Banking

Treasury Committee calls for OBR forecast to be expedited due to ‘continued market uncertainty’

Chair of the committee Mel Stride has written to Chancellor Kwasi Kwarteng to ask that he make an OBR forecast public “immediately” since “it is hard to conclude other than that an absence of a forecast has in some part driven the lack of confidence in the markets”.

He added that the OBR had assured him a forecast would have been ready to accompany the fiscal event: “The OBR was standing by ready to provide a meaningful forecast alongside the 23 September statement had the Treasury requested it. No such request was received.”

Since the government’s Mini Budget last Friday (22 September), the UK market, economy and currency has been in turmoil – incidents Stride described as “significant and concerning”.

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In his letter, Stride described the government’s Growth Plan as “amongst the largest fiscal interventions of modern times”, causing the yield on 10-year gilts to jump from 3.5% to 4.2% in just two days, “exceeding any movement during the global financial crisis or the pandemic”.

Stride also referred to the Bank of England’s comments that it was forced to intervene yesterday (28 September) and delayed its gilt sales to manage the “material risk to UK financial stability”.

The chair continued that Kwarteng’s Mini Budget “significantly exceeds that of a typical budget and yet there was no OBR forecast to accompany it”. He said that some have apparently “formed the unfortunate impression that the government may be seeking to avoid scrutiny” due to the possibility that said forecast would “not be supportive of the economic outcomes the government expects”, particularly its 2.5% growth target.

In the letter, the committee called for the government to to release the forecast by the end of October, having received confirmation from the OBR that the chancellor will be provided with one on 7 October.

In its statement, the committee said: “[It] argues the fiscal event and OBR forecast planned for the 23 November should be brought forward given ‘continued uncertainty within markets’, that it would benefit a key meeting of the Monetary Policy Committee on 3 November and because a meaningful OBR forecast can be provided earlier.”

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According to him, an updated forecast was vital, given the last full report was made in March, since when there have been “deteriorating economic conditions and policy interventions”.

Instead, Stride claims the “waters appear to have been muddied” by legal technicalities about the space between forecasts and the correct preparation period being observed.

“Our exchange of correspondence over the forecast only adds to the sense of the avoidance scrutiny,” he said.

Stride called on the chancellor to confirm what date an earlier  forecast and fiscal plan could be announced.

Oral evidence

Stride also called on the chancellor to appear in front of the committee and give oral evidence on his Growth Plan. Kwarteng has so far declined the invitation, a move Stride described as “disappointing”.

He added that former chancellors have been aware of the “importance of select committee scrutiny”, particularly in times of “great economic difficulty”.

He cited a previous example: “For example, the then Chancellor, Alastair Darling, appeared five times before the committee in 2008. I would be grateful if you would reconsider our invitation to appear before the committee shortly after the conference recess.”

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