have acted decisively today because my priority is ensuring our country's economic

stability. As prime minister I will always act in the national interest. This is always my first consideration.

I want to be honest. This is difficult. But we will get through this storm. And we will deliver the strong and sustained growth that can transform the

prosperity of our country for generations to come.


ANDERSON: Well, she is also sacrificing her finance minister, Kwasi Kwarteng. His resignation letter stating, "You have asked me to stand aside

as your chancellor. I have accepted." Well, now former Tory leadership contender, Jeremy Hunt, takes over as the new Chancellor of the Exchequer.

Well, Truss-Kwarteng spending plan unveiled only three weeks ago sent turmoil through the markets and sank the pound. That recent chaos fueling

public criticism of Liz Truss from U.K. lawmakers in her own Conservative Party.

I've got a team covering this on two continents. CNN's Richard Quest standing by in Washington, D.C. where the IMF has been meeting. And this

has, I'm sure, sent some shockwaves, necessarily, but some waves through Washington. Kwasi Kwarteng was only just there in Washington. And Bianca

Nobili is live from Downing Street in London.

Let's start with you, Bianca, because we -- this had sort of been telegraphed, the rumor was out there that Kwasi Kwarteng, the finance

minister, was on the way out. He was for the (INAUDIBLE) and he's gone. Justified?

BIANCA NOBILO, CNN CORRESPONDENT: Well, I mean, Liz Truss thinks so, from the sounds of it, from messages I have been getting from MPs. Within the

Conservative Party knows because they were in lockstep with the prime minister and the chancellor. They had the same economic set of beliefs.

They operated on the same economic principles, and she signed off on this plan, which has got the economy into this critical juncture and

precipitated the chancellor having to go today.

So a lot of people think, well, no, this isn't justified. You're obviously trying to use the chancellor as a scapegoat to try and absolve yourself of

some of the responsibility. And essentially, he is the cost of her political survivor for a little bit longer. Now the question will be,

whether or not this olive branch to the more centrist wing of the Conservative Party, the more moderate economic faction, to bring in Jeremy

Hunt will do enough to say to the party that she is going to take a more conciliatory approach.

It will be more of a broad-church. She will listen to people. But I don't feel like it's enough to undo the damage that's already been done. And

Becky, that press conference was a prime minister that was defeated. She is in such a weak state. So I am not sure how much longer she's got to

convince her party that she does have what it takes to do this job.

ANDERSON: Because, of course, you know, her critics will state, you were in lockstep with your finance minister. You put this plan together as it were.

This was a fiscal event a couple of weeks ago. She knew what he was doing. She knew what he would announce. So, why is it that he has gone and she

still stays?

Let's have a listen to a little bit more of what Liz Truss, the British prime minister, said just an hour ago or so.


TRUSS: It is clear that part of our mini-budget went further and faster than markets were expecting. So the way we are delivering our mission right

now has to change.


We need to act now to reassure the markets of our fiscal discipline. I have, therefore, decided to keep the increase in corporation tax that was

planned by the previous government.


ANDERSON: Changing the chancellor doesn't undo the damage made in Downing Street. Those are the words of Keir Starmer who is of course the leader of

the opposition party. Liz Truss' reckless approach has crushed the economy, causing mortgages to skyrocket and has undermined Britain's standing on the

world stage.

You could argue that nothing that he's written there is untrue. The question is, what happens next?

NOBILO: Yes, Becky, I mean, that is the question. And in terms of the options that are available if the prime minister continues this trajectory

into deeper political danger the options are severed. First of all it is possible that her own MPs could put in a letter of no confidence despite

the fact that most prime ministers are safe for a year after they assume the role. But there might be a loophole on that if you don't come in for

the general election so that could be difficult territory for her.

They could also change the rules to make it easier to depose a prime minister. That is possible. She could start to see resignations from her

own government which could push her into resigning like what we saw in the last days of the Boris Johnson's administration. Or she could be approached

by close friends, allies, political confidants who say to her, you don't have the confidence, you don't have popularity in the country, and you

simply can't continue, Becky.

Those would be the options if things continue to get worse. She's got a very small amount of time to steady the ship. When I was at party

conference, most people were saying the prime minister has until Christmas to show the party that she can get things in order, that she can restore

some faith in her leadership and get those polls ticking up. Well, today definitely hasn't done anything to restore that confidence.

So she is still on an incredibly shaky political ground. She's got the weekend at least. MPs have left Westminster but I would expect early next

week for the political pressure could get to really heat up.

ANDERSON: Yes, the British public and investors in the U.K. economy, they expect competence.

Richard Quest, you are in Washington where, you know, you've heard talk of people suggesting that there is no competence coming from this British

government. Just explain what you've been hearing, what people have been telling you.

RICHARD QUEST, CNN ANCHOR AND CORRESPONDENT: They are horrified. The U.K., they are either looking at it with horror or as a laughing stock or

probably a combination of both.

With me is Martin Wolf, the chief economic commentator for "FT." Martin wrote in a tweet earlier on, he said, they are mad that and dangerous. They

have to go. Martin Wolf is with me.

Martin, the way in which they -- he has gone now, how is it enough?

MARTIN WOLF, CHIEF ECONOMICS COMMENTATOR, FINANCIAL TIMES: Certainly not. I mean, I think he had to go. He completely lost the confidence of the

markets and the party. You can't remain chancellor in that situation. But everybody knows Liz Truss was responsible for this. It was her plan. She

hasn't even really apologized for it as far as I can see. She has to go.

QUEST: Delaying the corporate tax cuts, putting it on the backburner for now, gives about $18 billion. Is that enough?

WOLF: No, they have to reverse the entire tax cut packaging size which is about 42 billion pounds. So quite a bit of money. And they are basically

about a third of the way there. And I think they might have to go further to restore confidence because it's so badly damaged. They can't just go

back to where they started. That's what happened to interest rates.

QUEST: But as they say here at the IMF, certain parts of a package are acceptable, when for example it's targeting and hits the most vulnerable.

So the energy support package side of it is probably OK.

WOLF: It's probably OK. I have big problems with it but I think the markets didn't go crazy over it. As long as it's credibly time limited, I think

they can probably just get away with it, though I think there are risks there too now.

QUEST: So now Jeremy Hunt. One assumes he got very, very strong guarantees of the editorial policy independence.

WOLF: Yes, I mean, Jeremy is a substantial figure. He would be a far better prime minister than she is. She can't have him in and then have a huge row

when he starts doing what he has to do.


He must now be completely free in what he does. She's lost all credibility now.

QUEST: But then how do you have economic policy with a prime minister who, even this morning, says she's wedded to her growth, which is nice and good,

but she's now got a chancellor who's going to want to go in the opposite direction?

WOLF: It's the government. That's why she has to go.

QUEST: Further and faster than the markets expected. Mark Carney (PH) the markets will punish those who do unorthodox things or who go off the rails.

Is that what happened?

WOLF: In the middle of a world crisis, which we are in, yes, of course. It was all completely ridiculous. That's why probably they had to sack Tom

Scholar to get away with it. Yes, the markets will punish you if you do crazy things. We've learned that. And now you have to overdo it to restore


QUEST: And, finally the governor and the Bank of England, now he said no extension.

WOLF: Yes.

QUEST: And gilt yields are coming down marginally.

WOLF: Yes.

QUEST: Is it going to have to extend by a different name?

WOLF: We don't know. I would like him to stop this. I would like the low program he has to work instead. But he might have to extend it a little bit

longer because they did such a kerfuffle. And at the least, he now as a chancellor can deal with this.

QUEST: Good to see you, Martin. Thank you very much.

WOLF: Great pleasure.

QUEST: So, Becky, there we are, so extraordinary business. The markets are giving their reaction. If you look at the 14 as other reasons involved. The

pound is down more than it was. That suggests sort of a -- I mean, it's now over 1 percent. We were at 8.8 percent, now we're over 1 percent. The

market doesn't like.

I think, Becky, what it is, the markets saying it's not enough. Losing the person who was the number two is not any good if the policy belongs to the


ANDERSON: Yes, absolutely. Look, we're going to take a short break at this point, folks. And it's important to put what is going on in the U.K. in

context of the sort of wider economic challenges that are out there at present, but it has to be said. I mean, what is going on in the U.K. is

peculiar to the U.K. Jeremy Hunt Is now the new finance minister. I think I'm right in saying that's four finance ministers in four months.

That sort of says it all as far as the U.K. is concerned at present. We're going to do more on this, as I say put this into context within the wider

economic story, globally, after this short break. Stay with us.


ANDERSON: We went further and faster than markets were ready for. Those the words of British Prime Minister Liz Truss as she fights for her political



She's just you U-turned on another major tax cut and fired her finance minister, Kwasi Kwarteng. She's now appointed U.K. lawmaker Jeremy Hunt in

his place. It comes after the spending plan that Kwarteng and Miss Truss unveiled only three weeks ago to go sent turmoil through the markets and

sank the pound.

CNN's Max Foster joining me from London.

We went further and faster than markets were ready for is the way that the British prime minister describes what has gone on. The markets might say it

wasn't a good plan and we've responded accordingly. You can't cut taxes and not raise any spending and convince us that you have a plan when clearly

there are holes in it. 37 days into her prime ministership, does Liz Truss survive this?

MAX FOSTER, CNN CORRESPONDENT: Well, it's a huge question. I mean, she's certainly not out of the woods. A lot of people are saying that was a

complete disaster. That press conference. Certainly in the political reporting sphere, if I can call it that. You know, that line that you gave

there, she did show some concession that she hadn't played things properly. But it was very mild. There were people shouting, aren't you going to say

sorry as she was leaving that room? And people want an apology, frankly.

Has she done enough? She's done a few things there. Jeremy Hunt was a Rishi Sunak supporter, in a very contentious campaign that got her into Downing

Street in the first. She was accused of not bringing enough of his people into the government. She is now bringing in Jeremy Hunt in a very senior

position. So that's one thing she's done. She's rode back on that corporation tax move. That will raise some money and balance the books but

people already saying it still doesn't add up.

That's not going to raise enough money. She is still, apparently, sticking to her spending targets. And, you know, economists are saying she has to

cut spending to be able to afford all of this. So the books don't add up quite enough yet. But the main thing is, whether or not the markets believe

she's done enough and we're going to be watching that. I think we'll have to see whether or not things play out next Wednesday, but really it's

Monday we're looking at once the economists and traders had a weekend to consider all of this.

If the markets start falling on Monday, I think she's in a real trouble. And, frankly, as leader she's in trouble anyway because she's handled

things so badly. There are so many people her party that want her out no matter what. And they want Rishi Sunak, for example, to come and replace

her. So she's got a really tough time ahead. It's difficult to see her being in a strong position anytime soon certainly, Becky.

ANDERSON: Yes, I mean, you're right to point out that what happens over the back end of this training day and into Monday is important. Let's remind

ourselves, the Bank of England stepped in after this fiscal event and had to prop up the gilt market to the tune of some 65 million. They stepped in

again consequent to that first action. And they have promised, and some people are calling the Bank of England government courageous in doing this,

they have promised that that action will end, that support will end today.

The question is, have the markets, you know, got enough out of this change in leadership at the Ministry of Finance in the U.K. in order that they

will survive that Monday morning trading sessions? So that is important. We do need to keep an eye on that.

Look, the FTSE is trading up half of 1 percentage point at the moment. The pound really hasn't fallen an awful lot off the back of what has just

happened over the last hour or so in the U.K. The firing of the finance minister there. It may have already been priced into the markets. There

were lots of rumors that this was going to happen.

She was asked at the press conference about, less than an hour ago now, Max, what credibility do you have to continue governing? And she

sidestepped the answer. And it was a relatively, sort of anodyne answer, which would have infuriated I think not only journalists in the room but

perhaps many members of the British public. And she rightly pointed out, she didn't apologize for what has happened, and really has provided very

little of substance to suggest that they are over this problem, this challenge, this hump, correct.

FOSTER: Yes, she only took four questions. And I think a lot of political correspondents felt pretty insulted by that because this is a major press

conference and the country is arguably in a crisis right now. It certainly could get into a very bad crisis if it's not handled properly by the prime

minister. And it's certainly a time when she should be taking all questions. And she's certainly be answering them, and should answer any of

the questions. I think there's huge frustration in that room and probably amongst the members of the public watching, as well.


So, you know, towards the end of this month the plan was the finance minister was going to come out with a proper, you know, set of calculations

explaining how they could afford this budget. She still has to do that. That's what the markets are waiting for. But has she got, you know, a

couple of weeks' time to build up to that or are the markets going to collapse in the meantime? So that Bank of England action on buying gilt,

bonds, continues for today. So, as you all are suggesting the big test is probably on Monday.

They need time to add it all up. You know, if they take the Bank of England action and government action, is it enough for the credit agencies to look

at the U.K. economy and say, that is a good investment or not? It's going to take a bit of time to digest. And I think people are very nervous about


ANDERSON: Well, look, I think, from the opposition side of the fence I am hearing, seeing on social media, an awful lot of calls for a general

election. It isn't that easy, of course. She is the leader of the Conservative Party which has a majority in government at present. And

therefore, she is the British prime minister.

What is the process at this point? Should the opposition get its way? And, do they, you know, provide a path for the general election? What is that


FOSTER: There would be a way, they could find a way to have a vote of confidence in the British government, in parliament, and they could lose

that. And that could trigger an election. The other option they are looking at within the Conservative Party is trying to find a consensus candidate.

And basically replace Liz Truss. And there are some mechanics that could play out for that.

They need though, as you know, Becky, the party is so divided, a consensus candidate and the one everyone is talking about at the moment is Rishi

Sunak combined with Penny Mordaunt as double act if you like going in and effectively being crowned leader and going in as prime minister. But

there's massive apprehension about that because it would mean another new Conservative Party leader, another new prime minister. Can the government -

- can the nation stomach it?

I think, you know, this is where the Labour Party argument for a general election becomes really strong. But you're going to have such resistance

within the conservatives no matter how upset they are with Liz Truss because they know that they'd be slaughtered in that election and Labour,

looking at the polls, would have a massive majority.

ANDERSON: It was a government under -- a Conservative Party under Boris Johnson who of course won a landslide victory back in December 2019. That

must feel like an awfully long time ago to the Conservative Party at present.

Let me bring back Bianca who is outside Number 10. She was asked why she wasn't quitting as prime minister today. She said she is staying to ensure

economic stability, Bianca.

NOBILO: A little hollow that bit, didn't it, Becky? Because obviously it was the plan of her and her former chancellor which has sent the markets

into a spiral. And it's precisely the prime minister and her economic beliefs, her commitment to libertarianism, low taxes, small state, produced

redistribution, those principles in action are partly what has led to this economic instability.

And the prime minister will say that it is making up for all of the support that was needed throughout the pandemic and, of course, Vladimir Putin's

invasion of Ukraine. But if you speak to any economist they all point to this package that was announced by the government. She is in such a weak


Becky, I was chatting to some MPs on WhatsApp in between -- the last time I did with you, and right now, as things stand, it seemed that that press

conference has made things worse. And that might come as no surprise to viewers who watched it because she did seem to be that she just didn't

answer questions at all. Now that's nothing particularly strange for a politician. But she didn't even play lip service to answering them.

And they feel like she is even more weakened and yet not providing that stability or conciliatory approach. So I think she is going to have to

spend these next few days trying to win all her MPs over, try and shore up support, assuage concerns. Jeremy Hunt will need to be a big part of that,

too. But as things are at the moment, I think this is a prime minister firmly on notice, Becky.

ANDERSON: Kwasi Kwarteng, a friend of the prime minister sacked by her earlier today as finance minister after what was a mini-budget or fiscal

event, as the conservatives would want to call it, three weeks ago which sparked financial turmoil. The sinking of the pound to levels it hasn't

seen in recent history. And real concern and revolt inside their own party.


Bianca pointing out that the press conference that the prime minister just held, pretty much, you know, hasn't done her any huge amount of favors

because as we've been pointing out she didn't really answer the questions that were put to her.

Have we got Anna Stewart standing by? OK. Bianca, I was hoping that Anna Stewart may also join us. She hasn't yet. We're trying to set her up. She's

actually in Dubai at the moment keeping an eye on what is going on and we'll try and get her up to give us a sense of what is going on, as far as

the markets are concerned.

Look, I have to ask you, the opposition Labour Party in the U.K. is in every poll that I read streaks ahead of the Conservatives, at this point.

What is their plan to support and grow this economy? They certainly are critics of the plan that Truss and Kwarteng had developed. They are ahead

but that is because the Conservatives are in a right mess at present. So what is the alternative?

NOBILO: Well, you make a very important point there, Becky, and that is political power is always a relative game. So the Conservative losses, at

the moment, have been Labour's huge gains in the polls. But Keir Starmer has still at points being in a wobbly position as leader than you might

expect when the Conservative Party has been beleaguered by so many scandals, revolving door of prime ministers, economic turmoil, accusations

of lies of the former prime minister, then recently, Liz Truss being accused of feeding into that narrative of the Tory Party being for the

bankers, for the rich, and not for ordinary people, you would imagine that the Labour Party would be doing very well.

Now the Conservatives that I speak to criticize Labour for not laying out very clearly how they would fund their economic plans. Of course, that's

natural for opposition to be less specific about exactly what they do. I think Keir Starmer's plan at the moment is to keep being, if you like, and

this doesn't sound very complimentary, but not that exciting and not that interesting, being the reliable guy, not somebody doing something that's

crazy and likely to stimulate markets or send things into turmoil, just reliable, somebody that comes, you know, you can expect what you're going

to get from them. And they bring no surprises.

I think it's that kind of politics that some people are starting to miss. There's been so much turbulence with Johnson, with Brexit, with Liz Truss

and her government just in the first month or so that one of the selling points of Keir Starmer is the fact that he has been very calm and poised in

how he's responded to a lot of this. So I think that will continue. There are, obviously, internal divisions within Labour itself which at the

moment, they've managed to keep a lid on.

Perhaps the closer in that election victory gets easier that becomes. So I would imagine that continues. And they're just continuing to respond to the

problems of the Conservative Party are having and they've done that quite well. And I think they're finding these narratives like one rule for them,

the Conservatives, and another for the public of the U.K. that are particularly reticent and really worked, Becky.

ANDERSON: No left turns, no right turns, and definitely no U-turns. I remember that phrase by Margaret Thatcher back in the 1980s. Liz Truss is

somebody who has modeled herself and her policy on a sort of factorize ideology. I'm not sure Margaret Thatcher would be mildly impressed by with

what is going on in the Conservative Party at present.

We are going to take a very short break. Back after this.



ANDERSON: I'm Becky Anderson in Abu Dhabi. Half past six here. You're watching CONNECT THE WORLD. We are following what is a government in chaos.

British Prime Minister Liz Truss has just fired her finance minister and made a complete U-turn on what is a controversial tax plan that she has

been standing behind for weeks. Speaking moments ago, she said that despite the back and forth her overall vision for the U.K. economy remains



TRUSS: I am absolutely determined to see through what I promised. To deliver a higher growth, more prosperous United Kingdom to see us through

the storm we face.


ANDERSON: Well, CNN's Anna Stewart joins me now from Dubai.

What investors, the markets, and indeed the British public needed was reassurance. Reassurance that the prime minister and her government have

the confidence to do the job in hand. At this point, people are questioning that, aren't they?

ANNA STEWART, CNN CORRESPONDENT: Yes, and trust arrives, unfortunately, on horseback. What we've seen over the last few weeks is Truss absolutely

cascading out of the U.K. particularly out of U.K. assets like U.K. government bonds, like of course the British pound, and that reaction has

really forced this government into its position. The U-turns we've not seen of course quite a few of them, whether it was the initial one which removed

their plan to abolish the higher rate of tax, whether it was the back and forth as to whether the chancellor was going to stay in his position or

not, whether it was the U-turns we had even in the sentiment before the Conservative Party conference, or the U-turn that we had today.

How can an investor trust that there is not more to come? It's really hard if you think about it to position your portfolio based on this U.K.

government. Now, quite clearly, the prime minister has laid a lot of the blame at the foot of the former chancellor, Kwasi Kwarteng. Her friends

made very clear they are allies, and they shared the same vision. And she really actually showed, I think, quite a lot of confidence in him as a

person, as an ally. It's going to be hard I think for people to accept that Liz Truss is remaining as prime minister given this was her plan, as much

as it was her chancellor's. And she has I think over the last few weeks tried to sort of almost separate herself from that at the Conservative

Party conference, saying very much this is my chancellor's plan, you know, rather than owning it herself.

Well, looking at the market reaction we had over the last 24 hours, yesterday, just as the rumor mill really kicked into action that Kwasi

Kwarteng's days or hours were numbered at this stage as chancellor, that is when we saw some market reaction. We saw the British pound gain a little

bit of some confidence and we saw some of the big moves that we've seen in terms of the gilt, the U.K. government bond. We saw those come down.

The 30-year gilt at one stage this week hit by 5 percent. It rose above 5 percent. And this was despite the Bank of England, at the time, intervening

in the bond market. So, what we have to look at now in terms of do investors have confidence in the U.K.? And that is absolutely key I think

to the future of the prime minister is we have to wait I think probably until next week. Now the Bank of England has stopped intervening in that


And also, Becky, it's getting late in London. You know, investors are packing up for the weekends. I think a lot of the market reaction we might

see will come on Monday.

ANDERSON: Yes, we've just been discussing that. She said I am absolutely determined to see through what I promised as she effectively refused to

resign. She was asked whether she had any credibility, you know, and whether she really thought, you know, she should stay in the job.


And she said, I am absolutely determined to see through what I promise. But, as I, you know, watch the comments coming in, particularly on social

media, one person pointing out what she isn't seeing it through because she's dropping most of it.

STEWART: She is. And this was the pro-growth plan. This was the idea that despite the look of the finances, and despite of course the market reaction

to it, that they were going to grow the economy after the quagmire that it is in, and it was going to throw money into the situation. She was going to

borrow massive amounts of money to make this a pro-business place to do business. To sort of attract people that have high wages to abolish the

(INAUDIBLE) as bonuses.

This was the plan. Now lots of those elements are still there. But, at this stage, she's lost some of the surprise tactics that I think she hoped she

would achieve here. And when we get the fiscal statement, and that's not until the end of October, so we've got two weeks to go until then, that is

when we'll get the OBR's forecast, as well. That is what was missing from the so-called mini-budget when it was announced. And that's part of the

reason why markets were so alarmed because this was an unfunded plan.

Will all be key was how well-funded the OBR think this is but also what they forecast in terms of growth because if they don't agree that this

prime minister is going to achieve anything like the growth that she has set out to on this current plan that's another moment where she won't just

lose confidence potentially in markets but I think she will lose huge amounts of confidence from within her own party. And that is where, after

months and years of Conservative Party turmoil that is where the problems really begin for her.

ANDERSON: Yes. Thank you, Anna.

Let me bring in Vicky Pryce who's an economist at the Center for Economics and Business Research.

We're talking there about the fact that the Office of Budgetary Responsibility hadn't sort of got their eye over the plan. It was announced

some three weeks ago which, you know, you've got to question what's going on there, haven't you?

Here's the deal at this point. I mean, as Anna and I were just suggesting, I am absolutely determined to see through what I promised is what Liz Truss

has said. She may or may not, you know, survive as prime minister or leader of the Conservative Party at this point. But I want you to just give us

some perspective here. You know, low tax, high growth, British economy, post Brexit.

Is what was on the table, effectively, badly managed but it was what was on the table? Does it have any merit? Does it have any value, Vicky?


Investments sort of slumped after that. Certainly, it's been a pretty difficult period. So, frankly, you know, achieving any fast growth now when

we're still having problems exporting to Europe, when Europe itself is slowing down very significantly, when the world is slowing down, even

though some of the price movements recently on commodities have been recently positive.

Overall what we're seeing is that confidence is dissipating everywhere. So what it's not going to be achieving is that part of what she had promised.

And certainly not in the short term. Of course, you can always get better productivity if you invest quite heavily in terms of skills and

infrastructure, and innovation, but they take a very long time to have an effect. And it's been tried for decades and nothing very much has happened.

So the U.K. suffers from lack of competitiveness. And frankly, the only way has kept some (INAUDIBLE) is from a very weak sterling which we know has

dropped to something 20 percent, 25 percent since the beginning of this year alone.

ANDERSON: So you are making a very good point. The context to what is going on, or you know, perhaps the sort of wider story around the U.K. is a story

of slowing growth in Europe. Europe, you know, working toward what seems like a very, very difficult winter with the energy crisis as well. And it's

not just the U.K. and Europe. You know, every indicator seems to suggest that, I think, at least things are bad, and at worst, we are gunning

towards a global recession at this point.

So were you to be advising the British prime minister, at present, what would you suggest is the best plan, the best foot forward, at this stage

for the U.K. economy?

PRYCE: We still have to be very careful. I mean, what the International Monetary Fund has said after all they're all meeting, you know, this week,

and that's the meeting that the chancellor or the ex-chancellor now had to leave early to hear what's going to happen to him. We have been saying is

that what you need to watch at the time of very high inflation is your fiscal side. Because what you don't want to do is add to this inflationary

problem that we're already facing because of living crisis, by doing something which, in particular, if the markets don't like, could cause

considerable problems for the future.


Because you may push your inflation high or may push your interest rates higher. And that, of course, could accentuate the slowdown that you have

just been referring to. And, indeed, the IMF has itself downgraded to the forecast for world growth. It's downgraded in the forecast for individual

countries. Downgraded in the forecast for next year which is just 0.3 percent for the U.K. and has, also, forecast recession in Germany and


Now this is not the time when you can do an awful lot but you have to really watch because in the process of that slowdown all markets and all

countries are going to try and borrow a little bit more because they're not going to be collecting enough in taxes. And if the markets think that the

U.K. is perhaps, you know, at the edge of maybe getting into an unsustainable deposition, they're not going to want to hold on some unless

they get an awful lots of interest rates to compensate for it.

And that's the situation where the U.K. still finds itself. And frankly, the markets will still be looking at the huge borrowing that will still

need to be done by the U.K. over the next year or two on Monday, when the markets reopen, probably, in Europe and the U.S..

ANDERSON: We're going to take a very short break.

Vicky, it's always good to have you on. You and I haven't spoken for some time. I appreciate your time. Thank you. It's an important day and we will

continue with this story over the next hour or so of this show. Also, still ahead on CONNECT THE WORLD as Russia gets ready to move civilians out of

one illegally annexed region. We take a closer look. The latest weapon that Russia is using to attack Ukraine and just where it came from.


ANDERSON: Ukraine's battlefield gains coming into sharp focus today with the evacuation of civilians from the Russian occupied Kherson region into

Russia. The governor of Rostov across Ukraine's eastern border says his region will start accepting evacuees today. This coming a day after the

Russian-backed head of Kherson said that Ukraine's counteroffensive is making it too dangerous to stay in at least four cities.

While at a summit in Kazakhstan, Russian President Vladimir Putin said more massive strikes against Ukraine are not needed at least not for now. He

also added he has no regrets about the latest wave of deadly attacks and he talked about ending global conflicts with words that many might find

ironic. Urging the use of, quote, "goodwill to the maximum."

Putin talking about goodwill as we learned an 11-year-old Ukrainian boy caught in a Russian attack in Mykolaiv has died. The boy named Artem had

been trapped in the rubble of this collapsed building for six hours. He was rescued alive but later he died in hospital.


Frederik Pleitgen is in Kyiv for us.

Let's just take a look at two things here. I want to know what's going on in Kherson, and get your perspective about what we've heard from the

Russian president. Kherson first, if you will.

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: Yes, Becky, so Kherson certainly seems though the Russian-backed authorities there in

Kherson are very conservative about this offensive that the Ukrainians have been conducting. And it's been sort of on the backburner, if you, the last

couple of days because obviously we've had so many of these massive airstrikes and missile strikes coming in from the Russians.

That in the news you really haven't heard that much about the offensive in Kherson, but it has been ongoing. From the past couple of days, the

Ukrainians have simply taken back further little towns and villages. Some of them have quite strategic significance. They're in the Kherson region.

And so then you have this Russian installed official in Kherson. Of course we have to keep in mind that the Russians now claim that the Kherson

districts, or region, is theirs.

It's one of those illegally annexed places that is now calling on the Russians to evacuate civilians and today the authorities there in Rostov

are saying that they would take those civilians in. Now, the Ukrainians, of course, are saying that this is all a ploy. They say, essentially, the

people that are going to leave the Kherson region are being deported to Russia. Obviously, one of the things that we've seen in the Kherson region,

really since the start. Kherson is one of those towns that the Russians actually took.

There's been a lot of protests there against the Russian occupation in Kherson. The Russians have a lot of problems suppressing that and were

quite brutal and certain cases suppressing that. So it really seems as though right now they're trying to get people out of there and they are

very concerned about this Ukrainian counteroffensive -- Becky.

ANDERSON: We have heard from the Russian president today at a summit in Kazakhstan. What do you make of what he said?

PLEITGEN: Well, it was quite interesting. I mean, first of all him saying that he was counting on goodwill to end conflicts around the world, it

certainly didn't seem as though he was necessarily speaking about what's going on in Ukraine right now. One of the things that the Russians have

obviously been saying is that they're calling on parties, for instance, between Azerbaijan and Armenia to settle their differences in a peaceful

way, and to stop conflict there.

Of course, if you look at Ukraine, and you look at the past couple of days in Ukraine, it seems as though the Russians are doing the opposite of what

Vladimir Putin was talking about there. Now one of the things that the Russians have been saying is they have been calling on the Ukrainians to

negotiate. But the Ukrainians are saying they are not going to do that. After the Russians annexed territory, or say that they've annexed

territory, that the Russians don't even control here in Ukraine.

If you look at those eastern regions, that have been now the Russians say are essentially theirs, it was a decree that was signed by the Ukrainian

president saying that that under these circumstances, the Ukrainians are not going to negotiate with the Russians. So it was a wide ranging speech,

certainly raised a lot of eyebrows, the things that Vladimir Putin was saying, Becky.

ANDERSON: Yesterday, NATO promised drone jammers after Ukraine was hit by a barrage of drone strikes. How much damage have these drones been doing


PLEITGEN: Yes. You know what, I just got an update on that and it seems as though the Ukrainians are saying that the threat from these drones are a

lot more wide-ranging than any people would've thought. We've some drone attacks from those kamikaze drones here in the Kyiv region, elsewhere as

well. But it was quite interesting, because a military spokesman for the southern region of Ukraine saying they believe that Iranian drone or

Iranian-made drones are also used to scope out air defenses that the Ukrainians have in that area as well. So wide ranging use of these drones.

They are very dangerous. Here's what we're learning.


PLEITGEN (voice-over): Early Thursday morning, an attack on a town west of the Ukrainian capital. Russia continues its bombardment of Ukraine's key

infrastructure. Across the country, scenes like this one in central Ukraine are a common sight. Wreckages of power plants. The tactic is familiar, the

weapon until recently was not.

A kamikaze drone seen here after an attack on the other side of the country in Kharkiv. Cheap, self-detonating and unmanned, they are a new weapon in

Russia's war on Ukraine. The markings say Geran 2, but this is no Russian- made weapon.

Its name is Shahed, designed and manufactured in Iran. Known as a loitering munition, it could circle a target and the lightweight air frame can travel

long distances. The U.S. government says a Russian delegation traveled to Iran in June to inspect the drones, seen here in satellite imagery obtained

exclusively by CNN. In recent weeks, Russia has massively stepped up its use of the drones, evidence posted on Ukrainian social media on a near

daily basis.


SERHIY BRATCHUK, SPOKESPERSON, ODESSA REGIONAL ADMINISTRATION (through translator): The enemy is trying to save up on cruise missiles, various

caliber types. These Shaheds are firstly much cheaper. They can be used much more frequently and they work in pairs.

PLEITGEN: Ukraine, too, uses kamikaze drones like the much smaller U.S. manufactured switchblade. Though there is no evidence to suggest Ukraine

has used the weapon against anything but military targets.

Ukraine's air defense has been fairly successful in downing Russia's drones. But the fact that they are so cheap has the Ukrainians worried and

plays a big part in their push this week for more Western help with air defense.

Ukraine's President Zelenskyy says Russia has ordered 2,400 kamikaze drones from Iran. Officials here fear that as Russia increasingly targets

population centers, kamikaze drones are a growing part of the arsenal.


ANDERSON: Fred Pleitgen reporting. We're going to take a very short break. Back after this.


ANDERSON: Welcome back. You're watching CNN. I'm Becky Anderson. This is CONNECT THE WORLD.

Well, to the investigation of last year's insurrection in the United States, lawmakers want to hear from the man they accused of threatening the

democracy vowed to preserve. The January 6th Committee voting unanimously on Thursday subpoena former President Donald Trump. No formal response from

his Truth Social media. Trump called the committee a total bust. He asked why they waited until now to ask him to testify.

Well, the panel claims that Trump set the uprising in motion, revealing evidence that he planned to declare victory months before the first votes

were cast. The country watched live as the chaos grew outside the Capitol on January 6th of last year. But now we are getting our first look at some

of the images on that day from inside.

CNN's Kristen Holmes has that.


KRISTEN HOLMES, CNN NATIONAL CORRESPONDENT (voice-over): It's never before seen footage.

REP. NANCY PELOSI (D-CA): Are they calling the National Guard.


HOLMES: House Speaker Nancy Pelosi shown fleeing the U.S. Capitol as it was under attack on January 6th. The videos captured by her daughter Alexandra

Pelosi, a documentary filmmaker.

PELOSI: We have got to finish the proceedings or else they will have a complete victory.

HOLMES: She provided some of her footage to the January 6th Select Committee who played clips in their hearing Thursday. But in the roughly

hour of additional footage obtained exclusively by CNN, we see lawmakers transforming Fort McNair, the military base two miles away, into a command

center to communicate with Vice President Mike Pence and others. Even considering reconvening the congressional proceedings at the military base.

PELOSI: We're being told it could take days to clear the Capitol, and that we should be more than everyone here to get the job done. We're at

(DELETED) which has facilities for the House and the Senate to meet. We'd rather go to the Capitol and do it there but it doesn't seem to be safe.

HOLMES: While Pence evacuated the Senate chamber he stayed behind in the Capitol with his security detail.

PELOSI: I worry about you being in that Capitol. Don't let anybody know where you are.


SEN. CHUCK SCHUMER (D-NY): Yes, I'd like to know a good goddamn reason why it's been denied.

HOLMES: Then Senate Minority Leader Chuck Schumer shouting at Army Secretary Ryan McCarthy after hearing a rumor Trump blocked the National

Guard going to the Capitol.

SCHUMER: Please move. The whole Capitol is rampaged, there's a picture of someone sitting in this chair, the Senate. We've all been evacuated, there

have been shots fired. We need a full National Guard component now. She said it was not denied. I'm going to call up the effing secretary of DOD.

HOLMES: A group of lawmakers including Republican leaders Representative Kevin McCarthy and Senator Mitch McConnell calling Acting Defense Secretary

Christopher Miller urging a faster response.

SEN. MITCH MCCONNELL (R-KY): By getting there in one hell of a hurry, you understand?


HOLMES: And Pelosi and Schumer also confronting Acting Attorney General Jeffrey Rosen in a heated phone call.

SCHUMER: No, no, no, please answer my question. Answer my question.

JEFFREY ROSEN, FORMER ACTING ATTORNEY GENERAL: Senator, I'm going to do everything I can do.

SCHUMER: Does that include asking the president to get these people who are followers of his to leave the Capitol?

HOLMES: Finally, word coming from Pence that it was safe to return.

MIKE PENCE, FORMER U.S. VICE PRESIDENT: We're literally standing with the U.S. Capitol Police. And he just informed me their best information is that

they believe that the House and the Senate will be able to reconvene in roughly an hour.

SCHUMER: Good news.

HOLMES: Which they did just after 8:00 p.m.

PENCE: Let's get back to work.

HOLMES: The footage also showing Pelosi before the attack.

PELOSI: And let us hope that they will see the light and have their own epiphany on the other side.

HOLMES: Participating in a video call with House Democrats from a conference room. The same room that was ransacked hours later by rioters.

DONALD TRUMP, FORMER PRESIDENT OF THE UNITED STATES: We're going to walk down to the Capitol.

PELOSI: Tell him if he comes here, we're going to the White House.

HOLMES: Pelosi later seen reacting to Trump's speech.

UNIDENTIFIED FEMALE: You can see them marching up.

HOLMES: And the rioters making their way towards the Capitol.

TERRI MCCULLOUGH, CHIEF OF STAFF: The Secret Service said they have dissuaded him from coming to Capitol Hill. They told him they don't have

the resources to protect him here so at the moment he is not coming but that could change.

PELOSI: Let him come, I'm going to punch him now. We're waiting for this. For trespassing on the Capitol grounds. I'm going to punch him out, I'm

going to go to jail, and I'm going to be happy.


ANDERSON: That was CNN's Kristen Holmes reporting. And it is worth noting, this video was played during the committee's last hearing until the

November midterm elections, which of course, will be held on November 8th. Taking a short break, back after that.