Kwasi Kwarteng is under increasing pressure to release his fiscal statement, which will detail how the government wants to pay for the £43 billion in tax cuts included in the mini-budget and how it aims to reduce debt.
Treasury officials have announced that Chancellor Kwasi Kwarteng’s debt-reduction plan would be released on October 31, three weeks earlier than originally scheduled, along with an independent economic projection.
The publication of the medium-term financial plan and the forecast by the Office of Budget Responsibility (OBR) had been scheduled for November 23, but the chancellor has yielded to pressure and moved this date to October 31.
The pound fell to a record low in response to the chancellor’s mini-budget last month on the financial markets.
Mr. Kwarteng is under increasing pressure to release his fiscal statement, which will detail how the government plans to pay for the £43 billion in tax cuts in the mini-budget and decrease debt.
Mr. Kwarteng stated in a letter to Treasury Select Committee Chairman Mel Stride: “I have already informed you that an economic and fiscal forecast will be released on November 23 alongside the Medium-Term Fiscal Plan. I’ve chosen to move this date up to October 31.”
The chancellor stated that the new date “will let a comprehensive forecasting process be conducted by the legal requirements of the Charter for Budget Responsibility,” which “provides an in-depth examination of the economy and public finances.”
He continued, “This will also allow for the completion of the Medium-Term Fiscal Plan.”
Now, the chancellor’s budget statement will be released before the Bank of England announces its latest interest rate decision on November 3.
Mr. Stride, in response to the chancellor’s letter, applauded the initiative, stating that the publishing of the government’s debt-cutting plan and an independent economic prediction on 31 October could result in a reduced increase in interest rates, which is “crucial” for millions of mortgage holders.
Former cabinet minister Grant Shapps referred to it as “a good but tardy action.”
Pete Wishart of the SNP advised Prime Minister Liz Truss and Mr. Kwarteng to abandon their proposals to impose £18 billion in cuts to social security payments and public services, including the NHS.
What did the chancellor’s mini-budget consist of?
Mr. Kwarteng’s mini-budget statement to MPs at the end of September highlighted the following:
• Beginning in April 2023, the basic rate of income tax will be reduced to 19 pence per pound;
• The 45% higher rate of income tax will be eliminated;
• Planned duty increases on beer, cider, wine, and spirits will be canceled.
Stamp duty will be reduced. Nothing will be paid for the first $250,000 of the property’s worth, which is double the present limit. The first-time buyer threshold will climb from £300,000 to £425,000.
• With the aid of the energy price guarantee and a £400 grant, household expenditures are predicted to fall by £1,000 this year.
• The bonus cap for bankers would be eliminated as part of attempts to “reaffirm” the United Kingdom’s reputation as a financial services center. Next year’s planned increase in corporate tax to 25% is canceled.
However, a few days after presenting the tax-cutting mini-budget, Mr. Kwarteng stated that the government was abandoning its plans to give the richest 1% tax relief, in response to a fierce outcry from Conservative MPs.
In light of the rising cost of living, the proposal to eliminate the 45p rate, which is paid by those who earn more than £150,000 per year, was criticized as unjust.
Truss under intensifying criticism regarding benefits
Mr. Kwarteng stated in a tweet that the policy had become a “distraction” from his goal of fostering economic expansion.
He said: “We get it, we have listened.”
Meanwhile, pressure from within the Conservative Party is increasing on Ms. Truss to increase benefits in line with inflation.
On Monday, former chancellor Sajid Javid joined the rising opposition to proposals to increase payouts by less than inflation.
Last Monday, Penny Mordaunt, leader of the House of Commons, became the first cabinet minister to explicitly criticize the idea of not increasing benefits with inflation, telling Times Radio: “Whether it’s pensions or our welfare system, I’ve always backed keeping up with inflation. It is rational to do so. This is what I voted for previously.”
The prime minister told broadcasters in Birmingham, where the Conservative Party had its conference last week, that she had “not taken a judgment” on whether or not to honor the increase in benefits promised by her predecessor Boris Johnson.
Ms. Truss added, “It’s very apparent that we must assist the most vulnerable as we head into this winter.”
Each percentage point increase in benefits adds £1.6 billion to the cost of welfare
Downing Street is rumored to be considering boosting Universal Credit using a lesser criterion, such as the increase in average earnings, as opposed to inflation.
Benefits are typically indexed to the consumer price index (CPI) inflation rate beginning in September, with the increase taking effect the following April.
The Institute for Fiscal Studies predicts that for every percentage point increase in the CPI, welfare spending increases by £1.6 billion.
Former work and pensions secretary Sir Iain Duncan Smith’s former welfare adviser Baroness Stroud, who now works for the Legatum Institute, has warned that failure to increase benefits in line with inflation will push 450,000 people into poverty next year.
A minister from the Department of Work and Pensions told earlier today that Ms. Truss is anticipated to decide in November whether to increase payments in line with inflation.
The Prime Minister will undertake a charm offensive with Conservative MPs.
Victoria Prentis stated that “no decision has been made on the increase in benefits,” but she is certain that the government will “make that choice as soon as feasible.”
According to a Downing Street insider, the prime minister can see both sides of the argument and is “really undecided” on the issue.
The source stated that before taking a position, Ms. Truss will “listen to cabinet and colleagues.”
In the meantime, the prime minister is poised to conduct a charm offensive this week to unite her party over the mini-budget.
As Members of Parliament return to Westminster on Wednesday, the Prime Minister is anticipated to hold policy lunches with groups of colleagues and speak to the 1922 Committee of backbench Conservative MPs.
