Chancellor Kwasi Kwarteng is to rush forward his new debt-cutting plan — and accompanying official forecasts — to October 31, as part of a broad effort to reassure markets the UK has a grip on public finances.
The move comes as the Bank of England also seeks to steady UK financial markets, by unveiling measures to stave off rushed asset sales by pension funds.
Kwarteng had promised to publish a medium-term fiscal plan — showing how he would put debt on a downward path within five years — on November 23. But he has been under huge pressure to act faster with the plan, which is likely to contain highly contentious spending cuts and growth measures.
His decision to accelerate the fiscal plan and the official forecasts was part of a flurry of moves on Monday intended to calm financial markets following the “mini” Budget, which contained £45bn in unfunded tax cuts as well as a huge energy subsidy scheme.
In an early morning announcement, the BoE, which was forced to intervene in government bond markets after the September 23 fiscal statement, said it would loosen the rules on its £65bn bond-buying programme this week. It also announced longer-lasting measures, such as a new facility to address the liquidity crisis in the UK pensions industry.
The government also announced on Monday that James Bowler, a veteran civil servant, would return to the Treasury as its new permanent secretary, sending a signal that Liz Truss’s administration values fiscal credibility.
The prime minister had been expected to appoint Antonia Romeo, permanent secretary at the justice ministry, a candidate who had no Treasury experience, but that plan was abandoned.
Kwarteng will hope the new BoE intervention, the acceleration of his fiscal plan and a tilt back to Treasury “orthodoxy” in the choice of permanent secretary will all reassure markets.
But the decision to accelerate the publication of the fiscal plan and forecasts to this month, first revealed in the Financial Times, means he has just three weeks to finalise his economic plan and make the sums add up.
The new fiscal plan will be judged by the independent Office for Budget Responsibility, also on October 31. Its verdict will be eagerly awaited by the financial markets, since the “mini” Budget was not accompanied by OBR estimates.
In a letter on Monday, Kwarteng said the new date of October 31 would allow the OBR to assess new factors such as the measures contained in his fiscal statement and the recent quarterly national accounts.
The letter, to Treasury committee chair Mel Stride, said the OBR would be able to provide “an in-depth assessment of the economy and public finances” and allow time for Kwarteng to conclude his medium-term fiscal plan.
Stride wrote on Twitter: “Having pressed so hard on this I strongly welcome decision by Kwasi Kwarteng to bring forward the medium term fiscal forecast to October 31.
“If this lands well with the markets then the MPC [Bank of England Monetary Policy Committee] meeting on November 3 may result in a smaller rise in interest rates [than previously thought likely]. Critical to millions of mortgage holders.”
On the day of his fiscal statement last month, Kwarteng said he would not bring forward his medium-term plan to balance the books until the “new year”; he has twice been forced to move forward that date.
But coming up with a plan that will fill in a permanent fiscal hole of £43bn — he has already abandoned the £2bn plan to axe the 45p top rate of income tax — could prove extremely difficult.
The plan will involve spending cuts and a number of measures to boost growth, including planning reform and extra immigration, which are likely to arouse considerable Tory opposition.
Truss said in her Tory conference speech that an “anti-growth coalition” would try to frustrate the plans, but already there are signs that the most dangerous opponents could be on her own backbenches.