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UK’s Kwarteng, seeking to calm markets, brings forward budget date

Reuters
UK’s Kwarteng, seeking to calm markets, brings forward budget date

CONSERVATIVE PARTY. British Chancellor of the Exchequer Kwasi Kwarteng speaks during Britain's Conservative Party's annual conference in Birmingham, Britain, October 3, 2022.

Hannah McKay/Reuters

Britain's fiscal plans and economic forecasts will be released on October 31, instead of November 23, as the government tries to restore investor confidence

LONDON, United Kingdom – British finance minister Kwasi Kwarteng, under pressure to rebuild shattered investor confidence in the new government’s economic agenda, on Monday, October 10, brought forward the publication of fiscal plans and economic forecasts to October 31.

The plan had previously only been due out on November 23 – two months after Kwarteng triggered a rout in British bonds by announcing a “mini-budget” that included 45 billion pounds ($50 billion) of tax cuts but no details on how they would be funded.

The new publication date will also allow the Bank of England (BoE) to understand the government’s tax and spending plans before it announces its next interest rate decision on November 3.

Earlier on Monday, the central bank enlarged its emergency support for the shaky government bond market, ahead of the expiry date for that support on Friday, October 14.

Kwarteng said the new date for his medium-term fiscal statement would allow the independent Office for Budget Responsibility (OBR) enough time to assess updates to official data and for a full forecast process to take place.

He and Prime Minister Liz Truss are hoping that the OBR will back their claims that the combination of tax cuts and reforms to areas such as planning rules and immigration will boost Britain’s economic growth prospects.

Asked why the medium-term fiscal plan was brought forward, a spokesman for Truss told reporters: “We want to provide the full economic and fiscal outlook quickly, we recognize the importance of that.”

“We believe the 31st is the right time to do that.”

Last month, the International Monetary Fund said the government’s push for economic growth and the BoE’s attempts to control inflation were working against each other.

Kwarteng is due to attend the IMF’s semi-annual meeting of global policymakers in Washington this week.

Kwarteng has previously said the OBR would not have had enough time to produce satisfactory forecasts for his September 23 announcement, although the OBR has contradicted this.

Junior Treasury Minister Andrew Griffith said market practitioners he had spoken to received news of the new date for the fiscal statement warmly. British government bonds and the pound showed scant reaction, with both in decline on Monday.

The government also announced the appointment of veteran civil servant James Bowler as permanent secretary to the Treasury. He replaces Tom Scholar, whose ousting by Kwarteng last month added to investor unease around the government.

Halloween

The new date leaves Kwarteng and Truss with little more than two weeks to settle divisions in her Cabinet over cuts to government spending.

Having already bowed to pressure to drop the most divisive policy – eliminating the 45% top rate of income tax for the highest earners – they face Cabinet opposition to the idea of cutting welfare benefits in inflation-adjusted terms.

Last week, two senior ministers expressed their dissatisfaction with Truss’ income tax U-turn, suggesting that unity among her top team was breaking down.

The Financial Times reported on Monday that as part of her attempts to stabilize financial markets, Truss had changed her mind about appointing someone to lead Britain’s finance ministry who had no experience of working there.

Truss was no longer expected to appoint Antonia Romeo to run the Treasury, the FT said, citing senior government figures. – Rappler.com

$1 = 0.9038 pounds

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