UK Leaders Say They Value Fiscal Scrutiny After Tax Plan Sparked Market Turmoil

Prime Minister Liz Truss and Chancellor Kwasi Kwarteng meet officials from the Office for Budget Responsibility (OBR) in Downing Street, London, on Sept. 30, 2022. (UK Treasury)

UK Prime Minister Liz Truss and Chancellor Kwasi Kwarteng have said they value the scrutiny from an independent fiscal watchdog, after their plan to fund massive tax cuts with government borrowing rattled investors and led to turmoil in the financial markets.

At an unusual meeting held in Downing Street on Friday, Truss and Kwarteng told officials from the Office for Budget Responsibility (OBR) that the government will “work closely” with them and will heed their input.

The government initially refused to let the OBR issue economic forecasts linked to its “mini-budget” unveiled on Sept. 23, which included the biggest package of tax cuts in half a century.

The plan was aimed at spurring growth in the UK economy but sparked panic among investors concerned about increased government borrowing, causing the pound to fall and borrowing costs to soar.

The absence of scrutiny from the OBR was a key factor that undermined market confidence in the government’s economic plan, former governor of the Bank of England Sir Mark Carney told the BBC on Thursday.

Reaffirming the Need for Scrutiny

In a statement issued after the meeting, the Treasury said the government and the OBR officials “agreed, as is usual, to work closely together throughout the forecast process and beyond.”

“The prime minister and chancellor reaffirmed their commitment to the independent OBR and made clear that they value its scrutiny,” said the statement.

The OBR said it will deliver an initial forecast to the chancellor on Oct. 7. But the Treasury made no mention of this in its statement, which only said an OBR forecast will be published on Nov. 23, when the chancellor is due to reveal his medium-term fiscal plan.

The government appears to be ignoring calls from the Treasury Select Committee, chaired by Conservative MP Mel Stride, which had urged Kwarteng to reveal his medium-term fiscal plan at the end of October, while also calling for OBR forecasts to be brought forward to reassure the markets.

‘Fly Blind’

The opposition Liberal Democrats criticised the government’s apparent decision not to publish the OBR’s initial forecast.

Lib Dem leader Sir Ed Davey said: “Delaying this forecast means shutting the door long after the horse has bolted.

“Liz Truss and Kwasi Kwarteng are allowing the economy to fly blind for two months while their reckless plans cause pension and mortgage misery for millions of British people.”

He urged Truss and Kwarteng to cancel the Conservative conference scheduled for this weekend, recall Parliament, and propose a new budget.

PA Media contributed to this report.