Last night, it was speculated that the Halloween Budget Statement would go forward regardless of who becomes Prime Minister.
According to sources, the key October 31 statement will take place regardless of who wins the Tory leadership race or who is Chancellor.
The statement, officially named the Medium-Term Fiscal Plan, is meant to describe how the government will balance tax rises, expenditure cuts, and welfare system modifications to address a £40 billion shortfall in the public budget.
Chancellor Jeremy Hunt, who has reversed the majority of the tax cuts proposed by his predecessor Kwasi Kwarteng, has already warned lawmakers that “quite painful decisions” will be needed to restore the public finances.
According to the Sunday Times, the Treasury wanted to deliver a “proper financial statement” before the Bank of England’s Monetary Policy Committee meeting on November 3.
To combat rising inflation, the committee is expected to raise interest rates once again.
Following Prime Minister Liz Truss’ shocking departure last Thursday, there are fears that the statement will have to be postponed. Despite signs that Mr. Hunt, who was appointed just over a week ago, wanted to keep markets calm, this is the case.
However, Ms. Truss’ retirement and the fact that her replacement may not be known until Friday have raised concerns that the statement will have to be postponed or canceled, causing further volatility in the currency and bond markets.
Mr. Hunt appears to be proposing freezing defense spending at around 2% of GDP – the NATO benchmark – until 2026-27, but then committing to significantly increasing it to attain the 3% target by 2030.
Ben Wallace, who has suggested that he may back Boris Johnson in the leadership election, has stated that he will resign if the budget is reduced.
The independent Office for Budget Responsibility, whose support is critical to ensuring Mr. Hunt’s plans’ credibility, has apparently already received details of the Chancellor’s fiscal measures and is anticipated to get further minor measures in the coming days.
According to one source, “the prognosis is grim,” and whoever wins the Tory leadership election will have to make “tough decisions.”
Mr. Hunt allegedly spoke with two leadership contenders, Rishi Sunak and Penny Mordaunt, on Friday.
Last night, sources close to Ms. Mordaunt told The Mail on Sunday that if she won, Mr. Hunt would remain Chancellor, as would the other two candidates, Mr. Sunak and Mr. Johnson.
The date of the statement, according to a Treasury source, will be determined by whoever wins the leadership election.
“The Chancellor prefers the 31st, but the decision ultimately rests with the future Prime Minister,” he stated.