FORMER chancellor Kwasi Kwarteng held back official warnings that borrowing was on course to rocket even before he attempted his ill-fated budget plans, new documents from the Office for Budget Responsibility (OBR) show.
Kwarteng’s Growth Plan published on Sept. 23 formed the biggest package of tax cuts in decades and triggered a meltdown in British financial markets, exacerbated by the structure of pension funds.
Even before he published the so-called “mini-budget”, Kwarteng had been widely criticised for failing to publish advice given to him by the OBR, something that unnerved investors.
The OBR, the country’s official forecaster, published that advice this week, in response to an order from the Information Commissioners’ Office.
Dated Sept. 5, the report showed borrowing from 2022/23 through 2026/27 was cumulatively on track to rise by £109 billion more than the OBR had forecast in March 2022, reflecting higher energy costs and rising inflation.
The forecasts – made faster and with less data at hand than for a normal budget event – were given to Kwarteng on a “pre-measures” basis, meaning the OBR had not considered his plans for sweeping tax cuts.
Kwarteng’s offices and the Treasury did not immediately respond to requests for comment.
At the time of the mini-budget, a spokeswoman for then-prime minister Liz Truss said providing accelerated OBR forecasts that reflected the proposed tax changes would have compromised their quality and completeness.
Kwarteng and Truss lost their jobs as a result of the mini-budget, which ended the Tory’s unbroken 15-year lead over the opposition Labour for economic competency in the eyes of voters, according to polling from Ipsos.
While current prime minister Rishi Sunak made restoring economic stability a central plank of his leadership, Labour maintains a large lead in opinion polls ahead of a general election expected next year.
The OBR’s September report showed Kwarteng was on track to fail the government’s fiscal target of running a current budget surplus in 2025/26.
The report warned that things could pan out worse still.
“The fiscal update presented here needs to be considered in the context of the elevated risks to economic and fiscal prospects at present… there are several risks that could significantly worsen this outlook,” the report said.
It concluded with a message to Kwarteng about his plans.
“Policies that your government announces in the coming weeks will have potentially large impacts on economic and fiscal outcomes,” the OBR said, adding that they could boost the economy but also add to borrowing, especially in the short term.
In a letter published this week, OBR chair Richard Hughes said energy prices had turned out lower than was assumed since the draft forecasts last September, but interest rates were higher and government budget policy was tighter.
Britain ran a budget deficit of £132bn or 5.2 per cent of GDP in the 2022/23 fiscal year.
In March the OBR forecast this would fall to 5.1 per cent in 2023/24, and to 1.7 per cent in four years’ time.
(Reuters)
