Sunak delays plan to plug Britain’s budget black hole
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LONDON: Britain’s new Prime Minister Rishi Sunak on Wednesday delayed the announcement of a keenly awaited plan for repairing the country’s public finances until Nov 17, two-and-a-half weeks later than previously planned.
The postponement, Sunak’s first policy decision since taking over from Liz Truss on Tuesday, briefly raised British borrowing costs in financial markets but there was no repeat of the panic bond selling caused by Truss’s September tax-cutting plan.
Sunak takes on an economy facing recession at a time when the Bank of England is raising interest rates to tame double-digit inflation. Low growth and rising borrowing costs have worsened the strain on already-stretched public finances.
The government is drawing up spending cuts and cancelling tax cuts just as the rising cost of mortgages, food, fuel and heating is squeezing many household budgets to their limits.
“I have been honest. We will have to take difficult decisions to restore economic stability and confidence,” Sunak told parliament, promising to protect the most vulnerable.
“The Chancellor (Jeremy Hunt) will set that out in an autumn statement in just a few weeks.” Finance minister Hunt said more time was needed to ensure the new plan took into account new economic forecasts.
It is expected to set out how the government will plug a budget shortfall of as much as 40 billion pounds ($46 billion). Unlike Truss’s plan last month, it will be fully audited by Britain’s fiscal watchdog.
Asked to confirm the government’s commitment to an expensive inflation-pegged rise in retirement pensions, Sunak’s press secretary said she would not speculate ahead of Nov 17. His team gave the same answer on other potentially costly spending decisions on foreign aid, defence and welfare payments.
Britain’s credibility in financial markets was shaken last month when Truss announced her unfunded tax cuts, triggering a bond market rout so severe the BoE had to intervene. Truss was forced into a U-turn and eventually resigned.
Published in Dawn, October 27th, 2022
