United Kingdom Treasury chief Jeremy Hunt on Wednesday delayed his much-anticipated economic statement until November 17, giving new Prime Minister Rishi Sunak a chance to weigh in on policies meant to stabilise the country’s finances after his predecessor’s tax-cutting plans triggered market upheaval.
The statement will now include a full budget and analysis of its impact on government debt and borrowing by the independent Office of Budget Responsibility. It was originally set to be announced on Halloween.
“I want to confirm that it will demonstrate debt falling over the medium term, which is really important for people to understand,” Hunt said in a pooled broadcast clip. “But it’s also extremely important that that statement is based on the most accurate possible economic forecasts and forecasts of public finances.”
Hunt’s announcement comes a day after Sunak took office, replacing former Prime Minister Liz Truss after she was forced to step down after just six weeks.
Truss’ decision to announce 105 billion pounds (US$116 billion) in tax cuts and spending increases without saying how she would pay for them sparked concerns about soaring public debt that drove the pound to record lows, fuelled turmoil on bond markets and increased mortgage costs for millions of people.
Financial markets have recovered since Hunt became Treasury chief two weeks ago and threw out most of Truss’ economic plan. The British currency and government bonds held on to recent gains after the economic statement was delayed, suggesting investors are willing to give Hunt time to make sure he and Sunak agree on the new government’s economic policies.
The delay means the Bank of England will have to make its next interest rate decision before it knows the details of the government’s tax and spending plans. The central bank is expected to raise rates for an eighth consecutive meeting on November 3 as it tries to rein in inflation that is running at a 40-year high of 10.1 per cent.
Hunt said he discussed the delay with Bank of England Governor Andrew Bailey on Tuesday night.
“He understands the reason for doing that, and I’ll continue to work very closely with him,” Hunt said.
The government is trying to restore its economic credibility and rebuild investor confidence as it faces a cost-of-living crisis, the fallout from the war in Ukraine and the lingering effects of the COVID-19 pandemic. Hunt has said that doing so will require both tax increases and spending cuts.
Delaying the budget statement is the best way to ensure that the decisions the government makes “are ones that stand the test of time and give us the best chance of giving people security over their mortgages, over their jobs, over the cost-of-living concerns that everyone has,” Hunt said.
When he took charge Tuesday, Sunak acknowledged the scale of the challenge, as well as the scepticism of a British public alarmed by the state of the economy and weary of a Conservative Party soap opera that has chewed through two prime ministers in as many months.
He pledged to tackle economic issues head on.
“I fully appreciate how hard things are,” Sunak said outside the prime minister’s official residence at 10 Downing Street. “And I understand, too, that I have work to do to restore trust after all that has happened. All I can say is that I am not daunted.”