The government will deliver a full fat budget on 15 March next year, chancellor Jeremy Hunt confirmed today.
The announcement will be accompanied by an assessment of the impact of the government’s tax and spending plans on the public finances by the Office for Budget Responsibility (OBR).
Last month, Hunt delivered what was in effect a budget in all but name in which he cut spending and raised taxes £55bn to reassure investors concerned about the UK’s commitment to financial stability.
He froze income tax bands for another year, confirmed the 130 per cent investment relief would end next spring and launched a near £6bn stealth national insurance tax grab on businesses.
Hunt and prime minister Rishi Sunak have argued “tough decisions” are needed to show Britain is committed to getting debt as a share of the economy – currently running at 97.5 per cent – falling in five years and not to borrow to fund day-to-day spending, known as his fiscal rules.
Financial markets’ confidence in Britain’s fiscal credibility were rocked by former prime minister Liz Truss launching £45bn of unfunded tax cuts in her mini budget on 23 September despite inflation running at a 40 year high.
The pound slumped to a record low against the US dollar, UK gilt yields – which move inversely to prices – notched their biggest gain in more than two decades and the Bank of England was forced to launch an emergency up to £65bn bond buying programme to stem market volatility.
Truss and her then chancellor Kwasi Kwarteng were ousted over the appalling market and political reaction, making her the shortest serving No 10 incumbent ever.
Analysts claimed part of the awful response was driven by Truss and Kwarteng blind siding the OBR by not asking its chief Richard Hughes and other big wigs to produce a set of forecasts detailing how their decisions would impact the economy.
Hunt scrapped pretty much all of the mini budget immediately when he was parachuted into the treasury after Kwarteng was ditched by Truss, news he claims to have heard about on Twitter on the way home from IMF meetings in Washington.
Taxes are on an upward path
The now chancellor also asked the OBR to assess his November fiscal statement. They found his decisions will push taxes as a share of the economy to their highest level since the end of the second world war.
Britain is also on course for the worst hit to living standards on record and is already in a recession that will last around a year, the OBR said.
The market response to Hunt’s plans were fairly tamed.