THE UK has not been in a more serious economic crisis in living memory, including the global financial crash of 2008, the First Minister has said. 

As the IMF warned UK Chancellor Kwasi Kwarteng to reverse his sweeping tax cuts that disproportionately benefit the rich, and the Bank of England staged an extraordinary intervention to avert a full-blown crisis, the FM was being quizzed by MSPs in the Scottish Parliament.

During an appearance at the Conveners Group, where MSPs who head the numerous Holyrood committees meet to question the FM each term, Nicola Sturgeon was asked for her assessment of the impact of the UK Government's mini-budget. 

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The FM said it would be "difficult" to defend the policies which benefit higher earners, and set out how the wider impacts of the fiscal decisions of the Tory government were becoming clear.

She said that it would be "hard to overstate" the impact of the UK Government's policies on poverty, inequality and financial stress for millions of people, adding that the UK is in the midst of an "unfolding and rapidly deteriorating economic and financial crisis".

Sturgeon explained: "Obviously, since Friday, we've seen the collapse in the pound. That will fuel inflation which will make the cost-of-living crisis worse.

"We're already seeing the cost of government borrowing increasing but there is now I think the inevitability of a sharp rise in interest rates, which is going to have a very profound impact on those with mortgages and those with credit card debt.

"That will push more people into very serious financial stress."

The FM then pointed to the warnings from the IMF, adding: "And, we've just had the quite extraordinary, [which] is a word that's overused in political discourse I think [but] it is appropriate this morning, intervention of the Bank of England concerned about serious financial instability.

"You know, speculation this morning of pension funds about to fall over. We have the Bank of England staging an emergency intervention, not to respond to some external shock or global event, but to try to reduce the damage of the UK government's own policies."

The FM added that the developments were "really extraordinary and unprecedented" and called for immediate and urgent action.

She said: "I don't think we should see the policies announced on Friday as inevitable. Now, I think as an immediate symbol of some kind of good sense being restored the decision to abolish the top rate of tax should be reversed. 

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"And clearly, that would have an impact on some of what I spoke about earlier on. 

"So I don't think it's possible to overstate the damage of this budget to what we are trying to do in terms of poverty and tackling inequality.

"But in the wider sense, the UK as we speak is in the midst of an unfolding and rapidly deteriorating economic and financial crisis, and it is going to be ordinary people who pay the price of that. 

"I don't think we've had a more serious economic situation and possibly even including 2008, which was a global financial crash, but in the UK, probably not a more serious situation in our memories. So that has a big impact."

The National: The FM said the intervention from the IMF and BoE are 'extraordinary and unprecedented'The FM said the intervention from the IMF and BoE are 'extraordinary and unprecedented' (Image: Scottish Parliament TV)

The FM said that in her view the crisis showed the need for the Scottish Government to have "greater economic and financial levers" at their disposal.

It comes after Deputy FM John Swinney committed to holding an emergency budget review in the coming weeks after the UK government's fiscal plans were revealed. The findings of the EBR are due to be released the week beginning October 24. 

The Scottish Government are currently in talks over pay for public sector workers after a deal was struck with staff in local authorities at the start of the month.

With teachers formally rejecting a pay offer and looking set to strike, the EIS has said, as well as Unison balloting NHS staff to take similar action, the FM was asked how the Scottish Government intends to find the money to pay for salary rises in the public sector "given the chaos imposed by the Chancellor".

The FM said that the inflation erosion of the Scottish Government budget equates to £1.7 billion and pay deals to date, with some still in negotiation, are set to cost £700 million more than what was initially budgeted for. 

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She added: "To be clear I think it's right and proper that at a time of soaring inflation we do everything we can to give public sector workers a decent pay rise.

"I don't think public sector pay is something we should be trying to bear down on for the sake of it. I want to give public sector workers a decent pay raise, but we have to be able to pay for it.

"That is why some of the difficult decisions that we've already been talking about here are inescapable for us and the emergency budget review is seeking to make sure that we can free up the resources in our budget to fund exactly that and other ways of supporting people."