A cross-party committee of MPs has asked the office of budget responsibility (OBR), Britain’s fiscal watchdog, to confirm that it is preparing for an expected emergency budget in September if Liz Truss becomes prime minister. Ms Truss’s team have suggested that any announcement of tax cuts and help with energy bills will not be accompanied by an OBR assessment of the impact on public finances.
But the House of Commons treasury committee asked the OBR on Monday if the treasury was helping the watchdog prepare a forecast to accompany any such announcement.
“OBR forecasts provide transparency and reassurance to the markets on the health of the nation’s finances. As a committee, we expect the treasury to be supporting and enabling the OBR to publish an independent forecast at the time of any significant fiscal event, especially where, unlike other recent fiscal interventions, this might include significant permanent tax cuts,” said the committee’s Conservative chairman Mel Stride.
“Whether such an event is actually called a budget or not is immaterial. The reassurance of independent forecasting is vital in these economically turbulent times. To bring in significant tax cuts without a forecast would be ill-advised. It is effectively ‘flying blind’.”
Mr Stride is backing Rishi Sunak for the Conservative party leadership and Ms Truss’s supporters accused him of using taxpayer-funded resources to promote his candidate’s interests.
Ms Truss has promised to break with what her supporters characterise as a cautious orthodoxy embraced by the treasury and Bank of England. She has argued that tax cuts funded by borrowing will boost economic growth and suggested “revisiting” the Bank of England’s mandate.
Mr Sunak warned on Tuesday that Ms Truss would alarm international investors if she interfered with the independence Britain’s central bank has enjoyed since Labour’s Gordon Brown was chancellor.
“I think we need to let the Bank of England get on with its job with interest rates. And I’m worried, quite frankly, by reports from others that they want to curb the independence of the Bank of England. I think that would be a mistake, and I think it would spook international investors into the United Kingdom and will be bad for all of us,” he told Sky News.
Speaking ahead of hustings in Birmingham, Mr Sunak said his priority as prime minister would be tackling inflation rather than cutting taxes.
“I’ve said throughout this campaign that the government’s sole economic focus right now must be bearing down ruthlessly on inflation while shielding people from the impact it will have on their bills this autumn. I simply am not willing to promise anything that undermines that goal,” he said.
“Focusing instead on immediate tax cuts funded by borrowing may sound attractive at first glance. But if they stoke inflation while doing nothing for pensioners and poorer people, they are bad for everyone and worst of all for the least well off.”
