Treasury Committee Chief Worries "Circle Cannot Be Squared" In Economic Crisis Crunch Meeting
The country’s financial watchdog could tell the Prime Minister and Chancellor that “the circle cannot be squared” with their current taxation plans (Alamy)
Economic watchdog the Office for Budget Responsibility could tell the Prime Minister and Chancellor that “the circle cannot be squared” to balance sweeping tax cuts at a meeting today, the Chair of the Treasury Select Committee has warned.
Liz Truss and Kwasi Kwarteng are due to speak to the OBR after their mini-Budget last Friday plunged markets into turmoil and devalued the pound.
The uncertainty has triggered emergency action from the Bank of England, but ministers have so far defended the plans for the sweeping tax cuts.
Mel Stride, a Conservative MP who heads up the cross-party Treasury Select Committee predicted that today’s meeting would include a “very difficult conversation” with the OBR.
He told BBC Radio 4’s Today Programme there will need to be a “rethink” of Truss and Kwarteng’s plans.
“This begs the big question as to what the OBR will be saying to the Prime Minister and the Chancellor in this meeting today," he said.
"But I suspect strongly that it will be that, this circle cannot be squared.
“You can't come forward with multiple billions of unfunded tax cuts in a high inflationary environment with a very tight labour market and expect that – along with various supply side changes – to develop the growth that's going to pay for those tax cuts. That just isn't feasible.”
Stride added that there needed to be a "rethink" of the fiscal plans announced last week, and predicted "a very difficult conversation" with the OBR.
Unusually, there were no OBR forecasts published alongside last week’s fiscal event, however, the BBC has since reported that the watchdog had offered to produce documents which met the legal standard, even if they would have been briefer than usual.
Stride and the other committee members have since written to Kwarteng, asking him to “release that forecast”.
“We have actually known that this forecast was available to the Chancellor at the time on his Friday statement for some time," Stride told the BBC.
“I've been pushing for that to be released. Going back many weeks, we knew there would be a meaningful forecast available, and I have written to the Chancellor yesterday asking him to immediately release that forecast so we can see the forecast that he must have been looking at the time that he made those decisions.”
Treasury minister Andrew Griffith defended the decision to not release the forecast saying that the OBR would only have been able to produce a “static forecast that would not have had the ability to reflect the growth plan”.
“That forecast wouldn't have had the growth measures in that plan. They would have been finalised in the hours before the Chancellor stood up. It was right that he did that first in Parliament,” he told Sky News this morning.
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