Chancellor Kwasi Kwarteng bows to Tory pressure to deliver fiscal plan before November
Chancellor Kwasi Kwarteng has sought to calm the markets by announcing that he has brought forward the date for delivery of his medium-term fiscal plan from 23 November to 31 October.
The financial markets have been in turmoil since Kwarteng announced his mini-Budget at the end of September, with the pound falling to its lowest-ever level against the dollar and the Bank of England having to step in to buy government bonds after yields rose to their highest level in more than two decades.
Kwarteng’s plans, which included the now abandoned proposal to scrap the higher 45 per cent rate of income tax, faced significant criticism from senior Tories including Michael Gove, and the chancellor was facing mounting pressure from within the party to do something to reassure the markets.
This morning the chancellor wrote to Mel Stride, the Tory chair of the Treasury Select Committee, confirming that the economic and fiscal forecast would be delivered earlier than initially planned and would also be accompanied by independent analysis from the Office for Budget Responsibility – something that was missing from the mini-Budget.
“This forecast, in addition to the forecast that will be commissioned in spring, will fulfil the obligation for the Office for Budget Responsibility to produce at least two forecasts in a financial year, as is required by legislation,” Kwarteng wrote.
“Upon my arrival in office, I received preliminary analysis from the OBR, but I have since made significant policy announcements including the Growth Plan. It is important that a forecast includes a full and final assessment of the impact of policy measures on the economy and public finances and, as such, it would not be appropriate to publish the initial analysis that the OBR provided.
“The new forecast date on 31 October will allow the OBR to capture data releases, such as the recent Quarterly National Accounts and Blue Book revisions. It will allow for a full forecast process to take place to a standard that satisfies the legal requirements of the Charter for Budget Responsibility enacted by parliament and that also provides an in-depth assessment of the economy and public finances.
“And it will provide time for the medium-term fiscal plan to be finalised. In the meantime, the prime minister and I met with the OBR’s Budget Responsibility Committee on Friday 30 September to discuss the economic and fiscal outlook, and we will continue to work closely together throughout the forecast process and beyond.”
Stride tweeted that “having pressed so hard on this” he “strongly welcome[s]” Kwarteng’s decision to bring the announcement forward, noting that it may help prevent interest rates from rising as quickly as is currently expected.
“If this lands well with markets then MPC [Bank of England Monetary Policy Committee] meeting on 3rd Nov may result in smaller rise in int rates. Critical to millions of mortgage holders,” he wrote.