UK seeking to plug £35 billion fiscal shortfall on Nov 17
UK Chancellor of the Exchequer Jeremy Hunt is seeking to fill a fiscal shortfall of £35 billion (S$57 billion) when he delivers his autumn statement next month, officials familiar with the matter said.
The government has drawn up a menu of 104 options to cut spending as it seeks to get the public finances back onto a sustainable track, according to the officials, who cited Treasury and Office for Budget Responsibility data from this week. The Treasury didn’t immediately respond to a request for comment.
Hunt and Prime Minster Rishi Sunak – who took office on Tuesday (Oct 25) – on Wednesday delayed a planned economic statement to Nov 17 from Oct 31 to give them time to make what the premier described as the “right decisions” to manage the British economy. The government also upgraded the status of the programme from a “medium-term fiscal plan” to an Autumn Statement – a form of interim mini budget.
The delay means the Bank of England will now make its next interest rates decision on Nov 3 without the benefit of knowing the full direction of travel the government is setting for the economy. But Hunt told broadcasters that it was important to allow for time to make enduring choices on the direction of the economy, and that he had discussed the timing with the central bank.
“This is my recommendation to the prime minister as the best way to ensure that the decisions we take, these very, very difficult decisions are ones that stand the test of time,” Hunt said. That will “give us the best chance of giving people security over their mortgages, over their jobs, over the cost-of-living concerns everyone has”, he said.
Markets were relatively unmoved by the announcement, with the yield on 30-year gilts rising 10 basis points to 3.77 per cent and the pound holding gains to trade 0.8 per cent stronger at US$1.1564.
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Sunak told his cabinet that the statement will “set out how we will put public finances on a sustainable footing and get debt falling in the medium term and will be accompanied by a full forecast from the Office for Budget Responsibility,” according to a government readout of Wednesday morning’s meeting of the premier’s top team.
The delay will allow the OBR to deliver more accurate forecasts about the state of the public finances and give better projections for economic growth, taking into account the recent calm in financial markets, Hunt said.
The plan was initially announced by Hunt’s predecessor, Kwasi Kwarteng, in an effort to calm markets that had been roiled by his previous tax-cutting strategy, which Hunt has largely since reversed. Kwarteng had planned it initially for late November, but later brought it forward in an effort to restore market stability. Hunt has already scrapped the bulk of the unfunded tax cuts outlined by Kwarteng and former premier Liz Truss on Sep 23.
Foreign Secretary James Cleverly earlier on Wednesday hinted at the delay in a series of broadcast interviews. He was asked on BBC radio about the UK’s development aid commitment, which Sunak cut to 0.5 per cent of national income from 0.7 per cent when he was Chancellor, and which has been touted as a candidate for further cuts. “I don’t think we are envisaging that,” Cleverly said. He reiterated that the government’s “ultimate desire” is to bring it back up to 0.7 per cent.
Sunak appointed his cabinet yesterday, keeping Hunt on to ensure continuity. The new prime minister met his top team of ministers for the first time on Wednesday before taking questions in the House of Commons for the first time.
The new premier is already under pressure to explain why he brought Suella Braverman back into the cabinet in her old role as Home Secretary, just a week after she quit the post over a security breach that she herself acknowledged broke the ministerial code. Asked about her resignation and reappointment in Prime Minister’s Questions, Sunak said Braverman had “made an error of judgment” but had raised the matter and “accepted her mistake”. BLOOMBERG
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