It may be a week too late but Liz Truss and Kwasi Kwarteng finally met with the Office for Budget Responsibility this morning. Oh, to have been a fly on the wall as the PM with her Chancellor came face to face with the OBR team after last Friday’s mini-budget was delivered without the OBR’s usual stamp of approval – or not – and which caused such gnashing of teeth from the markets.
That the meeting happened at all is a surprise as both Truss and Kwarteng had been holding firm. But even they knew they couldn’t get away with hiding any longer. Aside from that U-turn – which former chancellor George Osborne described as a “welcome move” –the OBR turning up physically at Number Ten is notable because meetings of this kind are not exactly common.
The OBR tends to communicate via email to the Treasury so the face-to-face meeting has led many to suggest that Truss is attempting to calm the volatile markets by bringing the watchdog back into the fold.
Following the meeting, the Treasury confirmed that the chancellor would stick to his guns and set out the medium-term fiscal plan on 23 November as planned, but promised to work closely with the OBR this time.
“The prime minister and chancellor reaffirmed their commitment to the independent OBR and made clear that they value its scrutiny,” the Treasury said.
However, Lib Dem leader Ed Davey said the government is allowing the UK economy to “fly blind” for two months”. “Families and businesses can’t afford to wait any longer for this government to fix their botched, unfair budget,” Davey said.
Meanwhile, the OBR said that it will produce a first draft of its fiscal and economic forecasts in a week’s time, on 7 October, as well as laying out its timetable up to 23 November.
“The forecast will, as always, be based on our independent [judgement] about economic and fiscal prospects and the impact of the government’s policies,” the OBR’s statement read.
Even before the meeting began, the fact that they were meeting at all seemed to smooth the waters: the pound even enjoyed a little bounce earlier today, trading at over $1.12 – close to its value before the mini-budget was announced a week ago – before dropping back slightly to $1.10.
And there was also more good news from the ONS, which has revised its initial prediction for the second quarter GDP.
Rather than shrinking, the ONS’s revised figures show the economy grew by 0.2 per cent in the second quarter, as opposed to the 0.1 per cent fall it had previously estimated, meaning that the UK has yet to fall into recession.
The bleeding seems to have been stemmed, for now at least. Well, until the weekend that is. Truss may have clawed back a little respite from the financial markets but now she has to face her own party at the Birmingham party conference. If she thought the markets were tough, wait til she faces her own MPs and members, many of whom are seething that the hash they made of the budget has led to Labour soaring in the polls. Hey ho.
