Moving fiscal plan ‘may help rate setters’

Moving fiscal plan ‘may help rate setters’
British Prime Minister Liz Truss and Chancellor of the Exchequer Kwasi Kwarteng attend the annual Conservative Party conference in Birmingham, Britain, October 2, 2022. REUTERS/Hannah McKay

The chair of the Treasury committee has welcomed the chancellor’s decision to bring forward the autumn fiscal plan to October, saying it will assist the Bank of England’s monetary policy committee (MPC).

Economic forecasts from the Office for Budget Responsibility are normally issued alongside budgets, with the body requiring 10 weeks' notice.

However, Kwasi Kwarteng declined to release one with the "mini" Budget last month, despite the OBR saying it was ready to provide one due to the severe economic uncertainty facing the UK's economy. 

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In a statement this morning (October 4), Mel Stride, chair of the Treasury Committee said he had pressed the chancellor “very hard” to release a forecast sooner than the planned date of November 23, and he had listened.

“Provided the OBR forecast and new fiscal targets provide reassurance, bringing these forward should calm markets more quickly and reduce the upward pressure on interest rates to the benefit of millions of people up and down the country,” Stride said.

He added that releasing the forecast before the November meeting of the MPC “might help to reassure rate setters that they can go with a smaller base rate increase than would otherwise be the case."

Stride warned the previous chancellor Nadhim Zahawi against releasing an emergency budget without an accompanying economic forecast, saying it amounted to "flying blind".

After the budget caused havoc in financial markets, eventually ending in intervention from the Bank of England, Kwarteng conceded yesterday at the Conservative party conference that his recent fiscal statement had caused “a little turbulence”, according to the Financial Times.

Experts have said some of this disruption was caused by the lack of forecast. 

No official date has been confirmed for the forecast.