Britain’s fiscal watchdog has been asked to produce the first draft of its next economic forecast, detailing the financial impact of last week’s destabilising mini-budget.
Prime Minister Liz Truss and Chancellor Kwasi Kwarteng met officials from the Office for Budget Responsibility on Friday, when he asked the office to prepare an early report for October 7, before his planned budget statement on November 23.
What has been dubbed the “Kwarteng rout” following last Friday's tax-cutting statement was fuelled by the lack of benchmark OBR figures illustrating the impact on public borrowing.
With another delay in the process sterling gave up some early gains Friday, trading lower at around $1.11. It had earlier jumped more than 1 per cent amid speculation Ms Truss could water down policies, including unfunded tax cuts, as the markets want.
There are no plans to alter the timetable for Mr Kwarteng to deliver a new medium-term fiscal statement in November, alongside a full OBR forecast.
Conservative insiders have suggested that Ms Truss’s own MPs could vote against the proposed tax reforms, forcing a difficult reversal for the new prime minister.
“There are the numbers to enforce a rapid change of direction, particularly with the reduction of the 45 per cent tax rate which is going down very badly in Red Wall [former Labour] seats,” a Conservative source told The National.
The source added that there would be intense examination of Ms Truss and Mr Kwarteng’s “words and demeanour” at the Conservative Party conference starting on Sunday.
There is already speculation that the self-inflicted economic disaster could lead to yet another leadership challenge, just three weeks into Ms Truss’s premiership.
A statement from the OBR said: “We will deliver the first iteration of that forecast to the chancellor on Friday 7 October and will set out the full timetable up to 23 November next week.
“The forecast will, as always, be based on our independent judgment about economic and fiscal prospects and the impact of the government’s policies.”
The economy was thrown into turmoil by the so-called fiscal event last Friday, which represented the country’s biggest tax cuts in 50 years, abolishing the top rate of tax, among other changes.
The pound plummeted, falling to its lowest recorded level against the dollar, while the FTSE tumbled, and the Bank of England was forced to step in to save the pensions system from crashing.
Base interest rates are now predicted to treble between now and next year, rising to more than 6 per cent.
The Treasury said the independent economic and fiscal forecasts would be published as part of the budget statement in November.
“They discussed the process for the upcoming economic and fiscal forecast, which will be published on 23 November, and the economic and fiscal outlook,” said the statement from Britain’s finance ministry.
“They agreed, as is usual, to work closely together throughout the forecast process and beyond,” it added. “The prime minister and chancellor reaffirmed their commitment to the independent OBR and made clear that they value its scrutiny.”
