Speculation that the chancellor will delay his budget until next year is mounting after he instructed the spending watchdog to publish new forecasts without announcing an accompanying fiscal event.
In a letter to the Treasury select committee, Rishi Sunak said he had asked the Office for Budget Responsibility to prepare an economic and fiscal forecast to be presented to parliament on October 27.
The OBR’s document usually accompanies a budget or spending review but in a break from normal protocol, Sunak did not announce either. The OBR is legally required to publish two forecasts a year that can simply be released to parliament.
Andrew Goodwin, UK economist at Oxford Economics, said: “It is unusual for the date to be announced like this. Given the unusual choreography, it could well mean the budget will be delayed. Or perhaps the Treasury is deferring a decision until closer to the time.”
A three-year spending review is planned for the autumn, for which a new OBR forecast is required. Each Whitehall department has been instructed to find savings of 5 per cent but the formal launch of the process has been delayed until after the parliamentary recess.
Since changes made in 2017, annual budgets are meant to be in November or December to give business time to implement tax rules before the new financial year begins the following April. However, in 2019 the budget was delayed until the following March because of the December general election. In 2020, the autumn budget was pushed back to March 2021 because of the pandemic.
Sunak is considering delaying the budget until the spring once again, when the underlying state of the economy should be clearer, as The Guardian reported this month. The end of furlough in September, the withdrawal of tax breaks and volatile inflation are expected to make the autumn a particularly difficult time to produce reliable forecasts.
The budget is when tax changes are announced and Sunak will announce his fiscal rules. He has said he wants to put the public finances on a more sustainable footing, by paying for all day-to-day spending out of receipts and getting debt falling as a share of GDP.
The public finances have proved stronger than expected thanks to the pace of the recovery but higher interest rates have increased debt servicing costs since the OBR’s last outlook.
Goodwin said: “They [ministers] need to give the OBR sufficient notice, so they may have ensured they can go ahead if they decide they are ready. And if they decide they are not ready, they can still ensure the OBR fulfils its obligation to publish two forecasts per year.”
Treasury sources said that no decision on the budget date has been made.BUSINESS NEWS • ECONOMIC NEWS • MAKE MONEY • News