New UK PM delays fiscal statement

William James and Sachin Ravikumar | October 26, 2022

Britain has postponed the announcement of a plan to repair the country’s public finances to November 17 for it to reflect the “most accurate possible economic forecasts,” finance minister Jeremy Hunt says.

The fiscal statement was previously scheduled for October 31. Hunt said it would now be a “full autumn statement” that will show debt falling over the medium term.

“Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way and for that reason, the medium term fiscal plan is extremely important,” he said.

“It’s also extremely important that statement is based on the most accurate possible economic forecasts and forecasts of public finances, and for that reason the prime minister and I have decided that it is prudent to make that statement on 17th of November when it will be upgraded to a full autumn statement.”

Sunak, who replaced Liz Truss after her brief stint as prime minister was engulfed in chaos, gathered his cabinet for the first time on Wednesday, a day after taking power with a promise to fix his predecessor’s mistakes and stabilise the economy.

At the top of Sunak’s agenda will be preparation of the fiscal statement, keenly anticipated by financial markets.

It is expected to set out how the government will plug a budget shortfall of as much as STG40 billion pounds ($A72 billion).

Before Hunt’s announcement of the new date for the statement, investors did not appear fazed by a possible delay. Sterling was trading up by nearly 1 per cent against the US dollar, extending its recent recovery, and British government bond prices were little changed.

Britain’s financial credibility was shaken last month when Truss announced a program of unfunded tax cuts, triggering a bond market rout so severe the Bank of England had to intervene and Truss was forced into a U-turn.

A delay in publishing the statement will affect the Bank of England’s plans as it ponders its interest rate announcement due on November 3 and prepares to begin selling bonds from its quantitative easing program on November 1. 

International Monetary Fund chief Kristalina Georgieva told Reuters she expected Sunak to steer Britain towards fiscal sustainability and said he was right to warn the public of difficult decisions ahead.

“I listened carefully to him talking to the British people, and this is a message that should resonate across the world. These are tough times, and tough times require tough decisions,” Georgieva said.

As Britain’s third prime minister this year, Sunak faces a daunting list of problems including what he called a “profound economic crisis” and uniting a fractured party whose reputation has been shredded by months of scandals and rows.

He began on Tuesday by re-appointing Jeremy Hunt as finance minister. Hunt was drafted in last week by Truss to reverse her tax-cutting plans and calm financial markets which has so far largely worked.

Beyond that, Sunak put together a cabinet with a mix of views from across the Conservative Party’s political factions.

His decision-making immediately came in for criticism from the opposition Labour Party, which highlighted the reinstating of lawmaker Suella Braverman as interior minister less than a week after she was sacked by Truss for a security breach.

That decision will likely come into focus later in the day when Sunak will for the first time face the opposition Labour Party leader Keir Starmer for Prime Minister’s Questions.

After Sunak promised in his first speech as prime minister to lead with integrity and accountability, some Labour lawmakers have accused him of cutting a backroom deal with Braverman to give her one of the biggest jobs in government in exchange for her support in his leadership bid.