Truss and Kwarteng to meet UK independent fiscal watchdog over tax plans

London — Prime Minister Liz Truss and her finance minister Kwasi Kwarteng will on Friday meet the head of Britain’s independent fiscal watchdog, whose analysis they previously spurned, in a bid to reassure markets after chaos triggered by planned tax cuts.

Kwarteng unveiled a string of lower taxes last week that were, unusually, not backed by forecasts from the Office for Budget Responsibility. The resulting sell-off led the Bank of England to intervene with emergency bond-buying to protect pension funds from partial collapse.

Truss and Kwarteng will now meet the OBR’s chair Richard Hughes, chair of the Office for Budget Responsibility (OBR), to discuss the budget forecast process and economic and fiscal developments since March, the Treasury said,

The OBR said on Thursday it had offered to produce a forecast for Kwarteng’s tax-cutting plan but were not commissioned to do so.

Adding to the pressure for the government to take action to calm markets, a committee of lawmakers in Britain’s parliament on Thursday urged Kwarteng to bring forward a November 23 budget statement which will include new forecasts by the fiscal watchdog.

Andrew Griffith, the minister who oversees the City of London financial district, said it would take time to prepare those projections.

“We all want the forecasts to be done as quickly as they (OBR) can but also . you also want them to have the right level of detail,” Griffith told Sky News.

Kwarteng has said the November “Medium-Term Fiscal Plan” will give new forecasts and detail the cost of the borrowing and measures to cut debt. He has asked the OBR to produce a first draft of its next economic forecasts on October 7.

Truss not for U-turning

Truss, who only replaced Boris Johnson as prime minister this month, has argued that the market turbulence is a result of global problems caused by the Russian invasion of Ukraine, and that she will not reverse her plan to snap the economy out of years of stagnant growth.

She also says the government had to intervene to provide support to help people and businesses with their energy bills, a package that could cost more than £100bn (R2-trillion) , to keep a typical household’s bill to under £2,500 (R50,000) a year.

Critics, including some in the ruling Conservative Party, say Truss and Kwarteng should have included forecasts from the OBR to reassure markets about where the funding would come from for their proposed £45bn (R900bn) of tax cuts.

Official data showed on Friday that Britain’s economy grew in the second quarter but was still below its pre-pandemic peak.

Concern has not been limited to the markets, with the likes of the IMF, US commerce secretary Gina Raimondo and European allies voicing unease at the British plans.

“I am not worried about the euro but I am worried about the situation in Britain,” French finance minister Bruno Le Maire said on Friday.

Polls indicate the British public is also unimpressed with the government’s proposals, with a series of surveys of Thursday giving the opposition Labour Party large leads of the Conservatives.

One had Labour 33 points ahead, an unprecedented lead for a party in recent times.

Some Conservative lawmakers have already said Truss needed to think again about her plans.

“The economic package of borrowing & tax cuts announced last week clearly can’t command market or voter confidence,” lawmaker George Freeman said on Twitter. “The cabinet must meet fast to agree with (Truss) & (Kwarteng) a Plan B which can hold.”

Reuters