4 min read
A senior Conservative MP has said that Liz Truss should not make new economic orthodoxy about “avoiding scrutiny” after the Treasury failed to order an official forecast ahead of this week’s mini-Budget.
Mel Stride, chair of the Treasury select committee, told PoliticsHome’s The Rundown podcast he believes the government should be more transparent about how ambitious tax-cutting policies will impact on the public finances.
It is convention that the Chancellor asks the independent Office for Budget Responsibility (OBR) to supply a report alongside fiscal events on the wider economic situation and how the government’s announcements will affect it.
But Kwasi Kwarteng has insisted the package of measures he is due to set out to Parliament on Friday morning, which are expected to include billions of pounds worth of tax cuts and a host of other policies, will not have an OBR forecast attached to it because there wasn’t time for the body to prepare one.
But in a recent letter to Stride, Richard Hughes, the chair of the OBR, said he had notified Kwarteng when he became Chancellor earlier this month that he was ready to provide a partial forecast in time for a fiscal event this week, rather than requiring the usual 10-weeks’ notice.
“What the markets want, what politicians want, is an independent forecast.” Stride told PoliticsHome.
“So we can start to try and answer some of these questions about where we’re all headed. The last forecast was back in March from the OBR, and an awful lot has changed since then.
“The economic outlook has undoubtedly deteriorated, certainly in terms of inflation, and growth forecasts.”
Stride, a former Treasury minister as well as chairing the powerful cross-party committee, said he was “not convinced by the kind of arguments the government’s been putting” as to why there won’t be a forecast with Friday’s fiscal event.
The Treasury has said it will stick to the legally-mandated two forecasts per financial yearwith a second pencilled in for a full Budget later this autumn.
Truss and Kwarteng have both recently been critical of a so-called Treasury “orthodoxy”, and have signalled their intention to do things differently by sacking the well-respected permanent secretary at the department Tom Scholar, have floated the idea of reforming a number of financial bodies and regulators, and indicated they will remove the cap on bankers’ bonuses.
“There’s a lot of questioning of the institutions or the architecture that sits around our economic future,” Stride continued.
“I think that’s something that my committee in particular will be very live to, and I think is a potential danger.”
He added: “I think that what the government mustn’t do is make the new orthodoxy in the economy one around avoiding scrutiny, not being transparent, knocking a lot of our institutions.
“We need to row back from that pretty quickly. So I’m hoping tomorrow that in the absence of an OBR forecast, there will at least be something the Treasury comes forward with by way of forecasts.”
Also appearing on this week’s episode of The Rundown, Paul Johnson, the director of the Institute for Fiscal Studies (IFS) think tank, was critical of the removal of Scholar after six years leading the Treasury.
“If you’re focused on growth, you absolutely need trust and stability in your political and macroeconomic institutions.” he said.
“The sacking of the Permanent Secretary of the Treasury, and some of these suggestions about undermining independent institutions, really don’t help in that context.
“That doesn’t mean you can’t ever make change, but after a summer of uncertainty and instability, I think it’d be useful to have a period of stability.”
Johnson said it was “really surprising” the government has also failed so far to estimate how much the cost will be in its energy bills support packages for households and businesses.
Expected to be upwards of £100bn, energy relief could be the single most expensive tax or spend policy in peacetime history, but ministers have so far refused provide detailed costing blaming the volatility of wholesale gas and electricity prices.
Johnson said it is clear the government has been working on the package for some considerable period of time and is therefore likely to have a range of estimates.
“It’s a shame that they weren’t put in the public domain at the moment at which these things were announced,” he said.
The leading economist said there was undoubtedly uncertainty over the costings, but added: “When you’ve got uncertainty it is even more important that we have clarity, and transparency, about what the scale of that uncertainty is, and what the underlying calculations are.
“So I really hope that we don’t just actually get a number in the speech tomorrow, but we actually get a proper document which sets out the calculations in a very clear and transparent manner.”
- The full episode of The Rundown featuring Mel Stride and Paul Johnson is out Friday
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