Kate Andrews Kate Andrews

Can Liz Truss regain market confidence?

She’ll need to convince the OBR of her growth plans

(Getty)

When the Liz Truss camp floated the idea of side-lining the Office for Budget Responsibility for her government’s first fiscal statement, the argument went that the announcements would be targeted at the energy crisis – and they couldn’t wait. As anticipation around the fiscal event grew, and it became clear that it would include much more than an energy update, MPs started to suspect foul play – that this was an overtly political attempt to avoid scrutiny of Kwasi Kwarteng’s growth plans and spending splurge.

This suspicion is only going to grow now that the OBR has confirmed that draft forecasts were presented to the Chancellor on his first day in the role – and its offer to provide updated forecasts to include the massive energy subsidies was outright rejected.

Cue damage limitation. This morning Truss and Kwarteng invited the head of the OBR into Downing Street to discuss the fallout from last week’s announcements (and lack of forecasts) in the markets. While the pound has recovered to pre-mini-Budget levels – currently around $1.12 – the UK has become an outlier for government borrowing costs. Fears are growing around mortgage offers – hundreds of which have already been pulled from the market – and what a much faster interest rate rise (expected by markets to be 1.5 per cent at the next MPC meeting) will mean for the UK’s housing market.


This morning Truss and Kwarteng invited the head of the OBR into Downing Street to discuss the fallout from last week’s announcements

It’s not uncommon for the OBR and the Treasury to communicate: the former works closely with the latter, and other government departments, to prepare for major fiscal events such as the Budget. But these are not usual circumstances. Having waged war on the OBR – as well as the Bank of England and the Treasury – in their first few weeks in the role, Truss and Kwarteng are in the strange position of being desperately reliant on the forecaster to help put markets at ease.


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