Will we see a September fiscal event?
The OBR has confirmed that it can produce an economic forecast if needed in September 2022, although it will lack the usual detail.
The OBR has confirmed that it can produce an economic forecast if needed in September 2022
As the cost-of-living crisis continues to dominate headlines and policy measures introduced by the Conservative Leadership candidates to tackle the crisis are debated, the Office for Budget Responsibility (OBR) has confirmed that, if asked by the new Chancellor to produce a forecast in September 2022, it would be able to do so, despite this exceptionally accelerated timetable.
Both Rishi Sunak and Liz Truss have set out their stalls on tax and cost-of-living measures during the Conservative Leadership contest, often taking very different approaches. With the economic outlook in the UK in flux and the political and economic landscape looking challenging, the OBR has been asked if it could provide a forecast for an emergency Budget in September.
On 23 August 2022, Mel Stride, Chair of the Treasury Select Committee wrote to the OBR to confirm whether a forecast could be produced in time for a possible emergency Budget on either 14 or 21 September, once the new Prime Minister has been announced. The Committee also wrote to the Chancellor seeking assurances that the Treasury had begun working with the OBR to facilitate the relevant forecasting.
In its response, the OBR confirmed that although this timetable is more accelerated than the normal 10-week period, it would be possible to produce a forecast for these dates. The OBR confirmed that, with the Treasury’s agreement, it had already begun the preparatory work that would be required to publish an economic and fiscal forecast in September, albeit the accelerated timeline would mean a less complete analysis compared to normal forecasts.
In his response, the current Chancellor Nadhim Zahawi, indicated that as the new Prime Minister will only be announced on 5 September and the date of the forecast is a decision made by the Chancellor in consultation with the Prime Minister, it would not be appropriate to set the date for a forecast at this stage. The Chancellor also reiterated that in exceptional circumstances the Government can take emergency measures and account for any fiscal implications of those measures in the next published forecas
Where does that leave us?
At the time of writing we are still waiting to hear whether Rishi Sunak or Liz Truss will be the next Prime Minister.
The Sunak camp has been quiet on plans for any fiscal event or emergency Budget should Mr Sunak win the leadership race. By contrast, early in the leadership race multiple media sources reported that Liz Truss was going to hold an emergency Budget in September. More recently the coverage has changed, with the latest reports saying that some form of fiscal event to help alleviate the cost-of-living crisis will take place, but that this would fall short of a full Budget. Any announcement is expected to include tax cuts and targeted support for the vulnerable. A Budget covering the whole economy based on OBR forecasts could then take place later in the financial year.
Whoever ultimately wins the race to be the next Prime Minister, the ever worsening cost-of-living crisis would seem to indicate that an announcement will need to be made in fairly short order. Whether that extends to a full emergency Budget remains to be seen but looks fairly unlikely at the moment.