Chancellor Kwasi Kwarteng has said that the government’s fiscal plan will be released on October 31, almost a month earlier than planned.
Kwarteng had promised to bring the plan forward from the intended date of November 23 following market volatility in the wake of his mini-Budget.
The government’s decision not to publish an independent economic forecast alongside the mini-Budget spooked the markets, seeing the pound plunge temporarily to a record low of $1.03 against the US dollar.
Meanwhile, surging borrowing costs saw the Bank of England step in to purchase government bonds to preserve pension funds which came close to imploding. Elsewhere, mortgage providers suspended sales of hundreds of products amid the uncertainty over interest rates.
Now, the publication of the fiscal plan at the end of the month will set out how the government intends to finance its tax cutting policies and deliver growth in the medium-to-long term, which ministers hope will reassure the markets.
Published in tandem with the fiscal plan will be the Office for Budget Responsibility’s independent forecast of the longer-term economic prognosis.
The Bank of England’s Monetary Policy Committee is next due to convene to discuss interest rates on November 3, and there is optimism that the government’s move will avoid interest rates increasing by as significant a margin as previously expected.
The Tory chair of the Commons Treasury Select Committee, Mel Stride, wrote on social networking site Twitter: “If this (decision) lands well with markets then MPC meeting on Nov 3 may result in smaller rise in interest rates. Critical to millions of mortgage holders.”
On Monday, the Bank of England announced measures to bring about an “orderly end” to its bond-buying move, with all eyes now on October 31 and the publishing of the numbers to provide much-needed certainty.
Prior to the announcement that the fiscal plan would be brought forward, the government had already U-turned on one element of its mini-Budget by abandoning plans to abolish the top rate of income tax for the highest earners. This came after significant internal pressure from Tory MPs and scathing criticism from the opposition and public.
The government continues to come under pressure as it is yet to come to a decision on benefit increases, with several senior Conservatives pushing for them to be hiked in line with inflation next April, rather than wages.
