Will the Halloween Budget be next for the chop? New Prime Minister may not have enough time to sign off spending plans that sunk Liz Truss
- The long-awaited Halloween Budget could be postponed it has been revealed
- The financial plan could be delayed because of the change in prime minister
- New Chancellor Jeremy Hunt this week vowed to keep the date of the fiscal plan
- But following Liz Truss’s dramatic resignation yesterday this could all change
The Halloween Budget may no longer go ahead as planned because of the change in prime minister.
Liz Truss and Kwasi Kwarteng had been forced to bring forward their detailed financial plans from late November to October 31 under pressure from the City to show they could balance the books.
New Chancellor Jeremy Hunt this week vowed to keep the date for his medium-term fiscal plan and immediately started discussing spending cuts with Whitehall departments, declaring that ‘decisions of eye-watering difficulty’ would have to be taken.
But Miss Truss’s dramatic downfall and the rapid Tory leadership election to replace her could now see the statement postponed or even cancelled, risking fresh turmoil in currency and bond markets.
If the new leader is not chosen until next Friday, it would give them just a weekend to consider the far-reaching economic plans before they were due to be announced.
New Chancellor Jeremy Hunt vowed earlier this week to keep to date for the autumn budget due to be revealed on October 31
The winner of the contest may want to change the balance of tax rises, spending cuts and changes to the welfare system needed to fill an estimated £40billion budget black hole.
A Whitehall source said the Halloween date was ‘still the plan’ but added: ‘It’s a decision for the new PM ultimately.’
Sir Graham Brady, who chairs the Tory backbench 1922 committee, indicated the budget could still go ahead as scheduled despite the tight timetable.
He said yesterday: ‘I have spoken to the party chairman Jake Berry and he has confirmed it will be possible to conduct a ballot and conclude a leadership election by Friday, October 28. So we should have a new leader in place before the fiscal statement on October 31.’
Prime Minister Liz Truss announced that she would be handing in her resignation after just six weeks in office
During the summer hustings Miss Truss pledged to hold an emergency budget if she won the leadership contest in order to provide urgent help for families suffering from the cost of living crisis.
In her first act as Prime Minister she announced that household energy bills would be frozen for two years, costing an estimated £150billion. When her Chancellor Mr Kwarteng delivered what was expected to be a ‘mini-Budget’ on September 23, however, it went far further than anyone had expected.
His growth plan bet that £45billion worth of spending cuts funded by borrowing would put rocket boosters under the economy, and involved slashing the basic rate of income tax as well as dropping a hike in corporation tax.
But he also said he would axe the top 45p rate of income tax and lift the cap on bankers’ bonuses, sparking outrage from Conservatives as well as opposition MPs who said it was wrong for the richest in society to benefit when so many were struggling.
And, fatally, the tax cuts were published without the usual accompanying forecast from the Office for Budget Responsibility watchdog – meaning that investors had no idea how they would be paid for.
Liz Truss and Kwasi Kwarteng had been forced to bring forward their detailed financial plans from late November to October 31 under pressure from the City to show they could balance the books
Mr Kwarteng initially said he would set out his medium-term fiscal plan on November 23, two months after the tax cuts were announced.
But he was forced to bring it forward to Halloween amid turmoil in the bond markets that wiped billions off the value of pension funds, drove up mortgage rates for homeowners and triggered a dramatic intervention by the Bank of England.
Mr Kwarteng also had to U-turn on the 45p tax rate cut, but when this failed to calm financial markets he was sacked just a week ago – with his successor Mr Hunt unceremoniously cancelling almost all of his other plans.
Last night the Treasury declined to comment on whether or not the Halloween statement would still go ahead. One insider said: ‘It will be up to the new prime minister.
But internally we’re still working very much to what’s been announced, unless told otherwise.’
John Hawksworth, formerly chief economist at PwC, pointed out that if the Halloween budget were delayed it would come too late for the next crucial decision on interest rates, to be made by the Bank of England just a few days later on November 3.
In addition, any late changes made by the new PM before the 31st would come too late for the OBR to assess, which would concern investors and add to pressure to stick with Mr Hunt’s existing plans.
‘If the new PM wants to change anything after October 28, it will be too late for an OBR forecast that all agree is critical for credibility,’ Mr Hawksworth tweeted.
Lib Dem MP Alastair Carmichael said: ‘Delaying the Budget should not be considered for even a minute. The Conservatives have crashed the economy and they must not leave the public waiting.
‘Mortgages for thousands of people are going up every single day, the country is in economic uncertainty with the pound teetering on the edge.’
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