The Treasury has been accused of avoiding scrutiny and "muddying the waters" over whether or not it was possible to publish a full economic forecast alongside its mini-Budget last week.
The Treasury Committee wrote to chancellor Kwasi Kwarteng yesterday (September 29) calling for a full economic forecast from the Office for Budget Responsibility (OBR), alongside a full Budget, to be published by the end of next month.
The Treasury had previously committed to a full forecast and Budget by November 23.
In the letter, Treasury Committee chair Mel Stride said OBR was standing by ready to provide a meaningful forecast alongside the September 23 statement, had the Treasury requested it.
“No such request was received. Instead, the waters appear to have been muddied,” he said.
Stride put this down to "suggestions" that a forecast "could not be provided", because there was not the usual ten-week period available for the OBR to create the forecast.
“Our exchange of correspondence over the forecast only adds to the sense of the avoidance of scrutiny," said Stride.
He said he pressed both Kwarteng and former chancellor Nadhim Zahawi, "well in advance" of the September statement to publish an OBR forecast alongside it.
In a letter to the Treasury Committee on August 26, the OBR said it had started preparing an economic and fiscal outlook at the end of July in the event of an emergency Budget in September.
“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.
The OBR did warn, however, that if it did produce a report by this date it would not be as comprehensive as usual, given the accelerated timetable. Usually the OBR has ten weeks to put this report together.
A Treasury spokesperson said: “Last week, the chancellor set out the first stage of the government’s growth plan, with more supply side reforms to come in the next few weeks - including announcements on changes to the planning system, business regulations, childcare, immigration, agricultural productivity, and digital infrastructure.
“And the chancellor has commissioned the OBR to produce an economic and fiscal forecast which will be published on November 23. He will set out the government’s medium term fiscal plan alongside this, which will build on the commitment to get debt falling as a share of GDP in the medium term.”
FTAdviser understands prime minister Liz Truss and Kwarteng are meeting with OBR's chair Richard Hughes today to discuss the forecast process and economic and fiscal developments since March.
No OBR forecast 'driven lack of confidence in markets'
The Treasury Committee said yesterday that an earlier forecast and fiscal event were urgently needed, given the “continued uncertainty within markets”.
Stride said to Kwarteng: “Your growth plan is amongst the largest fiscal interventions of modern times and one that has resulted in various significant and concerning reactions in the markets.
“The fiscal impact of your growth plan significantly exceeds that of a typical Budget and yet there was no OBR forecast to accompany it.
“It is hard to conclude other than that an absence of a forecast has in some part driven the lack of confidence in the markets.”
Following Kwarteng’s mini-Budget on last week (September 23), the pound crashed to a historic low and gilt markets soared causing swap rates - a lead indicator for mortgage rates - to jump.
This has pushed up mortgage interest rates by as much as 1.5 per cent in days, and seen lenders pull hundreds of products in order to try and reprice them.
The Bank of England also had to step in this week to steady the gilt market after acknowledging “a material risk to UK financial stability” if it did not act.
The Committee suggested the government’s decision not to publish a full forecast along with its mini-Budget might have been because a full forecast would not have supported the tax cuts and projections of 2.5 per cent growth.
“Some have formed the unfortunate impression that the government may be seeking to avoid scrutiny, possibly on account of expecting the OBR forecast to be unsupportive of the achievement of the economic outcomes the Government expects from the Growth Plan,” said Stride.
“Independent forecasts are an essential component of both accountability and demonstrating fiscal credibility to markets and the public.”
ruby.hinchliffe@ft.com
