The Office for Budget Responsibility (OBR) has said it is currently preparing an economic and fiscal outlook at an “exceptionally accelerated timetable” in the event of an emergency Budget next month.
In a letter to the Treasury Select Committee on August 26, the OBR said it had commenced preparatory work for the earlier-than-usual Autumn Budget as the final result of the Tory leadership election edges closer.
Usually, the Autumn Budget is published in late October along with a fiscal report by the OBR.
However, with a new prime minister set to be announced on September 5 which will likely trigger a cabinet reshuffle - including a new chancellor in place of Nadhim Zahawi - the non-departmental public body said it was preparing for an emergency Budget.
In response to the letter, Treasury Committee chairperson Mel Stride said it was "reassuring to hear" the OBR "stands ready" to provide a forecast in time for an emergency fiscal event next month.
She added: "Given the very significantly increased economic challenges since the OBR’s last forecast in March and the likely significant measures to be brought forward in September by whoever becomes our next prime minister, it will be vital that the OBR is requested by whoever is chancellor in the new government to publish as full a forecast as possible at that time.”
The race for leadership now sits between secretary of state for international trade Liz Truss and former chancellor Rishi Sunak.
Current chancellor Zahawi wrote to the Treasury Select Committee last week. He said: “The decision on the date of the forecast is a government one, made by the chancellor in consultation with the prime minister.
“Given the results of the leadership election will not be announced until 5 September, I do not think it is appropriate to set the date for a forecast now.”
On July 29, the OBR began preparatory work necessary for it to be ready to publish an economic forecast in September covering at least the next five fiscal years to 2027-28.
In the absence of exceptional circumstances, the OBR usually has ten weeks’ notice to put together its report.
The report will cover key drivers and changes in the economy and public finances since its report following the last Budget in March, as well as major new policy announcements since then.
This year, the Bank of England has raised the base rate to 1.75 per cent, its highest level since 2008. Meanwhile, inflation has tipped over 10 per cent and the energy price cap is set to rise by 80 per cent come October reaching £3,549 a year.
“In summary, if asked by the new chancellor to produce a forecast on 14 or 21 September, we would be able to do so to a standard which meets the legislative requirements,” the OBR said in its letter.
It has also commissioned HMRC and the Department for Work and Pensions to analyse the latest economic developments and how they compare to assumptions made in March, looking at individual tax and welfare spending lines.
Neither of these processes, the OBR said, have been completed yet.
The OBR warned that its own report, though meeting the threshold of what is expected of an economic and fiscal report, would not be as comprehensive as usual.
“As with other forecasts produced to an exceptionally accelerated timetable, they would provide less complete analysis supporting the key judgements, less detailed breakdowns of the key economic and fiscal aggregates, and less contextual and supplementary information,” it said.
ruby.hinchliffe@ft.com
