This week the Chancellor Kwasi Kwarteng will announce a mini-Budget, in which it is expected he will reverse the rise in National Insurance and scrap a planned hike in corporation tax. Cuts to Income Tax are expected to follow shortly thereafter. These are the landmark commitments of the Truss leadership campaign, and the government is eager to enact them. It is all part of the Treasury’s efforts to stimulate economic growth, which it predicts will create more jobs and higher paid jobs.
However, in an unusual move, the Treasury is refusing to publish an economic projection alongside the budget. The independent forecaster, the Office for Budget Responsibility (OBR) has already provided the Treasury with a draft, but it seems unlikely MPs – and more crucially the public – will see a copy.
While the OBR forecast does not include the impact of the recently announced energy bill support, in which bills will be frozen at an annual average of £2,500 for two years, the forecaster has offered to conduct such a projection, though this has been rejected by the Treasury.
Could it really be the case that less than two weeks into the job, Kwarteng is content with a Treasury flying blind in the face of massive public spending and tax cuts? It surely could only be fear of scrutiny that would witness a government refusing to publish independent economic projections.
MPs on the Treasury Select Committee, in charge of scrutinising the Chancellor’s department, wrote to him on Tuesday urging the publication of a forecast. The Committee’s chairman, Mel Stride was right in saying: “These forecasts are a vital indicator of the health of the nation’s finances, and provide reassurance and confidence to international markets and investors.”
The public deserve to know the state of the nation’s finances. The Chancellor is not running his own household, he is an elected politician overseeing the economy on our behalf; he is in position by the will of the British people, he’d do good to remember that.
The economic commitments made during the Conservative Leadership race and in the first week of the Truss government will markedly alter the state of the public finances. It is projected the reversal in corporation tax will cost around £30 billion, while the freezing of energy bills could cost into the hundreds of billions. It would be a mistake to consider these plans to not be of significant impact to the direction of the economy by maintaining that an economic forecast is unnecessary.
While the Treasury has remained committed to publishing the two usual OBR projections this cycle, the precarious nature of the economy surely demands an additional forecast alongside a mini-Budget? A refusal to publish the OBR report suggests the government has limited confidence in its own economic policy, and this being the case, why should we – the voters – have any confidence either?
The government’s position seems confusing. Is it seriously pinning all its hope on stimulating enough economic growth to create millions of new jobs and higher paid jobs all before the next election – less than two years from now? Or are we in it for the long game? If so, the government must level with the British people, through way of plan and projection.
The government is right to focus on economic growth and the pledge to cut taxes is a welcome step. Nevertheless, the British people are a fair-minded lot, they recognise the economy will not fully recover from its recent shocks in just two years. If the government fails to make this plain and continue to trail a track of eternal economic bliss, then the British people will be forgiven for failing to see results in the government’s economic ambition.
On Friday we will know the full details of the Chancellor’s so-called ‘mini-Budget’. What we won’t know is its projected impact on the economy and how that will affect the pound in your pocket. The OBR forecast is on the Chancellor’s desk. It is either insecurity or sense of superiority preventing its publication.