UK tax and spending plan pushed back two weeks

A much-anticipated plan on the UK’s tax and spending has been delayed by more than two weeks.

It was due on Monday, but Chancellor Jeremy Hunt said moving it to 17 November would mean it was based on the “most accurate” economic forecasts.

Mr Hunt had already scrapped his predecessor’s plans for huge tax cuts. This had sparked market turmoil due to fears over how they would be paid for.

The move settled investors and lessened the urgency for a new economic plan.

The calmer market conditions mean the government will not have to pay as much interest on money it borrows because it is not considered as much of a risk.

Official projections suggest that the government’s bill for the interest on its debt could be up to £10bn lower than feared just a few weeks ago.

This could potentially change how much it needs to cut spending and raise taxes by to balance the books and possibly delay big spending cuts or tax rises until after 2024.

The economic plan will now be “upgraded” to a full autumn statement, suggesting wider tax decisions will be announced. It will be accompanied by a report from the Office for Budget Responsibility (OBR) which gives independent forecasts on what the impact the plans are likely to have on growth and spending.

Mr Hunt said the new “short two-and-a-half week delay” would ensure the tax and spending plans “stand the test of time”.

He said his top priority was “economic stability and restoring confidence that the United Kingdom is a country that pays its way”.

Delaying the announcement gives the chancellor and prime minister a chance to review options for money-raising.

With Rishi Sunak promising stronger public services, some predict the pair will favour new taxes rather than spending cuts, which could include increasing windfall taxes on energy companies.

The delay also means the Bank of England will make its next decision on interest rates on 3 November without knowing the government’s plans.

It has already warned interest rates may need to rise by more than previously expected to help tackle the soaring cost of living.

Inflation, which measures the rate at which prices are rising, hit a 40-year high of 10.1% last month.

Mr Hunt said he had discussed the delay to the economic statement with the governor of the Bank of England, who “understands” the decision.

The move follows Rishi Sunak’s appointment as prime minister on Tuesday, after he replaced Liz Truss as Tory leader.

Mr Sunak said it was “important to reach the right decisions and there is time for those decisions to be confirmed with cabinet”.

He is under pressure to reassure investors of the UK’s economic credibility, following financial turmoil after last month’s mini-budget.

The pound had plunged to a record low against the dollar and government borrowing costs had risen sharply in the aftermath of former Prime Minister Liz Truss’s mini-budget. The Bank of England was forced to step in to buy government debt. Ms Truss was forced into a U-turn and earlier this week resigned.

Mr Hunt said his plan would show government debt falling over the medium term.

Shortly after the delay was confirmed, Mr Sunak warned “difficult decisions” lie ahead to “restore economic stability and confidence”.

Speaking at his first Prime Minister’s Questions, he declined an opportunity to commit outright to raising working-age benefits in line with inflation, but he pointed to his record over the pandemic and pledged to “protect the most vulnerable”.

Labour leader Sir Keir Starmer said the Conservatives had “crashed the economy and now somebody has to pay for their mess”.

He added that working people had been “hammered time and again” and “those with broadest shoulders must step up”.

Reports /TrainViral/