Kwarteng unveiled a string of lower taxes last week that were, unusually, not accompanied by forecasts from the Office for Budget Responsibility (OBR). A resulting sell-off led the Bank of England to intervene with emergency bond-buying to protect pension funds from partial collapse.
Kwarteng has come under pressure to allay market fears and bring forward a fiscal statement planned for Nov 23, when he has said he would publish the OBR forecasts and detail the costs of the debt-financed tax cuts along with a path to lower debt in the medium term.
However, after Truss and Kwarteng met the OBR’s chair Richard Hughes today, the finance ministry said the timing of Kwarteng’s “Medium-Term Fiscal Plan” was unchanged.
“They discussed the process for the upcoming economic and fiscal forecast, which will be published on Nov 23, and the economic and fiscal outlook,” the Treasury said in a statement.
“They agreed, as is usual, to work closely together throughout the forecast process and beyond.”
The OBR said the first draft would be delivered to Kwarteng on Oct 7, and it would “as always, be based on our independent judgment about economic and fiscal prospects and the impact of the government’s policies”.
The watchdog had said on Thursday it had offered to produce an analysis for Kwarteng’s tax-cutting plan but were not commissioned to do so.
A senior parliamentary committee has joined those urging Kwarteng to bring forward his November statement to calm markets, echoing calls from other lawmakers in the ruling Conservative Party.
Andrew Griffith, the minister who overseas the City of London financial district, earlier said the projections should not be rushed.
“We all want the forecasts to be (done) as quickly as they (OBR) can but also .. you also want them to have the right level of detail,” he told Sky News.
Truss not for U-turning
Truss, who only replaced Boris Johnson as prime minister this month, has argued that the market turbulence is a result of global problems caused by the Russian invasion of Ukraine, and that she will stick to her plan to snap the economy out of years of stagnant growth.
She also says the government had to intervene to provide support to help people and businesses with their energy bills, a package that the government said would cost about £60 billion (US$66 billion) for the next six months, in order to keep a typical household’s bill to under £2,500 a year.
Official data showed today that Britain’s economy grew in the second quarter but was still below its pre-pandemic peak.
Critics say Truss and Kwarteng should have included forecasts from the OBR to reassure markets about where the funding would come from before announcing their proposed £45 billion of tax cuts.
The International Monetary Fund has criticised the plans, saying they would increase inequality in Britain, leading investors have warned the country’s credibility was at stake, and US commerce secretary Gina Raimondo and European allies have voiced unease.
“I am not worried about the euro but I am worried about the situation in Britain,” French finance minister Bruno Le Maire said today.
Polls indicate the public is also unimpressed with the government’s proposals, with a series of surveys on Thursday giving the opposition Labour Party large leads, including one that had Labour 33 points ahead, unprecedented in recent times.
Some Conservative lawmakers have said Truss needed to think again about her plans.
“It’s really very, very bad. There’s no way of dressing this up as anything else but being pretty shattering,” lawmaker Charles Walker told Times radio. “This has been handled really badly, and we’ve got to start handling it better.”