LONDON – Britain’s independent budget watchdog said Friday that it would deliver an initial analysis of the government’s economic plan to Treasury officials next week, putting pressure on Prime Minister Liz Truss to release a document seen as crucial to rebuilding confidence after a sweeping package of unfunded tax cuts triggered turmoil in financial markets.
The announcement from the Office for Budget Responsibility came after agency officials held an unprecedented meeting with Truss and Treasury chief Kwasi Kwarteng. After the meeting, the government didn't commit to immediately releasing the OBR's analysis, saying only that it would publish the agency's full economic and fiscal forecast as scheduled on Nov. 23.
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Investors are waiting to see the OBR's analysis of the plan with 45 billion pounds ($50 billion) of tax cuts that many see as benefiting the wealthy and would be paid for by a surge of public borrowing. The government’s failure to provide such figures sent the pound to a record low against the dollar this week and forced the Bank of England to intervene in the bond market to protect pension funds.
The OBR said it has already started reviewing the plan and would deliver the “first iteration" of that analysis to Kwarteng on Oct. 7.
“The forecast will, as always, be based on our independent judgment about economic and fiscal prospects and the impact of the government’s policies,” the OBR said in a statement.
It marked the first time OBR officials had met with a prime minister since the independent agency was created 12 years ago.
The chairman of the House of Commons’ Treasury committee said the meeting was an opportunity for the government to change its course. The talks between Truss and Kwarteng and the OBR were likely “difficult” conversations because investors want to see independent analysis showing that the new prime minister's plans won’t push British government borrowing to unsustainable levels, said Mel Stride, a member of Truss’ Conservative Party.
“The judgment so far of the markets, and indeed myself and many others, is that what was announced last Friday, unfortunately, doesn’t stack up fiscally and some changes are almost certainly going to need to be made,” Stride told the BBC.
Truss defended her plan Thursday and shrugged off the market chaos, saying she was willing to make “controversial and difficult decisions” to get the U.K. economy growing. She said the problems facing the economy — namely high inflation driven by soaring energy prices — were global and spurred by Russia’s invasion of Ukraine.
She got a piece of good news Friday, with revised figures showing the U.K. economy grew slightly in the three months through June, indicating the country isn't technically in a recession, with two consecutive quarters of shrinking GDP being one definition.
Besides the tax cuts in the government’s economic stimulus plan, Truss also has capped energy bills for households and businesses that are driving a cost-of-living crisis. Prices, however, are still going up on Saturday as natural gas prices soar.
Treasury minister Andrew Griffith played down the significance of the meeting between the government and OBR but still described it as a “very good idea.”
“Just like the independent Bank of England, they (the OBR) have got a really important role to play,’’ Griffith said on Sky News. “We all want the forecasts to be as quick as they can, but also as a former finance director, I also know you want them to have the right level of detail.”
The decision to meet with the OBR also was welcomed by Conservative lawmakers and senior party figures, including former Chancellor George Osborne, who oversaw the creation of the independent spending watchdog in 2010.
“Turns out the credibility of the institution we created 12 years ago to bring honesty to the public finances is more enduring than that of its critics,” Osborne said on Twitter.