Chancellor Jeremy Hunt announced this morning that the government’s proposed financial statement for 31 October has been pushed back by 2 weeks to 17 November.
With the pound recovering in foreign exchange markets and the price of long-term government bonds falling, the government now has more breathing room with financial markets than it did in mid-October.
Financial markets did not react negatively to this morning’s delay, and the pound actually rose against the dollar during lunchtime trading. This is something that would have been highly unlikely two weeks ago, assuming financial markets had calmed down from the tax-and-spend noise they are now hearing from the new government.
The two-and-a-half-week delay will give the chancellor and prime minister more time to refine the measures they will need to include in the statement as they look to close the £35bn annual deficit.
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With wholesale energy prices falling and the medium-term cost of public debt falling, the government will no doubt be hoping that by mid-November the fiscal problems will be further reduced.
The delay would also avoid holding the financial report on Halloween, the traditional day of horrors, which would not necessarily work well from the Conservative party’s point of view.
Speaking to reporters in Westminster at lunchtime, the Prime Minister’s spokesman reiterated that the government remained committed to its manifesto promise for the 2019 general election, but would not be guided by how it was linked to each policy measure in it.
Along with major decisions related to taxation, particularly corporation tax, the government faces a number of tough spending decisions. They include whether to raise the Universal Credit rate in line with inflation, whether to continue the current capital hospital building programme, whether to spend 0.7% of GDP on international trade and whether to maintain the so-called triple lock, whereby the state pension rises with inflation.
The government’s financial report will be published after the next meeting of the Bank of England’s monetary policy committee on November 3. The delay means the Bank will have to set interest rates next week without knowing the government’s tax and spending plans.
